Insider information

As an investor you probably believe you can outsmart the market. You are sure you can pick the right stocks at the right time. Furthermore, you will sell these stocks at exactly the right time. The execution of your investment strategy gives you a return that exceeds the return of the market, year over year. Even better, you make this return with a lower risk profile than the risk profile of the general market.

Information

Having the right information is very important to become a successful investor. Most information that is released by companies will not shock the market in a dramatic way. But it always pays off to keep an eye on news about a company that you invest in, or would like to invest in.

As an investor you should keep in mind that you will never be able to track the news of all companies. There are simply too much companies and investment possibilities. Spitting through the press releases of all companies will keep you off the street for a long time. And when you can go out again, you will find another pile of press releases.

Create your own portfolio of companies that you like. I like to call this my opportunities-portfolio. Keep track of information that is released about these companies. And if there is information that you think you can benefit from, invest in these companies. This will allow you to keep a close eye on the news, and still are able to get out from time to time.

Timing of information

But information is not the single most important thing that an investor needs. Timing of that information is. When you get information at the time that the market has already reacted on this, you will not be able to benefit from that. The sooner you can get a hand on information of companies in your 'opportunities-portfolio', the sooner you can invest in them. And this means that you can benefit from changes in the stock price for a longer period.

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Altman Z-score

In a previous article on this website (What is the risk of investing?) it was mentioned that the largest risk for a company is bankruptcy. But how big is the risk of bankruptcy? And how can that risk be determined for a specific company? To answer these questions, the model of the Altman Z-score can be used.

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(Un)predictable

Lots of investors and investment experts try to make predictions about the stock market. For their predictions, they use technical analysis or predictions about specific shares. But can predictions about the stock market be made? Or is it impossible to make predictions about the prices of specific shares? In this article I will explain how (un)predictable the stock market really is.

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Investment experts and predictions

Investment experts who are making predictions about investing, can be found at many places. Most of these predictions are based on experience or theories of these experts. In other articles, there is already written that predictions should never be taken for granted and being the whole (possible) truth. But how can you identify an investment expert that is reliable, and how can you see what is a good prediction and what is not.

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What is the risk of investing?

In short, risk is, in terms of an investor, the chance that an investment will result in a loss. To be more precise: Risk is the probability that the downward potential is partially used before investors can anticipate. The latter is important because if an investor knows in advance that a stock will fall, then the investor will not buy the share. The investor would try to make a profit of the downward potential of a share by, for example, buying put options or sell call options.

Read more: The risk of investing