Last Updated on January 9, 2025
Overview – Knowing How to Effectively Use Investment Reports
When coming across prospective investments, there’s a good chance you aren’t the first to do so. Instead, it’s more likely that several other investors have already analyzed the prospect you wish to pursue.
While this makes finding “overlooked” investment opportunities harder to find, there is one key benefit to this. Some investors or other parties may choose to share their analytical work and publish their work as some kind of investment report.
These investment reports can vary significantly: perhaps it’s something put together by a contributor of an investment news site summarizing key points, a detailed report that was published by a major bank, or something in between. Unless it’s extremely niche or new, almost every stock, REIT, ETF, or any other type of investment instrument has had someone look at it and talk about it before.
If used properly, investment reports can help investors perform their work faster and more efficiently. Despite their potential, there are some caveats to keep in mind when using investment reports.
Different Investment Reports Will Discuss (Or Miss) Certain Points
Before discussing how investors can make use of investment reports, it’s important to keep one thing in mind: different reports will have differing levels of quality. Given the seemingly countless reports that exist, this is to be expected.
At first, this may sound like a truism, but it’s crucial to remember this for two reasons. First, just because a reputable author publishes an investment report doesn’t mean it’s infallible, and second, a report published by a “lesser-known” author shouldn’t immediately mean what it has to say isn’t worth paying attention to.
It’s entirely possible for reports published by a major brokerage or bank to overlook key points that were picked up on by a lesser-known report. Conversely, reports published by major authors may contain information or insights that otherwise can’t be found elsewhere due to their extensive connections and access to information that smaller authors can’t possibly hope to get their hands on.
This isn’t to say that every report will be worth reading. Investors only have limited time and energy at their disposal, so they can’t realistically expect to read every report they come across. Some judgements will need to be made on which reports are worth reading and which aren’t.
Instead, this is a reminder not to be overly trusting or overly critical of certain reports simply based on who wrote them. After all, an informed investment decision is one that takes into account all relevant facts, not just the ones that are pleasant to hear.
Beware of Potential Biases/Unsolicited Investment Advice
If there’s one thing many investment reports are guilty of doing, it’s giving a recommendation of whether a certain investment is worth pursuing or not. This is usually presented by labelling certain investments as “buy”, “sell”, or “neutral/hold”. These labels are either presented at the start of the report, or more commonly, to conclude with it.
While there’s nothing inherently wrong with these labels, and are certainly worth keeping in mind, they may be indicators of potential bias in the report or the insertion of unsolicited investment advice.
For example, if a report starts by saying a certain investment is worth buying, then the rest of the report may simply be trying to justify this recommendation instead of objectively reporting its strengths and drawbacks in equal measure. Similarly, after sharing their recommendation, some reports may go on to try and push certain bits of unrelated, unsolicited investment advice, such as convincing readers to invest in certain industries or countries.
Almost all investment reports will have some kind of bias/preferred stance in their reporting, and therefore is imperative that investors pick up on it as soon as possible to avoid picking a side too early.
Now, this doesn’t mean an investment report’s recommendations can be ignored entirely: trying to understand why a certain investment is labelled as “buy” or “sell” is important, especially if different reports offer different recommendations for the same investment. Conflicting reports may discuss certain details that can’t be found in the other.
Ultimately, “buy”, “sell”, or “neutral/hold” are just recommendations – and nothing more. Even if dozens of reports share the same recommendation, listening to or ignoring them is ultimately up to you.
Just like many other things in investing, it never hurts to maintain a healthy sense of skepticism.
Investment Reports Are, at Best, Preliminary Tools
The power of investment reports is, arguably, their ability to familiarize investors with key points, considerations, and other bits of information right away. Instead of starting from scratch, investors can get up to speed with some major facts and data with relatively minimal effort.
Whether it’s key financial data, industry prospects, or certain qualitative factors, investment reports can showcase many of the things investors want to know right away.
If this is the case, why go through the trouble of doing the work and forming conclusions when other investors have already done so and have shared their work for you to view? Surely this means the extent of your research is to simply understand what other people’s findings/opinions are, right?
Before we answer this question, think about your own life. When making big decisions, we typically consult others for additional insights and second opinions. However, unless you’re very pressed for time or can’t be bothered to do any additional work, our consultations with others serve as a starting point for future, more in-depth research. We do this not because we distrust what others have to say, but rather to verify if what others are saying is justifiable or not (more on this later).
The same can be said when it comes to using investment reports: no matter how many you read they should, at most, serve as a sturdy foundation for future, more in-depth, independent research.
Investment reports, if used properly, are incredibly helpful tools that can save investors significant amounts of time and help them analyze prospective investments more efficiently.
Despite their power, they won’t always show the entire picture, and investors may inadvertently get a skewed image of their prospective investments by basing their decisions solely on what others have to say.
Investment Reports Supplement an Investor’s Analysis, Not Replace It
After having read some investment reports and getting to know your prospective investment better, it’s tempting to think that you finally know enough to make an informed decision. However, no matter how many reports you read, there will always be an implicit, unanswered question: how do I know if what these reports are saying is valid?
No matter how detailed the report or how credible the author is, readers implicitly assume that the author knows what they are talking about, but how can they be certain? Sure, multiple reports can be read to see if there are commonalities, but even then the question of validity across different authors remains, plus there’s also the risk of falling victim to confirmation bias.
Because of these inherent shortcomings, investors are still responsible for performing their own analysis and forming their own conclusions based on their understanding of the relevant facts and data. Remember, an investor isn’t right because others say they are, they’re right because the analysis they performed proves so.
With their own work in hand, investors can better judge the validity of investment reports without having to worry about potential bias or external influence. In turn, investors can use investment reports to critique their own conclusions: if several investment reports suggest a certain investment isn’t worth pursuing, but your analysis otherwise, it would be worth understanding why the difference in opinion exists.
Investment reports can help investors save time and perform their analysis more efficiently, but ultimately they are still responsible for looking at the data and making the relevant decisions themselves.
Wrapping Up
When trying to learn more about a prospective investment, chances are other people have analyzed it already. Some of these people may even share their findings and publish them as an investment report, whether it’s very basic or incredibly thorough.
Investment reports are incredibly useful tools. By sharing key points, important data, and other considerations, investors can familiarize themselves with prospective investments much faster than if they were to start their research from scratch. Many investment reports even share their opinion on whether certain investments are worth pursuing or not.
Despite their incredible usefulness, there are some things investors will want to keep in mind when using investment reports.
Different investment reports will vary significantly in their quality, meaning some reports may mention things that others won’t. Every report, no matter how objective they claim to be, will always have some kind of bias or preferred stance when it comes to certain investments. Finally, investment reports are, at best, preliminary tools for an investor’s work.
There’s nothing wrong with turning to other people’s work to try and accelerate their investment analysis, but ultimately, investors must still perform their own work and reach their own conclusions.
