4 easy research tools for any share investor

Posted: 15 April 2021 4:00 pm
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So you've started dabbling in stocks and want to take it to the next level? Research tools can help you get there.

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If you're like the thousands of other Australians who joined the stock market for the first time in 2020, you might be at the stage where you start looking a little closer at potential investments.

What makes one stock better than another? Can data really point to a stock with high potential? And the biggest question of them all, how do you find a low-priced stock before it blows up?

A lot of the time, it comes down to research and patience. While there's no foolproof way to predict the next big win, there are heaps of tools that can identify trends and point you in the right direction.

Plus, they're not as scary as they might look. There are plenty of stock research tools that are completely manageable for the minimally-experienced investor, including the following:

Social investing and trading platforms

Social investing and trading involves sharing ideas, strategies and insights with other investors. This might be through an app, online forum or investment platform.

For example, eToro allows users to interact with each other and share investment ideas. The platform also has a CopyTrading feature that lets users see and mimic the decisions made by other investors.

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The platform even curates a list of "Top Traders" to watch and copy. If you like their investment style, or even just their returns, you can opt to formally copy their strategy.

That means whenever they open a position, so do you. Other brokers give you the option to attach third-party copy trading software, such as MT4 Trade Copier.



Stock screeners

Stock screeners are an easy way to narrow down the types of stocks you want to keep an eye on. For example, if you're feeling bullish about US technology stocks, you can use a screener to find stocks in that industry that you might never have heard of.

It works for more than just sectors too. You can screen for companies on multiple criteria. If you really wanted to, you could screen for US stocks with a small market cap, that pay dividends, are in the biotech space and have just hit a 52-week low. Give it a try.



Broker ratings and recommendations

If you do feel overwhelmed by the prospect of researching stocks yourself, you can hire an adviser or sign up with a full-service broker like Goldman Sachs – but you'll pay for the luxury.

A more affordable option is to watch out for broker recommendations that are published publicly on share trading platforms or subscription accounts.

Broker recommendations are basically when major investment banks or brokerages give a buy, hold or sell recommendation based on where they think the company share price is headed.

They usually do an in-depth analysis of company profit reports, debt levels, growth plans as well as looking at macroeconomic factors to decide whether a company's stock will go up or down.

Often they'll give a price target – that's an approximate price of where they think the company will be in 12 months' time.

Even if the recommendation ends up being inaccurate, it can still impact investor sentiment. Typically, after a major brokerage releases a stock recommendation, the price will usually react in line with the recommendation.

Technical analysis charts

This is probably the trickiest of all the research tools mentioned here, but it's worth taking the time to wrap your head around technical analysis.

In a nutshell, technical analysis involves looking at past prices and trade volumes to try to predict future trends. It's about figuring out when the best time to buy and sell is.

Picture not describedImage: eToro

One of the most common types of technical analysis is the candlestick chart, which shows the stock's opening and closing prices for a set period. This is then typically combined with trade volumes to see how price changes in line with trading numbers.

The big aim is to see whether a stock's price is trending upwards, downwards or sideways. Technical analysis helps you do this by plotting resistance points on the chart. When prices peak and buyers begin to drop off, you've hit a resistance point. When prices drop and buying picks up, you've got a support point.

Giving it a go

Trying out stock research doesn't have to be overly complicated. Lots of platforms make it easy for budding investors to access expert advice and start incorporating data into their investment decisions.

Even if you're not ready to jump in just yet, you can always try a demo account to practice techniques and trades without risking any real-life money.

Remember though, even with all the research in the world, there will still be unpredictable events, but doing your research is a big step towards becoming a savvy investor.


Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

eToro disclaimer: You may lose more than your initial investment. Copy trading facilities cannot be construed as financial advice. ARSN 637 489 466, promoted by eToro AUS Capital Pty Ltd AFSL 491139. Your capital is at risk. Other fees apply.

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