The Empowered Investor: manage your investments the way the professionals do

“The stock market is not a zero sum game. Over the very long run, like the economy, it always goes up.”

“When I chat to private investors it is always staggering how many think choosing stocks does not require much effort. It is just tragic that people are willing to risk their hard-earned cash on the back of some shallow tip in a newspaper report. There is a world of difference between a tip and empowering analysis that adds value to building a portfolio.”

“Lets start by distinguishing between noise and information. Responding to noise is not the same as responding to information. If people invest on the basis of a random guess, a bulletin board posting, broker gossip or a groundless tip then they are “noise-trading.” This is investment on the basis of what people mistakenly think is new information. For me noise trading is an act of confusion about what the stockmarket is for.”

“Individual investors can create market noise but they also have access to the tools to tune it out.”

“These new active investors and traders are becoming a force to be reckoned with around the world as they already are in the United States. They want to be on equal terms with the institutions by having access to all the best information”

“Information is the key to successful investing. Knowing how to access the right sources is particularly critical in today’s marketplace. This book will tell you all you need to know – straightforward and very readable.”
Diane Hay, Chief Executive, Proshare

“Professionalinvestors are consistent and rigorous in their approach to making investment decisions, but the range of tools on the Internet now allow private investors to follow the same rules and disciplines. ‘The Empowered Investor’ will help private investors to graduate from being a reactive stock picker to a proactive investment professional. Anyone who has ever bought a stock based on a Sunday Newspaper tip should read this book!”
Martin Spencer, Managing Director, The RiskMetrics Group.

In the Internet age where there is too much information, and where investors are bombarded with dubious tips, eccentric investment systems, oversimplified investment rules and fee-grabbing brokers, control is not only necessary – it is vital.

The Empowered Investor enables you to take control of your own portfolio. It shows you how to use techniques traditionally exclusive to institutions, how to select the information that you will lead to your success, and how to become a professional private investor.

The Empowered Investor will show you how to:

• Jump onto the stock market information wheel and learn to spot really new news that beats the city at it’s own game.
• Build your own stock portfolio independant from expensive fund managers.
• Professionalise your understanding of fundamental and technical analysis to make money in any market, bull or bear.
• Use screening and portfolio tools on and off the internet with fluency.
• Understand the minds of an analyst selecting stocks and sectors.

Mark Harrison has spent the last couple of years developing one of the UK’s most popular and successful financial websites, www.iii.co.uk, Ample Interactive Investor, as its Chief Investment Editor. In 2000 the site won the Bradford & Bingley Personal Finance New Media Site of the Year. In 2001 it won the Investors Chronicle Best Online Content Award.

Mark originally trained as a securities analyst at Credit Lyonnais Laing, a large City stockbroker, before working for three years as part of a team managing £20 billion of assets for Guardian Asset Management. He is a Member of the Association for Investment Management and Research (AIMR) and the UK Society of Investment Professionals. He was educated at Lincoln College, University of Oxford.

At the height of the boom in technology shares in 1999, one of the leading stockbrokers took a call from a client, “I want to buy a thousand of whatever that bloke on the telly just tipped,” he said, “don’t know the name of the share, just buy me a thousand shares quick.” I didn’t write my new book, The Empowered Investor, for him since he may well be beyond hope. I have written it to help investors exploit the opportunities of the stockmarket and realise the benefits of the latest technologies to take intelligent decisions for themselves.

The technology stock boom has created many new investors. Some have been disappointed, but many have caught the bug. There has been a huge growth in trading especially over the Internet which now accounts for one in five trades here in the UK. Equally many private investors have become disenchanted with the fund management industry, which has a habit of heavily promoting sectors just before a downturn.

These new active investors and traders are becoming a force to be reckoned with around the world as they already are in the United States. They want to be on equal terms with the institutions by having access to all the best information. “They do not accept that there should be a charmed circle of brokers, analysts and institutional investors with privileged access to corporate data.” Individual private investors now demand a level playing field to furnish them with enough independent information to take their own portfolio decisions.

My object in writing this book is to empower private investors to build and manage a portfolio of investments. Portfolio might seem a forbidding word suggesting ancient leather bound binders full of papers. Nothing could be further from the truth. If you have more than one share then you have a portfolio. Everyone can have a portfolio. With new technology you can manage it entirely without the burdens of accumulating piles of paper and expensive administration costs.

By your portfolio I don’t mean your house, your pension and any cash you have for emergencies. Since your home is not real spendable stuff, you should not account for that in the same way as you do your shares. The same applies to your pension, which although it is a portfolio of assets, is designed to match a set of liabilities to provide for your retirement.

I am talking less about the selection of individual shares but rather about the deliberate combination of shares into a portfolio. To do this you can learn to use all the tools of the fund managers’ trade and learn to think just how the professionals think. I have at one time or another been a stockbroking analyst, part of a team managing a £20 billion institutional fund and a financial journalist so I suppose I have been around the block and back. One thing is certain; no professional investor would invest a penny on the back of a tip he saw on TV.

There is a world of difference between a tip and an analysis. For a start analysts are increasingly regulated for the protection of investors and tipsters are not. Analysts in the UK (and now in the US) cannot “front run” or buy shares for themselves before tipping them. If they do then they risk losing their licence to practice and damaging the reputation of their firm.No such binding restrictions apply to tipsters.

A tip could be a one liner made up in the bath. It could be founded on nothing more substantial than the fact that it sounds clever. Those are the innocent explanations. After the Wall Street Crash of 1929, it was discovered that tipsters had taken bribes to push up stocks held by corrupt investors.

In the United States there has been a vicious backlash against a number of rogue analysts who became popular amongst novice investors. In the UK inexperienced private investors were instead exposed to a plague of dodgy tipsters rather than analysts. To their shame, the UK regulators have taken no action against these discredited tipsters leaving private investors to fend for themselves. In such an environment investors need to take their own precautions and seek out their own empowerment.