The World Wide Web has empowered investors. 200 years ago, shares were traded between an elite group of wealthy individuals through their established networks. Now, a small investor only needs a good internet connection to gain access to almost unlimited amounts of information, analysis, data and opinion on markets for free, and can execute trades in a plethora of investments in just a couple of minutes.
Here is Financial Expert’s guide on how to use the web to your advantage as an investor. This article will guide you to the best free information sources for each type of information you’ll need, including live prices, charting, ratios, financial statements, short selling activity, analyst ratings, financial news and more.
How to Find: Live Prices
Live prices are a hot commodity in the financial markets. Companies like Dow Jones, Reuters and Bloomberg specialise in providing insightful data, news and prices – at a cost. Your average Bloomberg ‘terminal’ will cost you hundreds or thousands of dollars a year. These are ideal for investment banks but not the armchair investors reading this article.
Your Online Brokerage Account
All online brokers quote you their best price for a stock as part of the process of how to place a trade. Therefore if you need the most up to date and reliable pricing – type in the ticker symbol of the share or investment and your broker will quote you a bid (buy) and offer (sell) price.
SharePrice.co.uk offers free and unlimited live prices for registered users. This must be an expensive service to offer, however SharePrice makes money because it operates a discount brokerage service so users can trade through the website. The service is owned by Interactive Investor, which is an FSA authorised and regulated firm. The fees and commissions on this account looks competitive, but do your own research before signing up.
Note that even though these services give you access to live prices, you’re not getting the kind of access that the real professionals use. Market data access is classified as ‘Level 1′ or ‘Level 2′, with level 2 being the highest access to pricing information available. Seeing a live mid price counts as below level 1. To learn more about the levels of market data see ‘Whats the difference between Level 1 and Level 2 Market Data?‘.
TheMarketFinancial.com offers rare free access to level 2 market data on this page: http://www.themarketfinancial.com/level-ii-quotes
As I explain in the article referenced above, level 2 data offers an often unnecessary level of information that most investors won’t derive any real benefit from, but it is nevertheless very interesting to catch a glimpse of a live ‘order book’. It’s like equivilent of seeing the beating heart of an organism.
How to Find: Free Charting
Free charting is widely available on the internet, although for full customisibility and full options you will need a professional package. Free charts should be insufficient for inactive, long term investors.
For London listed shares, livecharts.co.uk offers an easy and user friendly way to look at the past performance of shares. Do remember that the share price only reflects the capital gains received by investors, and that dividends should be taken into account as well when assessing how companies have performed in relation to one another. Live charts allows you to draw charts using data at several frequencies (from 15 minutes to per hour) across a wide timescale, although I find it lacks a meaningful way to directly compare one chart against another.
One of my favourite financial websites, the ‘Interactive Charts’ from the Financial Times cover for all worldwide listed investments but use prices delayed by 15 minutes. These charts allow you to easily add extra companies and indices to make useful comparisons against competitors and the benchmark index. FT has recently introduced several other useful features such as tagging news articles to specific dates, allowing you to quickly find news coverage that explain prominent movements you may see on the chart. FT also shows trading volumes as well as the price.
How to Find: Financial Ratios
For fundamental analysts, financial ratios offer a snapshot of a company’s financial strength, profitability, financing structure and operating efficiency. The power of financial ratios lies in your ability to derive reasonable and educated conclusions from them, so you should be aware of their limitations. Different accounting standards can distort comparisons across peers and time series, for example.
These two services offer quick access to financial data from companies. By simply typing a ticker symbol into the search bar, Google Finance will immeadiately display ratios such as ‘net profit margin’ and other popular metrics. However if you click ‘add/remove collumns’ you are given the opportunity to select from up to 25 financial ratios on offer and automatically displays them alongside the same ratios for competitors. This is an efficient and comprehensive service.
How to Find: Financial Statements
To download a companies financial statements, it is usually easier to visit their official ‘corporate’ or ‘investor relations’ website and download the relevant annual or quarterly report directly. This way, you may also spot additional press releases and other investor information that aggregation websites may have missed.
The key financial statements are the Profit & Loss/Income Statement and the Balance Sheet, which show the profit for the year and the assets & liabilities of a company respectively. They may have been renamed ‘Statement of Comprehensive Income’ and ‘Statement of Financial Position’ as a result of recent international standards.
Short Selling Activity
Short selling is where a trader borrows shares from a broker (who may be holding shares on behalf of their client), to then sell it on the market and receive cash (e.g. £50k). After an agreed time period, the short seller will then buy the relevant number of shares back on the market and return these to the broker. If the share price fell during the borrowing period, then the trader will make a profit as have sold the shares at £50k and would be able to buy them back for a reduced price. If the share price increases then the short seller will make a loss. This is the common way for traders to bet against a company, and therefore it is useful to gauge the level of short selling against a company to get an insight into whether speculators see a likely possibility for a fallout in the share price.
Searching for share price data on a company on FT.com will also bring up information from ‘Data Explorers’ which will describe the short selling activity on a company’s shares as ‘low’, ‘medium’ or ‘high’. The following is an excerpt the share price screen for Crocs Inc, which shows that short selling activity is medium. As a guide, most shares have ‘low’ activity. So anything above low should raise further enquiry. This short selling data is formed from a ‘proxy’ for short selling, and therefore isn’t precise data, merely an indication.
How to Find: Analyst Ratings
By visiting http://uk.moneycentral.msn.com/investor/invsub/analyst/recomnd.asp?Symbol= and entering the ticker symbol of the share you want to evaluate, MSN will display an easy-to-read graph showing the distribution of the analyst ratings it has aggregated. This data may not include all public analyst ratings, and ratings are just opinions after all so don’t put too much weight on them. To put it another way, the overall message of analyst ratings was not ‘sell’ before the financial crisis.
How to Find: Financial News
The Financial Times is my preferred online news source for its wide coverage and political neutrality. Rupert Murdoch’s Wall Street Journal on the other hand, saw its editor resign just 4 months after Murdoch took it over, making it clear that he opposed the interference from the new owners. The Financial Times gives very detailed coverage on the international financial markets, particularly equities, government bonds, commodities and currency markets. The only downside is that access to FT.com is not free. An online-only subscription costs £4.50 per week in the long run, which amounts to £234 per year.
For free financial news, stick to quality sources Reuters and Bloomberg. The financial news produced by other media organisations such as CNBC and Fox Business tend to be sensationalist and weighted towards punditry and opinion pieces rather than integral journalistic reporting, which I believe is important if you want to make your own financial decisions unswayed by the often persuasive ‘market sentiment’. Whilst the FT may report that ‘Gold hits record high at $1,743 an ounce”, CNBC may run articles such as “How high will gold continue?” “Will gold hit $2,000? We speak to one fund manager who firmly believes so”. Such journalism panders to fund managers and CEOs who will always issue a ‘sunnier’ version of real life events.
For more information about the wider world of investing, read our guide on ‘How to Invest in the Stock Market & Shares‘