Is Too Much Information a Good Thing?


Are you the kind of investor who keeps reading investment theories on the internet? Are the “top dividend stocks for the year” the type of articles that grab your attention? Come on… don’t be shy… we all like to see the investors’ top lists! I like to read them too!

But sometimes, when you read too much analysis, you get stuck. One of my DSR members sent me an email last week telling me he was suffering from “paralysis by analysis”:

(Me) What is your biggest investment struggle??  (paralysis)

(Him) Trying to pick individual stocks. ?Here is the Money Sense report. For example you recommend Metro (MRU.TO) but it gets a D from Money Sense?  This creates indecision. ?

If I value investor #1 who is telling me that he likes Metro (which made a very smart deal in acquiring Jean Coutu (PJC.A.TO)) and I also value investor #2 who is telling me this stock is a borderline sell… my head hurts… what do I do?

Well… this guy has Power Corporation (POW.TO), Power Financial (PWF.TO), Great-West Life (GWO.TO) and Sunlife (SLF.TO) at the top of its rankings. Those four companies have been just terrible on the stock market for the past decade… do they really earned an “A”? I’m not sure I would follow him… hahaha!

More seriously, this is beyond the point. My point is that too much information is not a good thing.

Too Much Information is NOT a Good Thing

I guess there was a time that only “those in the know” could have access to valid information and make sound investment decisions. Today, we are facing the opposite. Anybody that has an internet connection could write about a stock on his blog (Hey, that’s me!). Even better, since investors are willing to pay for such services, we can now purchase thousands of investment newsletters and get hundreds of pages to read each week (or you can just try the best one).

Many investors subscribe to 2-3 paid newsletters or read a dozen financial sources each week. In theory, this is a good move. By following so many different sources, you get to a point where you educate yourself and can get your head around which companies you like the best. But what happen when 2 guys you follow and appreciate tell you the opposite?

This recently happened to me with my fellow investment blogger and good friend Ben from Sure Dividend about Target (TGT). Sure Dividend wrote that Target is a good investment here and there. At the same time, I share my “hate” (alright, strong word for nothing!) of this company and think it’s a strong sell. So… which one is right? The real answer is that it doesn’t matter who is right.

It doesn’t matter because no matter what Ben or I write about any stocks, we will live with our own decisions. I decided not to buy TGT and ignore it and I will live with my portfolio as I built it. Ben will do the same on his side. But you, in the meantime, you keep reading about Target and haven’t made a decision. This is where the problem is.

I understand you spend lots of time reading about company XYZ because you want to make sure you make the right decision. But at one point, you will keep reading articles telling you to buy, to hold and to sell the very same company. Those articles will be written by people who makes decision about their portfolio, while you don’t. Am I telling you not to read anybody? Off course not! I think it’s a benediction that anybody could become a DIY investor now and educate themselves for a small price and manage their own portfolio.

However, the most important part of managing your portfolio is to take action, and this part, nobody can do it for you.

Why Don’t You Trust Your Guts?

I think it’s a good thing you read others’ research. But it’s a really bad thing if you follow their articles blindingly (yes, including mine too). I love reading other investment bloggers and paid newsletters. It gives me a different perspective on companies I follow. But in the end, I always go back to my own investing strategy.

Define your goal. Define what is important for you, and define your own investing strategy. What are you looking for? Which kind of companies do you want in your portfolio? Trust your guts and draw a line in the sand. A line allowing you to consider others’ work in your decisions. But a line that will also determine what comes into play that will help make your decision.

So the next time your read one article telling you Target is a buy followed by an article telling you it’s a sell, just pick a side. Pick a side according to your beliefs and trade accordingly. If you haven’t designed your investing plan yet, here a few articles that will help you doing it:

How to Invest a Lumpsum Amount of Money in an All-Time High Stock Market

The Dividend Triangle – The Equation to Successful Dividend Growth Investing

Which Factors influence your Investment Performance + the Only One that Really Makes the Difference

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