Before buying a stock, the typical individual investor spends six minutes researching it. Yes, six minutes. So says a new US study, The Research Behavior of Individual Investors.
Using browser data going back to 2007, researchers sifted through 8.5 million clicks and 60,000 hours of internet use to conclude the median investor devotes about six seconds to risk statistics. Earnings, dividends and other fundamentals get a more generous 14 per cent of their attention.
The rest? Mostly price charts – often showing no more than the last 24 hours. Much of this “research” takes place in a caffeinated burst immediately before the trade.
The most visited site is Yahoo Finance, and most journeys begin – and end – on a snapshot page: a graph, some headlines, a few numbers on recent prices to nod at solemnly. “Many investors do not pursue research beyond this page,” the study notes.
Meanwhile, a modern quantitative fund manager “spends years and millions of dollars refining algorithms” while traditional active managers might employ teams of analysts to study companies in depth.
“It is rather optimistic,” the authors dryly observe, “to think that the average individual investor gains an edge based on their own occasional minutes of research.”
As one Reddit user confessed: “Guilty as charged. I spend about that much time.” In his defence, he said he could spend 10 times that duration “and not be any more likely to pick the ‘winners’“. Perhaps the real edge is knowing you don’t have one.
