If you have been an investor for long, you must have heard about Jim Rogers.
Rogers is a leading global investor and commodities guru, and has an amazing track record over the past few decades.
When someone once asked Rogers what was the best advice he ever got, he said it was the one he received from an old man in an airplane.
The advice was – Read everything.
This advice is also one of the best ones I can give you when it comes to being an investor in stock market. Read everything.
Charlie Munger, Warren Buffett’s business partner, says so often – “In my whole life, I have known no wise people who didn’t read all the time – none, zero. You’d be amazed at how much Warren reads – at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
You can outsmart 99% of all investors
If you get interested in a company and you read the annual report, believe me, you will have done more than 98% of the people in the stock market.
And if you read the notes and schedules accompanying the financial statements in the annual report, you will have done more than 99% of the people in the stock market.
As I’ve realized over the years, if I just literally read a company’s annual report and the notes – or better yet, 4-5 years of reports – I would know much more than other investors out there.
But I realize that most investors don’t bother even doing this basic homework.
So when people ask me why 99% of people don’t succeed in stock market investing, my reply is, “Because 99% of people don’t read annual reports!”
I look at an annual report not just as a collection of pages that a company (whose stock I own) sends me at the end of every year, but as a communication link between me and the company’s management – a report of what the management wants to tell me about the company’s…
- Past performance
- Opportunities and challenges in the future
- Big risks the company faces
- Financial standing and track record
- Industry performance
I am not sure if you, as an investor, can get your hands to a better source of “insider” information about a company.
Although, given widespread accounting scams, you must not trust whatever is written in the annual report on face value. But the report still gives you a starting point to look deeply into the company, get your answers, and also the questions that you must explore further in your analysis of that stock.
How to read an annual report?
With the view of bringing the annual report closer to you – believe me there’s no better romance in a company’s analysis than to read its annual report – I am working on a “classroom series” of videos that will help you understand the annual report better…
…so that you can appreciate its importance and know how to read it to make better investment decisions.
I start with the basics of an annual report through the following video. This will show you the importance of reading an annual report and the key sections that will give you a lot of ideas in what the company has done in the past, and where it is heading in the future.
So let’s start right here. If you are not able to see the video below, click here to see.
Let me know your feedback on this video in the Comment section below, so that I can improve upon my efforts in the future.