Time for darts

Published in The Advertiser Sunday Mail, October 2007 by Alia McMullen and Erica Thomspon

THE days of throwing darts at the ASX200 index are over, with investors who fail to carefully research their stock picks warned to prepare to be burned when market volatility returns.

Rodney Weston, general manager of independent investor services provider Bourse Data, said do-it-yourself investors lost discipline when the sharemarket was performing strongly.

"During the last three years, investors and traders have not needed information to make money," he said.

"When all boats are rising it is easy to cast information aside and to think that you are doing something special, when in fact it is market driven rather than skill driven."

He said recent market volatility was part of an inevitable cycle which always caught up with "dartboard"-type investors.

"An overpriced stock will always revert to its true value."

Wealth Within chief analyst Dale Gillham said the emotions of fear and greed could be amplified so it was wise for everyday investors to educate themselves.

"The process taken to invest $500,000 or $1000 should be exactly the same, as they both represent the same amount of risk," he said. "Education is extremely important for any type of investor though I would say it is even more important for the smaller investor as they cannot afford to lose."

While professional advice can be helpful, Mr Gillham said people should not be lulled into a false sense of security.

"Advisers do have a role to play but I always recommend investors question the advice and under no circumstances should they rely on only one person's opinion," he said.