Equity research is important for investors to make informed decisions. It involves in-depth analysis of companies to evaluate their fair value and estimate earnings and valuations. Good research identifies growth and decline trends to help maximize returns by solving for the "right time" and "right price" to invest. While companies now provide more information to researchers, individual investors are unwilling to pay for research themselves. They should learn from institutional investors, who spend heavily on research and analysts to gain an edge. Relying on research rather than broker tips allows individual investors to take informed actions.

1. Let Markets Work For
You!!!

2. While I talked about the importance of individual
investments in equities or broader financial markets in
my last blog, I probably didn’t emphasize on the
requirement of quality equity research.
Why everyone consider equity as a riskier investment?
Investing in a company’s equity cannot always be at high
risk; if that is the case no bank will be willing to give such
leverage to companies. From where I look at it, it’s a
problem of perception due to lack of information. And
that’s why we need good research to educate investors
and help them identify right businesses to associate with.

3. Let’s try to base the importance of research from this argument -
In a perfect market, the correlation between the equity analyst
prediction and overall market performance will be close to ‘1’.
None of the markets are perfect and even time does not help in
making them perfect but my argument is trying to refute only the
known devil.
Equity research involves critical in-depth analysis to evaluate the
fair value of stocks of a particular company. Also, analysts use
best of their expertise to analyze a company, its industry and its
peer group to provide estimated earnings and valuation
multiples. A good research should clearly signify the possibility
of growth or decline in a share price. The primary objective is to
identify trends through which investors can maximize returns.
The two things which investors always look at are ‘right time’
and ‘right price’. A good research should cover all aspects of the
company from macro to micro level to help investors in solving
the two wants.

4. As companies have started to understand the
importance of Equity research analysts, they have
taken steps to provide greater information to the
community by arranging various site visits,
seminars, and conferences. Since equity analysts
meet the management of companies and attend
regular briefings along with other research analysts
they are better placed to understand the true picture
of the company and to estimate future earnings.

5. The challenge is that while research has proven to
be valuable, individual investors are not willing to
pay for it. It’s very important that investors realize
that fee-based research helps in increasing the
market effectiveness and bridges the information
gap specifically for the companies who are not
sponsoring their research by large broking
houses. Individual investors should learn the value
of research from institutional investors. Institutional
investors spent huge amount on research and even
hire their own analysts to gain a competitive edge
over other investors.
It’s time that individual investors stop reacting to
broker tips and start relying on the research to take
informed decisions!!!