Für den Zugriff auf die beiden Plattformen können Sie jeweils dasselbe Saxo-Konto verwenden.
Many investors buy stocks blindfolded—why spending six minutes on research isn’t enough
Jacob Falkencrone
Global Head of Investment Strategy
Key points:
- Most investors spend only six minutes researching stocks before buying, usually focusing just on recent price charts.
- Quick, superficial research often leads investors to make poor investment choices and buy overpriced stocks.
- Adopting structured research habits, understanding cognitive biases, and following simple investment rules significantly reduce investment risks.
This content is marketing material.
Imagine strolling onto a used-car lot and instantly purchasing the flashiest car on display without even test-driving it, checking the mileage, or popping open the hood. It might look great on the surface, but you’d have no idea what costly issues lie beneath. Sounds risky, doesn’t it? Yet, startling new research shows this is precisely how many individual investors approach buying stocks. And with stocks, the hidden risks could cost you far more than just mechanical troubles.
Remarkably, the median investor spends a mere six minutes researching a stock before clicking ‘buy.’ Yes, six minutes—less time than it takes to brew your morning coffee or scroll through social media. And within those fleeting moments, most investors hardly scratch the surface, often relying entirely on recent price charts—typically just today's activity.
While it’s wonderful that more individuals than ever before are embracing investing and taking charge of their financial futures, doing it hastily or superficially can lead straight into trouble. Here’s why—and how to protect yourself by upgrading your research habits.
Skipping the basics: Investors ignore fundamentals
Professional investors devote hours—or even days—to methodically dissecting companies. They carefully examine financial reports, earnings, dividends, debt levels, and key risk metrics like volatility. They understand detailed research isn’t optional—it’s essential.
Contrast that with typical investor behavior. Recent research by two finance professors from New York University Stern School of Business, based on an extensive database of browsing patterns (over eight million clicks), reveals that most investors spend just a dozen seconds on crucial risk indicators like volatility or beta, and less than two minutes of their already limited time looking into critical fundamentals such as earnings or dividends. Instead, investors overwhelmingly focus their attention on simple price charts—and a shocking more than 70% of these views consider price movements of just one day or less. This reliance on short-term price movements can be particularly misleading, as daily fluctuations often reflect temporary market sentiment or noise rather than true long-term business performance or value.
As the researchers reflect, it seems unlikely at best, or downright impossible at worst, that glancing at a short-term price chart can yield meaningful insights about a company's long-term prospects.
“Investors often underestimate the importance of thorough research, mistakenly believing quick glances at price movements are sufficient. But investing without a clear understanding of the fundamentals isn't just irrational—it's very risky.”
Understanding our biases: Why do we invest impulsively?
To understand why investors rush into stocks with minimal research, behavioral finance offers crucial insights. Humans have inherent cognitive biases—shortcuts and tendencies that influence our financial decision-making, often causing investors to chase recent winners, overlook critical risks, or impulsively trade based on emotions rather than analysis. Among these biases:
- Recency bias: We disproportionately value recent information (like a stock price jump today) and disregard longer-term data.
- Attention bias: We focus on stocks making headlines or gaining media buzz, believing attention equals potential.
- Overconfidence: Investors often believe their quick intuition or judgment is superior to detailed analysis.
These biases lead investors down a treacherous path—chasing headlines, buying at inflated prices, and subsequently experiencing weaker returns.
The danger of chasing the news
Remember the meme-stock mania surrounding companies like AMC, GameStop, or Bed Bath & Beyond? Investors flocked impulsively into these trending stocks, many probably without even knowing or understanding what they were buying into beyond a rapidly rising graph, and ignoring fundamental analysis altogether. When the excitement faded, so did their returns—often dramatically.
Indeed, extensive research has found that stocks receiving disproportionate media attention often underperform significantly in the long run. Investors chasing such attention typically pay excessive prices, driven by hype rather than solid financial fundamentals.
As legendary investor Benjamin Graham wisely said: “In the short run, the stock market is a voting machine, but in the long run, it's a weighing machine.” In other words, while short-term stock prices reflect popularity and temporary market sentiment, long-term performance ultimately depends on the underlying strength and actual value of the business.
Better research takes more than six minutes
Can a few minutes spent looking at today's price chart realistically provide meaningful investment insights? Probably not. Real research involves understanding the company's core business, long-term profitability, financial health, and broader industry trends. Investors should consider management quality, competitive positioning, and economic resilience.
A structured checklist might include examining earnings growth, debt levels, market position, management experience, industry outlook, and specific risks the business faces, providing a clear and thorough foundation for informed decisions. Six minutes simply isn't enough for that task—at least not to do it well.
The researchers also found significant differences among investors: while a majority rushes impulsively into trades, a thoughtful minority does conduct more extensive, structured research—and their approach likely delivers better long-term results.
Simple ways to strengthen your research process
The solution to impulsive investing is straightforward: adopt simple but disciplined guidelines. Risks can be significantly reduced with just a few strategic rules:
- Strategy over impulse: Follow a clear investment plan, defined by your goals and risk tolerance, rather than fleeting headlines.
- Fundamentals first: Always examine key metrics like earnings growth, debt levels, and valuation (price-to-earnings, price-to-sales).
- Risk awareness: Know your stocks' volatility and market exposure, which can help protect you from costly surprises.
- Maintain a watchlist: Rather than jumping impulsively into trending stocks, track a curated list of carefully researched companies for long-term consideration.
- Diversification: Spread your investments across multiple industries, geographies, and asset classes to mitigate single-stock risk.
A reflective approach to investing
Stepping back, it's fantastic that investing is becoming more widespread and accessible. Everyone deserves the opportunity to build wealth through financial markets. Yet, investing carelessly—without sufficient research or strategic clarity—often leads to avoidable losses and unnecessary disappointment.
Ultimately, the aim of investing isn’t excitement or short-lived thrills, but consistent, sustainable growth. A patient, structured approach is how real wealth is built.
As behavioral finance reminds us, awareness of our own biases and limitations is the first step toward better decisions. Remember that great investors aren't necessarily smarter—they simply manage their biases better.
Smarter habits mean safer investments
Your money deserves better than just a quick glance. Picking single stocks intelligently takes more than six rushed minutes, but the payoff in improved returns, reduced stress, and greater confidence is substantial. With a structured, patient approach, you can truly unlock investing’s long-term potential.
As renowned investor Warren Buffett wisely observes: “The stock market is a device for transferring money from the impatient to the patient.”
Let patience, prudence, and discipline guide your investments—and watch your financial future flourish.
Note: This article references findings from the research paper by Professors Toomas Laarits and Jeffrey Wurgler from NYU Stern School of Business, titled "The Research Behavior of Individual Investors."