Want to learn about equity research? Start managing your own equity portfolio, sort of…

One of the best ways to start understanding what it is like to be an equity analyst is to start following the markets and putting your ideas to work. Now I am not suggesting you go find a broker and hand over your life savings. Most of you, as I was at that time in my career, probably don’t have much in savings to risk in the stock market, particularly during these challenging economic times. But you can start to get a feel for equity trading and research by tapping into one of the many virtual stock markets on the web, like the Virtual Stock Exchange from Market Watch (https://vse.marketwatch.com).

These tools use real-time data from the exchanges and allow you to place bets; both long and short positions. If you don’t know what this means, use the dictionary on Investopedia (https://www.investopedia.com; a great website for investment definitions and terminology). OK, so you’ve got your account set up and your virtual cash in hand. Now what? Well, you need to find some investments and start placing bets.

I always recommend starting with a short list of companies, say 5 or 6, to start. Try choosing public companies that you find interesting or that specialize in an area you are familiar with (neuroscience, diabetes, oncology, etc.). Review the company’s website and read their latest annual report (10-K). Most companies post their 10-K in the investor relations section of their website. Alternatively you can download annual reports from the U.S. Security and Exchange Commission’s website using the Edgar system (https://www.sec.gov/edgar.shtml). The annual reports are packed with information, from the company’s history to the operational risks of the company. You may also find information about upcoming events (like impending clinical trial results) which could greatly impact the company. Oh, and of course, it will contain all the company’s financial information.

Professional equity analysts do much more research on the companies than merely studying annual reports, but it is the best place to start for a novice. So I recommend doing some reading and start building your investment strategies for the companies you choose. Then, put those virtual dollars to work. It’s fun to do this as a group, so find a few friends to play the game. Within a few months, you will start to see that to be successful in investing you need to do a lot of homework and have a stomach of steel. At least in the virtual world, if you experience a big loss it only becomes a running joke among friends.

Recommended readings: Biotechnology Valuation: An Introductory Guide by Karl Keegan The New Buffettology: How Warren Buffett Got and Stayed Rich in Markets Like This and How You Can Too! by Mary Buffett and David Clark Martin Zweig Winning on Wall Street by Martin Zweig The Little Book That Beats the Market by Joel Greenblatt The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein I don’t mean this to be an exhaustive list but just a few examples to whet your appetite to the techniques and philosophies touted by a few well-known investment professionals.