If it were easy to pick a good stock, we'd all be millionaires. Unfortunately, it's not that simple. How do you assess which stock investments are more likely to work for you? Reading the disclosure documents is a great place to start. These documents include:
Annual reports and quarterly filings
- One of the best sources of investor information.
- Tell you whether the company is making or losing money and why.
- Have information about the company's operations and financial statements.
- May also contain comments from the president or chief executive officer on how the company did over the past year, as well as industry trends and events that may have affected stock performance.
The company prospectus
- Published when a company issues stock.
- Has information you find in an annual report, including audited financial statements and a summary of the major risk factors affecting the company.
- A mutual fund prospectus may tell you how much other people have earned or lost on their units in recent years.
Press releases
- Issued when a company decides a change is important enough to be shared with the public.
- Investors should pay close attention to press releases from a company.
Company websites and other electronic communications
- Provide current news, as well as annual reports, quarterly statements, and past press releases.
- May include speeches and presentations by executives and analysts' reports.
- May offer conference calls with analysts as a webcast.
- Some telephone conference calls are opened up to the public and any investor can listen in.
What happens if any of the information a company tells you turns out to be wrong or misleading? The prospectus will tell you your legal rights to stop a purchase or to sue for damages. These rights are limited. That's why it's so important to do the research and choose your investments carefully.
Tip: You won't find a lot of history if the company is fairly new. Also, most privately held companies are not required to disclose information about their business activities. For information on these companies, contact the firm directly and ask for the information you need.
Remember: Only use high-quality, up-to-date information
A lot can happen within a company even in a few weeks or months. If you only look at an old prospectus or last year?s annual report, you won't really know what's going on.
Learn more
You'll find many documents at the System for Electronic Document Analysis and Retrieval (SEDAR). SEDAR is the official website where public companies file documents required by securities laws in Canada. Investors can search the SEDAR site by date, document type, company name, or industry sector.
To research past stock prices, you can get some information free from Internet sources such as www.globeinvestor.com or http://finance.yahoo.com. The Toronto Stock Exchange's Market Data website offers more detailed historical information for a fee.
To find out if a company is publicly or privately held, check with the Ontario Ministry of Government Services, Companies and Personal Property Security Branch. You can get information about an Ontario corporation, including its registered or head office address or the names of the directors and officers of the corporation.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.
