This is an excerpt from Dollar Scholar, the Money newsletter where editor Julia Glum teaches you the modern money lessons you MUST know. Don’t miss the next issue! Register on money.com/subscribe and join our community of over 160,000 scholars.


For the past few months, every second of my free time has been spent binging The Vampire Diaries. I dedicated my nights and weekends to Damon, Stefan and Elena, watching them hook up, break up, get back together, destroy Mystic Falls, save Mystic Falls, lose their memories, regain their memories, drink blood, swear not to drink blood, drank more blood, et cetera.

When I finished the series, I was finally able to begin my favorite post-show ritual: browsing the Instagram pages of the stars. I had resisted following the RST cast because I was afraid to see a spoiler. But now the floodgates are open! I can scroll all I want, combing through a decade of posts for clues as to what went on behind the scenes while the show was being filmed.

It’s similar to how I feel about corporate shareholder reports and earnings calls. There’s so much information out there, and I can’t help but get sucked in by the promise of finding clues to what’s going on behind the scenes.

Forget parsing old Instagram captions to pinpoint the exact moment Nina Dobrev and Ian Somerhalder split — if corporate docs can give me any tips on how to make more money, I should stick to my heart. Right?

In fact, let’s consult someone whose brain doesn’t been turned into mush by the CW.

Should I read shareholder reports for my investments?

I emailed Michael J. Garry, founder of Yardley Wealth Management, to get the scoop. He told me that publicly traded companies publish annual reports to shareholders “which usually look like glossy magazines.” Usually there is a letter from the CEO, financial data from the last year, the results of certain projects, market research, plans for the coming year and more.

“These reports can be very interesting and enlightening,” he says, pointing out that “people are looking forward to Warren Buffett’s annual letter to shareholders in Berkshire Hathaway’s annual report.”

Annual reports summarize the state of the company, but I have to beware – their intention is to entice shareholders and “look good”, adds Garry. For more objective and detailed information, I can consult the document that public companies are required to file with the Securities and Exchange Commission.

One of them is the Form 10-K, an annual report that Garry says contains detailed financial information “without the glossy photos.” Others include Form 10-Q, which is submitted quarterly, and Form 8-K, which is triggered when certain events occur. Deposits are available through EDGAR, the electronic data collection, analysis and retrieval system.

Reading these materials can be helpful, but it’s not something amateur investors like me typically need to spend the time on, says Michael Becker, chartered financial analyst at Hightower Wealth Advisors.

“In 99% of scenarios, you don’t need to pay attention to it,” he says.

As an individual investor, sifting through company financials for clues in the market is not a wise business because I probably shouldn’t invest a ton of money in individual stocks to begin with.

Experts generally recommend investing in low-cost index funds, which are baskets of different stocks or bonds that track a segment of the market, as opposed to stock picking. Index funds generally offer lower risk and more stable long-term performance than individual stocks.

“For someone who’s younger, buying and holding index funds for a while, there’s nothing you’re going to learn by [annual reports] it would change the strategy you have,” says Becker.

Although index funds are passively managed, there are professionally guided actively managed funds whose sole objective is to try to outperform indices over time. This is extremely difficult – the S&P Indices versus Active scorecard, which tracks the performance of actively managed funds against indices, recently revealed that around 79% of fund managers underperformed the S&P 500 last year.

They’re people with resources beyond my wildest dreams, so that doesn’t bode well for me, a vampire-obsessed reporter who snoops around the SEC website largely out of curiosity.

There is also a danger that being too informed could lead me to make unnecessary changes to my investment strategy. If I start getting into the weeds too much, I might be tempted to start trying to time the market — and “it’s probably a losing battle,” says Becker.

But if I have a particular business at heart, Timothy Chubb, chief investment officer of wealth management advisory firm Girard, says it’s not a complete waste of time to do some basic homework.

I might want to check out the investor relations section of its website, for example, and look for company recap presentations or recent conference slides. I should have an idea of ​​how the company makes money, its market share, and the dynamics of the industry.

Transcripts of income calls can also be helpful in this regard. Although they may require a bit of background knowledge to decipher, these transcripts can help me understand market trends from a business perspective, as well as how a company’s business strategy can change from quarter to quarter. Sometimes, if the leaders answer questions from analysts or journalists, there are also nuggets of economic information.

I just need to take everything with a grain of salt.

“Be very particular about where your information comes from,” says Chubb. “Deposits and transcripts are great because they come straight out of the horse’s mouth. This is not conjecture or opinion.

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The bottom line

There is a ton of information there. While it’s never a bad idea to know more about where my money is going as a shareholder, I should probably stick to my long-term investment plan and avoid getting bogged down in reports. annual.

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