If you’re looking for investment advice, you may often turn to one of many so-called ‘experts’ for recommendations. Analysts, advisors and investment banks all have an opinion on which stocks to buy – but their advice may actually be no better than flipping a coin.
Share picks of investment banks would have resulted in nearly 5 per cent loss, says top CFD broker
InterTrader – to many the best CFD broker – has carried out research to determine how accurate investment banks really are when it comes to recommending shares.
Picking sixteen banks including Goldman Sachs, Barclays Capital, UBS, JP Morgan and Cantor Fitzgerald, the top CFD broker modelled the banks’ 270 share recommendations over the course of 2015. The CFD broker assumed holding period of 30, 90 and 180 days and the full year, beginning on the date of the recommendation.
Their results are very interesting. InterTrader found:
- If you followed all the share picks and held the shares for 30 days, your gains would have been just 0.8 per cent
- Their accuracy rate was 55 per cent: only just better than the flip of a coin
- The longer you held the shares, the worse your results. If you held them for the entire year you would have lost 4.79 per cent of your investment. The accuracy rate fell to 43 per cent
All in all, the recommendations from major investment banks were no better than you would expect from random chance – and in some cases it was much worse. Citibank propped up the table with an accuracy rate of just 14 per cent.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.