Query: Does doing your “research”/“homework” on stocks make any sense?

Relevant passages:
 <=SEP=> "Doing your homework means to perform what's more accurately called ""fundamental analysis"". According to proponents of fundamental analysis (FA), it is possible to accurately determine how much a stock should trade for and then buy or sell the stock based on whether it trades above or below this target price. This target price is based on the discounted anticipated future earnings of your stock, so ""doing your homework"" means that you figure out how much future earnings you can expect from the stock and then figuring out at what rate you want to discount those future earnings (Are 1000 dollars that you'll earn next year worth $800 today or $900 or only $500? That depends on the overall economic and political climate...) So does this make any sense? Depends. I'm aware that there are a lot of anecdotes of people researching a stock, buying that stock and doing well with that stock. But poor decisions can at times lead to good outcomes... EDIT: Due to some criticism, I want to expand on a few points. So, is homework completely for naught? No!"

 <=SEP=> "TL;DR: Sure, ""do your own homework"" is sometimes a cop out. But that doesn't mean we shouldn't do our homework. I agree that in many cases this is a cop-out by commentators. However, even if you believe in perfect market efficiency, there is benefit in ""doing your homework"" for many reasons. One of which you already mention in the question: different stocks all with the same ""value"" might have widely ranging risk. Another factor that might vary between stocks is their tax consequences. High dividend stocks might be a better fit for some buyers than others. One stock might be priced at $40 because there is a small chance they might get regulatory approval for a new product. This might make this stock very risky with a 20% of being $150 in 12 months, and a 80% chance of being $20. Another stock might be priced at $40 because the company is a cash cow, declining in revenues but producing a large dividend of $0.40 per quarter. Low risk, but also with some potential tax disadvantages. Another stock might be priced at $40 because it's a high growth stock. This would be less risky than the first example, but more risky than the second example. And the risk would be more generalized, i.e. there wouldn't be one day or one event that would be make or break the stock. In short, even if we assume that the market is pricing everything perfectly, not all stocks are equal and not all stocks are equally appropriate to everyone. Sometimes when we hear an analyst say ""they should have done their homework"" they are really saying ""This was a high risk/high reward stock. They should have known that this had a potential downside."" And that all assumes that we believe in 100% pure market efficiency. Which many disagree with, at least to some extent. For example, if we instead subscribe to Peter Lynch's theories about ""local knowledge"", we might believe that everyone has some personal fields of expertise where they know more than the experts. A professional stock analyst is going to follow many stocks and many not have technical experience in the field of the company. (This is especially true of small and mid cap stocks.) If you happen to be an expert in LED lighting, it is entirely feasible (at least to me) that you could be able to do a better job of ""doing homework"" on CREE than the analysts. Or if you use a specialized piece of software from a small vendor at work, and you know that the latest version stinks, then you will likely know more than the analyst does. I think it is somewhat akin to going to a doctor. We could say to ourselves ""the doctor is more knowledgeable about me than medicine, I'm just going to do what they tell me to do."" And 99% of the time, that is the right thing to do. But if we do our ""homework"" anyway, and research the symptoms, diagnoses, and drugs ourselves as well, we can do get benefits. Sometimes we just can express our preferences amongst equal solutions. Sometimes we can ask smarter questions. And sometimes we have some piece of knowledge that the doctor doesn't have and can actually make an important discovery they didn't know. (And, just like investing, sometimes we can also have just enough knowledge to be dangerous and do ourselves harm if we go against the advice of the professionals.)"

 <=SEP=> "The markets are not as information efficient as some might have you believe. But on the contrary, looking up what the aggregate professional analysts have said is also part of ""doing your homework"""

 <=SEP=> In fact markets are not efficient and participants are not rational. That is why we have booms and busts in markets. Emotions and psychology play a role when investors and/or traders make decisions, sometimes causing them to behave in unpredictable or irrational ways. That is why stocks can be undervalued or overvalued compared to their true value.  Also, different market participants may put a different true value on a stock (depending on their methods of analysis and the information they use to base their analysis on). This is why there are always many opportunities to profit (or lose your money) in liquid markets. Doing your research, homework, or analysis can be related to fundamental analysis, technical analysis, or a combination of the two. For example, you could use fundamental analysis to determine what to buy and then use technical analysis to determine when to buy. To me, doing your homework means to get yourself educated, to have a plan, to do your analysis (both FA and TA), to invest or trade according to your plan and to have a risk management strategy in place. Most people are too lazy to do their homework so will pay someone else to do it for them or they will just speculate (on the latest hot tip) and lose most of their money.