While gain is always at the forefront of any investment decision, it is never an overnight route to success. It takes long term investments, persistence and planning to ensure you secure a pleasing result.
To prepare yourself though for those fail-safe profits, there are two main questions you need to broach. Are you investing within your safety zone limits? And more importantly does the company you've favored promise to grow?
COMPANY SPECIFICS
So the company you're considering sounds good on paper, but to truly play it safe you have to cover all bases.
Is it solid enough to bag a bright future? Or is it likely to crumble when faced with change? Paying attention to a few key factors will help shed some light on whether the company is likely to deliver.
Brand basics: To start with, we must study what the company's selling. A solid brand is not just about a strong product. It's a combination of how well the company deals with both competition and the consumer.
Do the math: The earnings of a company are always important. Doing a background check on the last 10 years profits gives a clearer picture on not only how much cash the business brings in, but also on how it's managed to fare during the economic downturns.
Cash flow: When you're done figuring out the financial specifics, it's time to ask where the profits go.
Plenty of businesses start out by borrowing money. So it's worth it to ask if a company has done the needful and paid off its debts. A business which has managed to do this and still has some set aside for future growth is far better than one with just enough profits to keep it afloat.
TRICKS OF THE TRADE
Once you've settled on your stock choice, it would be wise to pay heed to a few precautions.
Timing is everything: It's never a good idea to invest in times of uncertainty. While some take the contrarian approach, the average investor is an antsy one. When emotions run high these big spenders are bound to drop their stock.
Keeping abreast of the world's economics and industrial affairs will keep you updated on investors' likely antics.
The big picture: Although faster results always sound more tempting, with stocks it's the riskier road to take. Investing long term in a solid company is not only safer; it'll also ensure you get your compounding interest benefits.
Cut cost: With stocks there is no happy hour. Though it's best to grab shares at a lower price, make sure you don't jump the gun in a buying frenzy. Spread your investments and add more over time, or you might end up with less than you'd hoped.
Once you've realized there are no shortcuts, you can easier put these tips into play. Though the time for results may seem lengthy, when the profits roll in you'll find it was well worth the wait.
Kevin is among other things.. a fan of old school fundamental analysis of stocks and is madly obsessed with finding the best stocks to invest. A keen giver of free advice, Kevin evangelizes long term investing and on occasion can be disparaging of pure technical analysis and its proponents.