We usually go to our stockbroker and ask for which investments/companies are best to invest our monies. These stockbrokers will suggest some for us to be included in our portfolio. This is not bad though and is even better than those who never make any effort to ask. There is great wealth creation in new companies as well as great loses. All these up and down movement of wealth depend on the investors’ knowledge about what he is going invest his money. In the world of investment information is very valuable than the price of the stock.
Therefore, what do I need to know before committing any money?
Knowledge about the record of accomplishment of the management. In your quest to invest, the main product you are investing in is the management thus management is key in your financial success in that company. Check to see how many companies they have been able built and how many have survived the bad times of the economy. Having knowledge about these things will help assure you of the level of commitment you must give.
Checkout for salary they are going to pay to themselves. The money you are going to invest is not for fashion sake but you need something in return. Whenever you identify that a chunk of investor’s money will go into payment of salary then back off because there will be nothing left for reinvestment into capital assets.
Another area to consider is to compare that company to similar companies in the same industry. In view of this, you can understand how vibrant your company will be in terms of its growth and survival. The future of that particular industry need not to be overlooked because I do not think you will want to invest for few years and quit if your company is doing well.
Try as much as possible to analyze the financials of the company especially its debt to equity ratio. This is important as it help tell you about the company’s debt level as compared with the shareholders funds. In an event where the debt exceeds the equity/shareholders fund, it means your investment is going to pay for debt.
Lastly, read more about the company and seek professional advice before committing yourself to it. Statistics shows that every ten companies started in their year only less than five survive their fifth year. This does not mean you need to be too careful when investing but be smart and vigilant.
By Asante Isaac
By Asante Isaac