Tue 19 Jun 2007
Investments and How to Find Them?
Posted by Robin Bal under Investing , MoneyMatters , Risk , Stock MarketsAdd Comment
There are risks involved in all investing. The skill of investing is knowing which risks are worth taking, and which should be avoided. Finding and knowing which risks to take is the essence of good investing and the whole reason that investments can pay such a high reward. It cannot be done without careful research and analysis. You must give yourself every chance to make the right decision. Investing without carrying out sufficient research is like playing roulette. You are giving yourself virtually no chance of covering your investments and avoiding disaster.
There are certain steps you will have to take in order to give yourself a fighting chance of being a successful investor. If you are considering investing in company shares on the stock market, then you should be aware that all publicly traded companies must provide investors and potential investors with access to company financial data. This data is generally available from the company so if you are considering buying into a company, then get access to this information and satisfy yourself that the company is in a good financial state before parting with any money.
If you do research a company, and are taking a look at its financial position, then you should look back two to three years into the past. You probably don’t need to go back further than this but if you go back less, there may be important trends in the finances that you will miss. Take special note of the quarterly statements and the revenue and earnings per share.
You should be trying to identify trends in certain figures. While these are no guarantee of what might happen in the future it is undeniable that an upward trend in revenue and profits will be a positive sign to look out for.
Once you have satisfied yourself with the basic financials of the company and that the prospects of making good profits into the future are favorable you will be in a position to consider putting money into the share.
There is an ongoing debate over whether it’s preferable to buy shares that will increase in value or shares that pay good dividends and the answer to this question must always lie with the individual investor.
What must be remembered however is that there is little point in chasing dividends? This refers to the practice of buying a share just before a dividend is expected to be announced. The price of the share will already have taken the dividend into account so you will be paying for it in any case.