by Marcus de Maria, Founder and Chairman, Investment Mastery
The subject of making money has been very linear up until the last decade. Investing in the stock market is nothing new to wealthy, well-established people. However, buying shares is now much more accessible and more people are doing it. Before making any decision, it is important to recognise the risks and ensure you are making the right investment for you. Here I will share what you need to consider when buying shares.
What are their ethics?
Research is imperative before making any investment. When looking to buy a share of a company, assess whether they are legitimate and are not involved in any illegal activity. Checking the company’s history and operations will give you peace of mind and ensure you are making the right move.
Is this company accelerating?
Is this a big company? Is it quite niche? Are they established in the mainstream and making lots of noise in the press? Knowing the size of the company will also inform you whether you should buy that share. It’s not essential that they’re a huge conglomerate like Google or Apple, but it does provide reassurance. For example, if they’ve not been growing for a while, it might not be worth investing in, but if they are constantly making gains, then it indicates they are a more reliable investment.
How Profitable is it?
May seem obvious, but profitability is a key component to consider. If it’s an established company then its financial performance should be easy to find, if the opposite is true then avoid. Comparing profitability will give you the best idea of what company is more likely to give a good return, so taking the time to check is highly encouraged.
Health = Wealth
Are its finances in shape? Like the above, evaluating the company’s performance and how much profit they are making will guide you to making your decision.
What is their stock value?
This is not something you should miss. The value of a company is referred to as a “market cap.” That means, for instance, if a company has 5,000 shares and those shares were worth $200 each, the company would have a market cap of $1 million. Essentially, the higher the market cap/value of the company, the less room it has for growth. When learning stock trading, you’ll know that when the stock prices of big companies drop, it is a great time to buy because these big companies generally bounce back. When they do, good profits are made.
Is it worth it?
This is the ultimate decider. Weighing up your options and combining the tips above should give you more certainty. Like anything, practise is most integral to your wealth building journey, so take some investment classes or alternatively you can go through a broker or a financial manager to take care of it for you.
Get started
Hopefully you have digested this information and found it useful. Building wealth is not an instant win. It takes time and an understanding of the markets, the unpredictability and the risks. If you follow this advice and be careful about your decision you will be well on your way.
