Virtually every business professional one day wishes to cash in on a major investment. Indeed, for many, the allure of hitting one big score on the stock market is enough to motivate them for years to come. However, there’s a difference between making investments with the mere hope of return and studying the stock market to find investment opportunities that are actually worth your time. While each investment should, naturally, be taken on a case-by-case basis, there are a few helpful rules that will assist you in your decision-making process. Here are four factors that will determine if an investment is a good fit for your portfolio:
Company Track Record
True, some businesses and stocks seemingly come out of nowhere and suddenly experience rapid growth. However, it must be said that these cases are exceptions rather than the rule. Most of the time, it makes sense to vet a given business or stock based on its previous track record. If, for instance, it has shown steady progress over the past few months (or even better a few years) then, odds are, the prospect is worth pursuing further. There’s a reason why longshots like penny stocks so rarely come good, after all.
Certain businesses perform better in times of economic hardship than others. As such, if you’re looking for a recession-proof business in which to invest, you should first identify which industries are most adept at weathering economic downturns. Furthermore, changes in a given industry’s structure could indicate that those businesses are poised to make some sort of move, one way or the other.
What you want from a given investment plan should color the investments you eventually make. For instance, it’s wise for those planning for retirement to explore low-risk, dependable stock options that will ensure financial security. Alternatively, those looking for a more aggressive approach can take a few more risks. It’s important first to form your own personal budget and use it to guide your eventual investment path.
Everyone has specialized knowledge in some field. Whether you’re intimately familiar with sophisticated lab equipment like a sodium citrate tube or you know everything there is to know about vintage bicycles, professionals should look to apply their hard-earned knowledge when they start investing. It’s a smart play to first invest in companies and industries you know best. This will allow you to make informed decisions and prevent some potentially damaging financial blunders.
The Bottom Line
The difference between investing success and failure often comes down to hard work and research. Sure, it’s impossible to completely discount the element of luck when it comes to the stock market. Nevertheless, following your head will lead to better results than relying on intuition alone.