How to spot a good investment If you want to get wealthy, then you better
start thinking of making great investment choices.
But how do you do that?
Today we share with your invaluable tips on how to spot a great investment.
But, before we do so, why don’t you tap the subscribe button and hit the bell icon
so you never miss out on any of our amazing videos.
Now, let’s begin, shall we.
The fundamental for all good investments is that they should be profitable.
Let’s talk about the other factors to consider.
Let’s start over here;
10) Consider New Markets Everyone follows the same trend and sticks
to the common investment routes on the US stock exchange.
There’s nothing wrong with this, but it can limit the options and it is where every
Rick and harry is looking.
Instead, you can expand your horizons to other boundaries and you could end up discovering
great opportunities.
We’re not saying to ignore the US market entirely, but look into other regions too.
You will be surprised at what opportunities are out there.
Follow the rest of the tips on this video and you won’t go wrong.
09) Get a Chart Analysis Whether you want to invest in stocks or trade
currency or whatever other asset you will need to analyze the chart data.
All sectors show the movements of the prices over time and by analyzing it you will be
able to understand and track the asset over time.
Spotting a great investment requires one to have the skills to analyze the charts properly
and use the analysis report to identify the opportunities.
By using a chart analysis, you will also be able to know the investments to skip.
Many investors today use indicators such as the average price movement and so many others.
It may sound complicated but there are so many apps that make it so much easier.
A chart analysis will also help you to know when to invest and when to sell.
The golden rule is to always buy when the prices go down and sell when they go up.
08) Get Advice If you’re a beginner it may be hard to know
where to start as you search for investments worth putting your money.
Many people don’t have the time to do the needed research or take on any of the tips
listed here, if this is you then you can hire an expert to advise you.
Of key importance if you decide to go this way, is to take advice from people who have
a proven record of making great investment decisions.
Don’t shy off from asking for numbers.
Ask them straight up what they have done in the past and how much they have earned for
their clients through managing their portfolios.
To make sure they’re not all talk, ask for some proof.
They may not be able to show you everything but they can at least provide you with some
solid evidence of their abilities.
Also don’t get information from online blogs and forums.
Identify an expert with experience and set up a meeting which could be in person or virtually
depending on how they work.
This could cost you some money, but it’s one of the safest ways to go about investing.
07) Watch the News The best way to find out which companies are
the best to invest in is by watching the news.
Create a routine of periodically watching the news whether it’s the first thing you
do in the morning or whether you prefer to set automated notifications on your phone
from the news apps, you have to stay ahead of financial news.
If you don’t want to blindly jump into a trend without the right information make this
your daily habit.
By doing this, you will be able to find new opportunities and make more informed decisions.
Today in the modern world we live in with multiple news sites, apps, and social media,
it has never been easier to do so.
06) Find Out How the company Makes Money They say successful businesses are those that
have an easy to understand business model.
The way a company makes money shouldn’t be complicated.
It should be as easy as one plus one is two.
For example, Company X manufactures Product A and sells at price B through channels Y
and Z.
If you are finding it hard to understand how a company works and its revenue streams then
leave it at that and look for other companies.
You should also be able to identify the major cost inputs for a company.
For example, a tyre manufacturing company is greatly affected with the pricing and availability
of rubber.
I bet you are wondering how this information is useful, right?
The reason behind understanding a company’s business model is the fact that this information
will help you understand when to buy or sell the shares.
For example, Warren Buffet doesn’t invest in oil companies but he invests in freight
companies and often adds his investment amount whenever the oil prices go down and create
favorable conditions for companies in the sector to be more profitable.
Hope it all makes sense now.
Let’s go on to the next tip.
05)Look at The Dividend Rate Policy Every company that has gone public has a dividend
policy.
Go ahead and read through the fine print which should be posted on their official website
and find out their dividend rate and the payment terms whether it’s yearly or quarterly.
This will indicate how much you could possibly earn at the end of every period from dividends.
Choose companies with a higher dividend rate and a more frequent payout term that is quarterly
or monthly, though monthly dividend payouts are very rare to get.
So why is this so important?
Well, by buying shares there are two ways you can earn money, one is through the capital
gains once the share price appreciates in value and you sell them at a higher rate or
through dividends.
An attractive dividend policy will have you smiling all the way to the bank!
Also, great companies have a history of making their shareholders happy.
They have history of increasing the dividend rate annually rewarding them with more money,
year after year.
In other words, you want to put your money where the execs running the show have your
best interest at heart.
Good companies have a history of returning surplus cash in the form of intelligently
executed share repurchase plans or a dividend that grows at a rate comfortably in excess
of the broader rate of inflation in the economy.
In other words, you want to go into business with executives who have your best interest
at heart.
You want them to nurture an environment that measures success by how the firm does for
you, the owner, as well as other stakeholders such as employees.
04) The Company Has High Returns on Capital Once again you have to go through the numbers.
The ability of a company to generate returns over a longer period of time is determined
by the returns on capital the company generates.
The best companies are those with high returns and low debt rate.
In short, the companies that have the ability to churn out cash from the available capital
and resources without having to borrow much money.
03) Durable Competitive Advantage Find out the industry the company is in then
look at the products or services it manufactures.
Then look at the customers who consume the products or services, are they loyal to that
particular brand?
Is it an industry where consumers are specific?
If so, what position does the company hold in the market?
Does it have a strong competitive advantage?
Do people prefer the service or product to other companies?
Do they hold trademark secrets to their manufacturing process?
For example, Coca-Cola, which has manufactured the same recipe for years and no other company
has been able to create the same exact product.
Well, Pepsi has really tried, but that’s an argument for another day.
The main point is to choose companies with a strong competitive advantage this will make
your investment more secure as the chances of the company facing high competition and
eventual losses in minimal.
02) Shares are Sensibly Priced The best businesses in the world can be the
worst investments if the price point isn’t right.
Price is so important as it can determine whether you will make a profit or loss from
your investment, especially if you are investing for the long run.
Most investors look for underpriced assets buy them in bulk, then sell them when the
real or actual price resumes making a substantial profit.
If you buy an over-priced share which could have been valued that way due to market forces
or speculation, you stand a chance to lose a lot of money when re-valuation occurs and
the real value replaces the over-priced one.
The ideal situation will be to find a company whose share price is fair or under-valued.
01) The Company Can Survive Tough Stretches The company has the ability to survive economic
turmoil.
Changes in the economy are inevitable and they don’t announce when they want to hit
hard.
Look at the current pandemic; the Corona Virus and how hard it has hit the entire world threatening
a global economic recession.
It may be impossible to mitigate such risks as they are beyond the control of the executives
in the companies.
But you can research the history and see how these companies have handled such situations.
For example, the financial crisis of 2008 is a great research point.
Look at how the company was affected during the period and how it handled the situation.
Look at the period it took, the measures the company employed and judge whether it really
has the capacity to survive the inevitable tough stretches.
Some companies have still not fully recovered from the crisis but some were able to recover
within record time.
We’re done with the top ten tips on how to spot a good investment, but it won’t
hurt to add one more.
The least considered factors which is of key importance is the management team.
90% of the companies that are led well become successful.
Therefore, it is important to look at the top management, find out who they are, what
experience they possess and their history.
Have they run successful companies in the past?
Do they have a good track record of transparency?
There are so many businesses with wonderful economics but horrible management, what you’ll
find in such cases is that the admirable financial performance is short-lived.
Managers who don’t have integrity will take advantage of the company through over generous
salaries, obscene options grants and questionable deals which could run down the whole business.
As you decide which company to invest in, take a hard look at the key decision makers!
This is one rule Warren Buffet lives by, and just see how far it has brought him.
Thank you for watching, we hope you enjoyed the video.
If you did, give it a thumbs up, if you didn’t let us know in the comments what we should
have done better.
As for subscribing you should hit that red button before you forget.
And while you’re at it turn on notifications with the bell icon so you never ever miss
out on our incredible videos.
We hope you learnt a thing or two, share the video with your friends and family who want
to start out or are struggling with their investment journey.
Thanks again!
Have a wonderful day.