Know your numbers when investing in stocks
Investing into stocks is a nice thing because you don’t have to worry about many of the every day struggles that business owners face but you also get to keep the upside when they make money. The downside is that unless you really understand the business model and strategies behind the company your buying stock from, you might take a big hit if that business doesn’t do well. This post has been written to help you minimize risk when choosing a company to invest in. Keep in mind, Lehman Brothers were in business for over 100 years and went bankrupt in 2008 when the stock market crashed so investing in stocks is risky business and there certainly aren’t any guarantees. Hopefully after reading this post you will be able to analyze the companies you invest in a little better and will feel more confident in your decision making progress.
While it’s true that old numbers don’t equal future results, they are still certainly a good place to start. If you’re looking into a business that has been around for a long time, take a look at their stock chart history. All major stock trading websites like TDAmeritrade.com and scottrade.com are going to have tools you can use to lookup the history of a stock and how it’s performed since the day it was introduced to the market. Sometimes you can see patterns over the last 10 years of a company and how their stock prices have either fluctuated or declined. If the companies stock price has steadily decreased over the past 10 years, be careful. Unless they have plans of being bought out by another company or have some crazy marketing/advertising plans for the near future, they might keep going down. However, this can also be a great opportunity to buy stock in a company at a great price before they start crushing it in their market again. On the flip side, you can check and see if the price of the stock you’re looking to buy has been steadily increasing over the past few years. If it’s going up, and they have no signs of flat-lining anytime soon, this could be a good time to buy that stock before it jumps up in price. The most important thing before buying any stock is to get as much information as you possibly can about that stock. Most major companies send out a monthly or quarterly news letter to share holders to inform them of how the company is doing and luckily for us, most of the time these news letters are available to the public. After all, anyone can scan a copy of that newsletter and post it on the internet anonymously making it available to the public. Make sure the information you’re getting is from a credible source because for every 1 honest article out there on the internet, there’s going to be 10 that are full of misinformation.
Stocks are always risky business and we highly recommend you get a professional adviser to help you with reaching your investment goals. One fair warning we will put out there is that financial advisers usually work for a major company. The goal of that adviser and that company is to make money so you might not always be getting the best advice possible. I do feel that most financial advisers usually have your best interest in mind but they can only give you options that the company they work for allows them to give. It used to be said that fiduciaries were the best option for investors because they have a legal obligation under state law to give you the best advice they possibly can while other financial advisers that aren’t fiduciaries don’t have to legally operate in your best interest. The problem with fiduciaries is that they can switch hats between a fiduciary and financial adviser at any time and still be operating legally under state law so they aren’t a sure thing either. The best thing you can do is educate yourselves on the stocks you want to get than interview multiple financial advisers & fiduciaries, and see who is going to be the best fit. Just make sure that you completely understand your financial advisers fee structure because even a 1% difference in fees can mean you’re going to take 10 years longer to accomplish your goals.