A lot of people who are learning how to invest money wonder how they can learn all they need to know to do well at it. These steps should set you on your way to learning how to invest for your future.
1. Set Up a Brokerage Account: Setting up an account often includes sending in a check and proving your identity. Once you’re signed up, you can keep track of your investments in one place and also use their research tools. Then, it’s time to start researching.
2. Look Around You for Investment Ideas: You can discover ideas from products you use every day or from the mall. A class of schoolchildren liked a particular pen, researched the company, found the company favorable, and then bought stock in the company with their play money as part of a school project. The stock increased, and the children “made” money. The children discovered a good product, and you can do the same.
3. Research: Before you buy into any investment, do research. One of the world’s greatest investors, Warren Buffet, says you should examine a company you want to invest in as carefully as you would if you were going to buy the entire company. Read on to learn of specific items to research.
4. Look for Strong Income: Every company will benefit from having high profits, low debt and lots of cash. You can’t go wrong there. If one company spends $1 million to make the same $15 widget as a company that spends $4 million to make the same widget, you will want to buy the company that spends $1 million.
5. Seek Insider Stock Ownership: When I research a stock, I look for insiders to be invested in the company. I do this for two main reasons. 1) I figure they want to make money and will work hard on the company if they are invested in it. 2) They have the inside knowledge to know if this product/company will do well. I’d say this is an important aspect – like icing on the cake – rather than one of the main reasons to buy into a company.
6. Seek Company Buybacks: If a company is buying back its own shares, then that means fewer stocks in circulation. The benefit of that is a higher earnings per share if the company’s earnings increase or remain consistent.
These tips should help you get you started on your research. Once you have the tools to research, you’ll have the freedom to make your own decisions instead of relying on possibly bad advice.