What Do You Know About Investing?
Hopefully, everyone is telling you to be careful about investing.
There are no guarantees when you invest. If you are looking at investing in company stock, remember Blockbuster and Kodak. Things happen. Things change.
You may hear about rental property being a good investment. But there are major points to be aware of, along with the major capital requirements. You need rental occupancy to drive your returns. So, pay attention to location, loan rates, rent potential, and maintenance exposure.
There are safer options for investment. Banks and insurance companies offer certificates of deposit and money market accounts. Those options have lower but more consistent returns than the potential in the stock market with much less risk.
Learning various options for investing your accumulated savings will be very important for helping your money grow over time.
Most financial advisors will suggest that you allow others to use your money to gain a profit for yourself.
The option you choose to use for investing can be qualified by your risk tolerance, which is the potential for loss. Can you afford to lose that money? Or do you need it to pay your bills?
Making Observations
You can ask friends or family what they know about investing. Then ask what they are investing in themselves. You might get two different stories. Or you might get some valuable suggestions to consider.
New technology or medical research are tempting topics for investments. But learning who will be successful with those changes can be mystifying. Until you have more experience and better resources for research, I suggest you stay away from high-risk stocks and consider more stable stocks with established companies and investment options hosted by banks and insurance companies.
That is my insight, but you can make your own observations.
Why Do Companies Exist?
“A going concern is an accounting principle that assumes a business will remain operational and meet its financial obligations for the foreseeable future.”
Working as an accountant, I had more information about my employers than most of the employees as to the company’s financial condition. Of course, we all want our employers to be operational and willing to keep all the employees.
However, not all companies do well, even if their stock is publicly traded.
Most companies are started by an individual or a small group of individuals with an idea and a business concept, sometimes referred to as a business model. If they find success and grow faster than financing can keep up, other investors may buy into the ownership. More growth often leads to becoming a publicly traded stock, which means that you or I can buy shares of stock and become part-owners of the company!
Of course, the original entrepreneur started the company to provide a service or product that could produce a profit for them. They wanted to be the boss!
And that might be a good goal for you to strive for. I bet you would make a great boss!
That goal, though, as most entrepreneurs discover, is filled with challenges and a steep learning curve for dealing with legal steps, government reporting, and the accounting requirements to please lenders and investors.
On second thought, maybe it would be easier to just own existing company stock! Or invest in Certificates of Deposit or open a Money Market account.
Does It Matter to You?
You have thousands of choices when it comes to buying stock. Therefore, I suggest you look at buying ownership in companies you know and you like their service or products.
Where do you shop? What do you like to buy? What services do you appreciate? Look for the company name that provides those products or services. Are they publicly traded?
Investing can be as simple as that.
Qualifying What You See
Pay attention to the news. Some events may affect the companies you are considering for investment.
Watch for management changes, changes in the way the company is being run, and what is made public about their financial results and forecasted sales and profits. Being publicly traded means making the public aware of their financial conditions.
Watch cultural changes in a company. Is customer service still a service?
There are many ways to qualify potential investment options. Ask around, study the references made in the news, and do your own research or reading to know who will make a good source for current information about the stock market.
Profits for Health
Every company needs profits to be a going concern. Profits keep investors happy and banks willing to loan money for expansion. Profits represent health in a company.
Technology start-ups, like AI and biotechnology, grow with investors who believe they will become profitable and be able to get huge returns on their original investment. They do not make a profit for an extended period. That is why they are referred to as high-risk investments.
Some will say “high-risk, high returns”. But be prepared to lose all of your investment if they fail on their promises. That is the real meaning of high-risk!
Watch for Who Benefits
Some CEOs for publicly traded companies are paid extremely well for building returns for investors and growing sales and profits.
There is a lot of stress put on employees and managers to deliver on the CEO’s promises. But if the employees are not getting a fair cut on those increased profits morale will suffer.
CEOs who center on short-term profits will create a problem for the long-term welfare of the company.
Look for consistent profits over the thrill of fast-growing profits. Stock value will be more consistent.
If you are young and willing to risk a good portion of your investment for potential loss, you might find high-risk stocks rewarding, but the occasional pull-back will make you nervous!
Like it or not, investing will be necessary to grow your savings beyond the small return on your savings account.
Maybe you will accrue benefits that you can pass along to those you love!