Monday, August 27, 2018

Investment is just like Marriage. Full guide before investing in stocks - Financially Pro(UPDATED)

"What?, How? Investment is just like marriage? JD you are really gone mad!"  my friend said surprisingly

"Wait a minute, let me explain it in more detail" I replied

 Investing can be connected to marriage in so many ways. Whether it is for analysis of the company, reviewing management, forecasting future profitability, checking fundamental of the company.

"I know that this all are important things to check before investing. But I still don't understand how you connect it with marriage?" he said

All the qualities seen in other one before marriage also needs to be checked before investing in stocks.

So let's check all the qualities which generally most people check before marriage.
  • Behaviour 
  • Loyalty
  • Understanding
  • Trust
  • Loving
  • Respect

"So, how this qualities can be useful while investing in any company ?" he asked again

If you are going to marry, do you check other ones family member? What they do ? How they are? 

"Yes" he replied

Likewise before investment it is very necessary to check industry of the particular comany, otherwise you won't get idea if anything takes place with company.
Without having idea of industry it is difficult to predict company's growth.

"So, how can i get industries data?" he aksed in interesting tone

Firstly check which company you need to research about and industry to which it belongs.

Also read:

Research about industry, growth prospects of it. Who are big players in industry? 
You can google about it. You'll get huge information about industry. 
Most important is to check whether there is any regulatory body established by goverment to monitors it?

If yes then you should understand about that regulatory body too.

Check overall performance of industry and compare it with company.
Does company performs better than industry or does not not match with industry standard also ?

" How do you think about this things in detail way and so easy way ?" My friend asked

" Only because I love to talk about personal finance and Investment" I replied with a big smile

" Answer my one question?"
" Say JD"
" You like which type of girls?" 

" Shhh speak slowly JD, if my mom will listen then again she'll start speaking about why don't I marry and all " he told in a very quite tone
"Ok, but answer my question fast " i also replied slowly

" I love girls who are honest and can be trusted. I find this quality to be most important." He told with a smile

" Not only you, almost all the people find this to be important and also for investing purpose."

"JD, not again. Now I don't agree with you. How trust helps in Investing. Is it like to trust ourself? "
"No no let me speak first"

It is very important to review management before investing. They are the people who can take company to the next level.

According to Warren Buffet

"Investor should check that management should possess integrity, intelligence and energy."

If management is not ethical and does not follow its own rule you should think thrice before investing.
Management view about the company, how motivated they are for their own company is very important.
If management does any cheating, it will effect company in long-term.

Also understand: 

"But how do I know whether company's management can be trusted or not" he said eagerly

Check that whether management is able to fulfill it's own standard set by them?

Do they have any case filed against them.?

Any action done by them which effects company's overall profitability.?

Does top level management is taking more remuneration inspite of company is making less profit?

"JD I understood this, still anything left?" 
"Yes, there are few more points to be covered"

Before investing, have all details regarding company's product, it's market growth etc.

You can read Annual reports, newspaper, business magazine to have idea about it.

Don't invest in any company by just it's name.
Don't go with what others say.
Do your own research then select company.

"Ok JD, now I am more clear on investment but still if had any doubt I will harasse you soon." He told by showing readiness to go

" Most welcome brother " i replied with a smile.

"By JD and don't forget to write about our conversation in your blog" he asked

" Sure, meet you soon " i replied 

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