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Investing is one of those tricky things that people just sort of do but don’t talk a lot about. Tech start-ups and aspiring entrepreneurs often understand how to get investors but don’t really think much about how to do their own investing. It’s important to understand the best approaches to investing and not wasting your money on a company that will fail within the first year.
To make things easier for you, here is a step by step guide on how to accomplish your investing goals.
Step 1 – Why are you investing?
No one wakes up one day and says “Hey, how about I take a grand and invest in a company?” No, often we have reasons why we want to invest. Some of those reasons can be:
~Saving for retirement
~Travel and life enjoyment now
~Increasing your personal wealth
~Support a company you are passionate about
~Support a business that will bring plenty of jobs to your area
Whatever your reasons, writing them down helps you with your goals. Always keep those goals at the forefront as you move into the next step.
Step 2 – Research the company
This is probably the most time consuming of all the steps. You will need to have a company in mind that you think may be a good fit for you and your investment timeline. There are some traditional aspects of research, such as:
~Stock upgrades and downgrades – Upgrade and downgrades can affect the price of stock. When the stock is upgraded (ie: taken from “hold” to “buy”), it usually results in a higher price for the stock. When the stock is downgraded (ie: changed from “hold” to “sell), it usually results in a lower price for the stock. When watching for trends, the downgrades and upgrades can help you determine when to buy and when to sell.
~Stock prices – are they growing? At what rate?
~Media mentions – are they utilizing the news to share what is happening within their business structure?
~Financial Performance – is it making a profit? Is it sustainable? How are they repaying their debt?
~Business Cost – are the costs outweighing the money it makes?
~Dividend History – Has there been a steady increase of dividends?
Be mindful that if you begin an investment with a startup, they will not have some of the historical trends you would research. That can create a higher risk but look at their business plan and leadership, that can certainly help with determining whether you should support the business.
Step 3 – Think Outside the Box
If you think you are done researching, take a moment and reconsider. We highly recommend taking the time to review some unique things about the company you are considering. You can look at the following:
~Company Culture – does it coincide with your own visions on how a company should be run?
~Upper Management Style – do you agree with how the company is managed?
Company culture is important when you are investing in a company. Reviewing mission statements, looking at ethics statements, and asking about the work environment are just a few things you can research to understand what the company is doing for its employees.
Upper management style also plays a role with how it handles working with employees. Is there an open door to new ideas no matter what position one holds? Does the management team embrace change or strive to keep things as they have traditionally been done before? What is your expectation when it comes to how upper management runs the business?
Step 4 – Talk with the CEO
Even though you have done all this background work, there is nothing quite like talking to the CEO to bring everything together in your mind. Things to consider is:
~Does the CEO make him/herself available to potential investors?
~Does the CEO speak passionately about the company?
~Does the CEO offer information to back up his/her claims about the company?
~Do you vibe with the CEO?
If you are unsure about anything about the company, the CEO can help you figure out if you are making the right decision. Don’t be shy!
Step 5 – Talk with Customers
If you think you were done at the CEO, nope! You should also talk to customers to get a feel for how their service or product helps them in their everyday lives. Why do they continue to support this business? Do they feel like the business cares about them? If the customers are loyal, that’s a fantastic sign for a good investment.
Step 6 – Plunge In
If you haven’t been able to really decide after the research has completed, it’s best to find another company to research. But, if you feel like the company is the perfect fit in your portfolio then you should get your investment in.
Investing can feel difficult and hard. Really, it’s not that hard when you consider why you are investing and what goals you wish to accomplish. You would work just as hard at your own business or workplace for a paycheck, the same attitude should go towards investing.
