So you’ve decided to start investing in the stock market, putting your money into companies and hoping for the best. To best invest in companies you may or may not have ever heard of, it’s best to start with some solid research. While it may sound fun, even exciting, to throw caution to the wind and invest hard-earned money into some company that sounds cool, this type of battle plan is not well-advised. Keep in mind, you’re buying more than a piece of paper, you’re becoming an owner of the corporation. Therefore, digging in and finding out information about the company is the smart action prior to purchasing.
The president or CEO of a company is the first place to start in your research. Like a captain steers a ship on the correct course across the ocean, a CEO or president directs a company in the way it should go. To start with an example, let’s say you look at Jim Tsokanos profile on Bloomberg. (Now there’s a good place to start your research!). There, we learn his current position as well as where he came from. You probably already know that he’s Coordinated Health Systems’ president, but knowing more about him and his stability will help give peace of mind about investing in his company. You’ll know if he has the experience to guide the company in the future.
Next, a smart investor will consider the business model a company is employing in order to make a profit. On the one hand, you have a company like Dollar General who uses low cost and volume shopping in order to make a profit. In contrast, you have a company like Rolex producing an expensive product to a select audience to bring in big bucks. Consider the target market and how the economy is at the time. Then make your decision.
Truly, in most cases, there is no right or wrong answer, but by doing your research, you’ll recognize which one is most likely to generate a profit in the coming months or years. For some companies, the business model is not so cut and dried, and in cases such as this, an investor should rely on newsletters and other media of authority for advice.