The Importance of Conducting Research Before Investing

Many a fortune has been lost by investors who failed to do their research before investing in a company. Even when colleagues say that they have made money on a particular company, individual investors should remain vigilant and do their research on the company themselves. After all, poor research can cost investors everything. As Warren Buffett once wisely said, “The first rule of investing is don’t lose money.”

WHAT IT MEANS TO RESEARCH A COMPANY

Investors have to look at all the facts before they choose to invest. Additionally, a slow relationship with a company might be more viable than an immediate investment. Look at the latest news on a company and examine how much the CEO earns per year and what special payments they might receive. Also, check for any allegations of executive misconduct. The best companies care about shareholders and strive to keep them happy, but also aim to please employees and clients.

An investor should also remain up to date with the latest news about a company to understand the current market and any changes that might happen. Significant changes can signal both positive and negative trajectories. For example, even if some big-name investors buy into a company, it may not be a good fit for you. Investors in exceptionally competitive markets should take this research seriously.

TOO MUCH DEBT?

A company that has high levels of debt should be a red flag for investors. Even if the debt doesn’t signal an immediate problem, the economy can shift overnight, and the stock will fluctuate in tandem. Companies in debt can quickly go out of business. A company in good health manages its debt with expert skills, and when the hard times come, they have extra cushion to stay afloat.

Even after someone invests with a company, they have to stay proactive and continue to research the company. They must keep an active eye on the news and, when new challenges appear, they must understand the risks and rewards of each choice they make.

This article also appears on HenryWillisVC.net.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Henry Willis

Henry Willis

6 Followers

Venture Capitalist, Saltwater Ventures Associate, Founder of Swift Fox | www.HenryWillisVC.net.