Knowing how to invest is a useful skill to have, but it can be difficult to learn the ins and outs. There are a few important skills that’ll help you learn how to be a successful investor. Knowing how to research investments is one of the most important. There’s not exactly a right way to do it, but this guide will hopefully provide a good place to start.
Where to look for information
There’s a plethora of places where you can go to research investment options. Some places are better than others, but there are a few that are widely regarded as trustworthy and reputable. The first among these is EDGAR, the U.S. Securities and Exchange Commission’s filing database. This is the best first stop for any would-be investor as it provides you a look at any registered company’s financial statements. Although many of these forms can be confusing to understand, they provide you the closest thing to the truth when it comes to a company’s performance.
Another great resource is the information that the company provides to its investors. Many publicly traded companies work hard to maintain relations with their investors. The information they share with investors can provide a comprehensive snapshot about all manner of different topics (how the company makes money, etc.). It’s very important to remember that companies are trying to encourage investment, so any information gathered from investor relations should be looked at with considerable skepticism.
A third resource is one that most people look at every day: the news. Companies of all sizes regularly make the news and news coverage can have a massive impact on the value of a company’s securities. Any reputable news outlet can provide this information and it’s absolutely important for investors to be up to date on current events, especially those that affect their investments.
What to look for
Now that you have several resources to use, it’s important to know what exactly to look for. There are plenty of numbers and concepts to analyze, but here are a few worth focusing on:
- How does the company make money? Is it making money? Where does that money go?
- Who is in charge of the company? How have they been doing?
- What direction is the company going in?
- What advantages does the company have? What are things that the company does that can’t be easily replicated by competitors?
- Does the company offer dividends to shareholders?
- What does the company’s industry look like?
- What could go wrong?
These are all questions for you to consider, but it’s always an option to consult an expert. An investment advisor, lawyer, or tax advisor can help you to consider pros and cons for any investment you’re looking to purchase.
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