Investment is one of the greatest ways to expand your wealth. However, the investment also comes with a higher risk of losing money. The risk factors aren’t only depending on your trading and holding skills, but also on the company you choose to invest in. Making mistakes while choosing the investment company might cause portfolio losses.
Many investors choose a stock just because it is trending on current events on social media platforms. This is one of the massive mistakes choosing a company based on trends will put your money at risk. You cannot call your investment successful without knowing relevant information about the company. Therefore, you need to be careful while choosing the company for your investment. But how would you do that? How can you know if the company will help you accumulate gain in the long return? Here are the top 4 factors you should consider about a company before you invest.
Paul Haarman Suggests You Start with the CEO
The CEO is the most important person in a publicly-traded company. The professionalism of the CEO will determine the success of the business. Not only the CEO will determine strategies for the company, but they are capable of making or breaking their business with a single decision.
Make sure the CEO has a good impression of the market. One of the best ways to learn information about the CEO is by going through LinkedIn. Look at their career details and their contribution to the company. Don’t forget to check their experience. If the CEO is the founder, consider how the company will go if they decide to step down.
Review the Business Model of the Company
The process through which a business generated money is known as the business model. Even though there are multiple ways to run a business, successful companies always position themselves to generate maximum returns.
The researching the business model of a company, learn about its target market, services and products, and its competition in the industry. Paul Haarman says some companies such as Amazon are focusing on higher volume sales with a wider audience. On the other hand, companies such as Apple develop exclusive devices that users love to pay the premium for.
Consider the Competitive Advantage of the Company – Paul Haarman
Businesses always compete to capture the attention of their audiences. Successful companies will always have a competitive advantage in the market. This is the secret weapon of the company that makes customers choose them over their competitors.
For instance, Amazon is a great company with robust economic goals. Amazing changed its retail industry, gaining a competitive advantage because the other companies cannot keep up with Amazon’s delivery promise or price.
A company with a good competitive advantage is undoubtedly a great option to invest in.
Examine the Price History and Revenue Trends
Revenue is known as the total sales of services and products usually determined quarterly. Examining the revenue history of the company can help you know whether the company is improving or declining, added Paul Haarman.
While examining the revenue trends, make sure you determine the growth sign of the company to know if they have strong sales strategies and making the right move. Even though companies cannot generate revenue each year, but declined revenue in each quarter is a negative sign for the investors.
Conclusion
These are the top 4 factors you should consider about a company before you start investing in them. Make sure you follow the factors to know if the company is suitable for your portfolio or not.