Study Investments

Very few individual investors actually study investments that they purchase. This is their most frequent mistake. You should study, in depth, every investment you make. Since equity is little more than partial ownership of the business, the most important task is to comprehend the business itself. You should not buy without understanding the investment’s driving force. A basic idea such as “They’re producing a brand new line of smartphones, everyone buys smartphones, therefore I should invest,” is not enough.

You should always understand the company you are investing in completely. This means you must develop the financial and business knowledge necessary to understand a company. If you are putting money at risk, you need to know how to select what you are buying, and this requires being able to comprehend it.

Once you’ve identified a market trend, you should utilize learned investment knowledge to actually study investments. Whenever you read, hear, or see a potential investment, immediately visit the financial statements of the investment, review years of performance, and compare immediate competition in case there are better performers. This may absorb some time, but it’s important these steps be taken to ensure a quality long term investment. This also cools down the excitement of hearing an asset is the best asset possible and should be purchased immediately, and allows smart decision making instead of greed driven investing.