Statistics and Probability – A General Introduction, Investing Basics – A Complete Beginners Guide, Introduction to management – Top 4 Functions, 9 Things to Consider When Investing in a Stock, Top 10 Warning Signs of a Stock in Trouble, What to Consider When You Make Your Forex Trading Plan. ... Now, they prefer investing it in money market funds, which yield higher returns and liquidity at the same time. Join the Discussion myMoneySage.in is an award winning personal finance platform. Benjamin Graham once quoted: “The individual investor should act consistently as an investor and not as a speculator.”. Bhopal Gas Tragedy: An incident which took place on the night of December 2-3, 1984 in Bhopal, M.P. What Factors Should You Consider before Buying a Stock? If a company’s current liabilities exceeds its current assets, it is an indicator that company may not be able to meet its short-term/current obligations, and if the working capital continues to decline over a period, then it’s not a good sign and requires further analysis. myMoneySage simplifies investing for individuals and amplifies business growth for Registered Investment Advisers by leveraging Artificial intelligence and machine learning. It contains various details about the company like its Shareholders, Financial statements, Management discussions and analysis, Corporate Governance report, Risk Management report, Accounting Policies, Auditors report on financial statements, etc. Learn how to mange your money & create wealth, Download your eBook now, Subscribe to awesome wealth creation ideas and get a FREE ebook. Investing in stocks is a great way to derive the optimal value from your money. I have a pretty simple checklist that I use when evaluating stock market investments: 1. Liquid Funds vs. Savings Bank A/c: Which is better? Examples listed below will give you an idea of how companies have gained competitive advantage over its peers: • Gillette has been successful in creating a niche of disposable razors for the customers. Money Market – What is money market fund? When it comes to investing, being young is an advantage. It shall be designed for regulating risks related to corporate activities such as corporate disasters, threat to investor interests, staff members, society, etc. “Good corporate governance is about maximising shareholder value on a sustainable basis while ensuring fairness to all stakeholders: customers, vendor partners, investors, employees, government and society.”–  said Mr. N R Narayan Murthy, Co-Founder- Infosys. The factors of sound investment may seem complicated, but here’s the truth: It doesn’t take a Ph.D. in finance to be a good investor. A factor you should consider to determine where to put your investment and how much to invest is your age. Balance sheet contains the details about the company’s assets and liabilities. at the Union Carbide India Limited (UCIL) plant, is one of the major disasters of all time resulting in thousands of casualties. . Investors tempted to bottom-fish would want to consider the following factors before scampering to buy into the ITC stock, which has proved to be a value trap in recent years. One should check the details about the top officials such as; how long they have been working with the company, their roles and responsibilities, educational and previous experience details, management style, etc. Sanam Nepal. You won’t complain when the stock prices rise. Assuming that you have savings to invest, there are several things you might consider. how efficiently the company is generating earnings, f)     The company’s Return on Equity (ROE) i.e. When you decide to try your hand at stock picking, it’s essential to do your homework. Income or Growth in Capital. Have you decided to invest in the stock market? Factors to Consider before Purchasing Shares Abstract: Though investing in shares has its own benefits in terms of periodic return (dividends) and transactional gain (capital gain), it is one of the riskiest securities to invest on as there is no guarantee that a company does perform well. They do not enter/exit stocks frequently. Before you can start investing, you need to understand the basics of how stocks and the stock market work. – In particular, focus on checking aspects like: b)    The per-share earnings of the company, –  Check whether the company has a history of steady earnings growth, –  Also, consider that a maturing company might not be able to register exponential increases in its growth as a younger company does, d)    The company’s earnings (these should reflect year-on-year growth), e)    The company’s Return on Assets (ROA) i.e. how efficiently the company is generating profits from sales, –  Compare the company you’re interested in with the company’s business rivals. One of the significant factors to consider before you choose a company to buy stocks is its stability. A pharmaceutical company may have the competitive edge over its competitors by producing a certain drug through its research and having a patent on that drug so that no other company is allowed to launch the similar drug in the market. Ready to take your first steps in the investment world? • Microsoft still dominates the operating systems market by tying up with the computer hardware manufacturing companies; as a result, most of the personal computers come with the pre-installed Microsoft software. Companies go from doing poorly to doing well or small companies grow to large companies.”- Well, that’s what Peter Lynch says about understanding a company. Therefore, do your homework, before investing your hard-earned cash in a company’s stock. –   Does one company dominate the market or is the market highly fragmented in nature? It considers the company's ability to generate free cash (cash remaining after all the bills are paid and current debt obligations satisfied). 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