Friday 29 May 2020

5 Traits of a Good Investment Opportunity

By Murray Newlands
Before you invest in a company, look for these five traits to make sure it's a viable opportunity.

There are more and more investment opportunities opening themselves up to potential investors, but not all of them are good investment opportunities; in fact, with the more opportunities that open up, the more likely you are to find an investment opportunity that will bleed you dry before you find one that will line your purse. The following are five things to look for when finding an investment opportunity; if the opportunity has most of these things or all of them, you are looking at one that is likely to add to your wealth instead of taking it from you.

Long-term Viability

If you look at a company and do not see yourself owning stock in it for the next ten years, then you should stay away from investing in the company. Most of the money made in business investments comes from owning stock in the company for quite a while and leaving it alone until the dollar value rises and reinvesting your dividends versus rapidly buying and selling your stock in a business.

Market Cap For The Business

Comparing the market cap of the business that you are looking to invest in to similarly priced businesses will help you determine whether or not the stocks are going to be worth what you are paying for them. For example, if a business has a lower profit than another in its class regarding size and product but is charging more for its stock, then the stock is not worth it to buy.

Good Business Stats

You can want to invest in a company for its vision or branding as much as you would like, but if there aren't good profits, price, or management, you are likely throwing your money down a sinkhole. That being said, if your investment opportunity has good profits, price, and management, but you cannot get behind the business as a whole, you should limit your investment until it has had some time to bring you returns; if you do not feel 100% about your investment, there is probably a reason why, and you need to work that out before you throw all of your investment money into it.

Company Is Buying Back Shares

While you may think that this is a sign of a business that is not doing well at first glance, businesses that buy back their shares are doing so in an effort to increase the wealth of their current and longstanding shareholders, which is a more lucrative investment opportunity; a larger share of the pie means a larger share in the profits, without you having to invest more upfront.

Easy To Understand Business Model

When a business is run simply, there is not much to draw the eye, however, it also means that the business is more likely to be stable and have a good growth curve behind it. This is because a simple business model does not require a lot of learning in order to implement, and new stores can be opened easier as a result of it. More stores means more customers and coverage, which means more profits... you get the idea.
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