Investing 101 Series – Part 5: Research Opportunities

Now based on being alert, observations and awareness you have discovered a trend. Within that trend you have found the Company that is the leader in this new area and is positioned to gain the most from their ground floor involvement.

What next – research and monitoring the Company’s plans and fundamentals. Fundamentals refers to the Companies financials, cash flow and what are the insiders or founders and key players in management saying and investing in their own Company. What Management and the biggest stockholders are doing is often a tell-tale sign of strength or weakness. What is the news media, and investment media reflecting about their progress and the area of their focus which caught your eye?

It may be better to watch the Company for a week or two or more until you are confident and comfortable before investing. This can be done daily by going to their web site and sites such as yahoo finance and my favorite Barchart.

Once you have gained confidence in their fundamental strength and plans then it is time to put your foot in the water and start investing. Pick an amount you are willing to invest that you are prepared to leave for the long term and then only put a fraction of that into buying stock in the Company. Maybe one quarter, this way you can build a position with confidence and confirm your research and thinking.

Increase your investment in the same amount on set intervals so as to not worry about ups and downs in the market place but rather are taking advantage of averaging the price of the stock. Remember you are investing for the long term. You are not a trader. Traders are professionals and you can never beat them at their profession. The day to day price of a stock fluctuates with supply and demand for the stock that day. In other words, people’s opinions. The price over a long time is based on the fundamental strength and growth of the Company. This concept is very important in investing and making good investments.

This method of starting a portfolio is conservative and prudent. Never invest more than you can afford to tie up your liquidity. Never follow more than 6 stocks at a time as a beginning investor. Your investments have to be watched daily when you are learning and first starting out.

 

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