"Investment Basics "


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How to Invest in the Best Companies

 

For many, investing in the best companies appears to be a puzzling endeavor. The key to minimizing your risk is to educate yourself. In his book "Cash Flow " Quadrant," Robert Kiyosaki states "the real risk of investing lies in the lack of financial education." Spend the time to become financially literate, or hire a broker to invest in the best companies for you

 
Instructions

 

Things You'll Need:

  • Financial Statements of Fortune 500 companies

     

    Investment Basics

  1. Step 1
     

    The most important step before you invest in a company is reading its financial statements. You want to check for inconsistencies. Really dig into the sales, forecasts, and profits and losses. Did the company pay dividends to shareholders? How do assets compare to liabilities? What are the stock price projections?

  2. Step 2
     

    Determine the size and risk involved in your investment. Generally speaking, the smaller the company, the higher the perceived risk. Smaller companies are exposed to high volatility. The best companies will clearly show a growth trend in size and increased sales. Remember, your goal is to maximize your return on investment or ROI.

  3. Step 3
     

    Determine what investment amount is right for you. Assess how much personal financial risk you can financially handle. Look at your personal debt to income ratio. This is a good time to consult your broker or financial adviser.

  4. Step 4
     

    Now that you're actually ready to invest in your desired company, decide whether you are going to hire a broker or if you'll be handling things yourself. If you do use a broker, he or his firm will charge a commission for services. If you lack experience, hiring a broker may be your best bet while you continue to educate yourself. Determine the price and amount of stock you can purchase at that particular price.

  5. Step 5
     

    Here's where it gets interesting. Monitor your investment closely. See how your company is performing on the stock market. You need to develop a buy/sell strategy. Even when investing in the best companies, the best strategy is buy low, sell high.