How confident are you when it comes to investing? Do you merely purchase stocks with a hope that they will increase in value? Is this your only plan for retirement? I sure hope not! If it is, then you might want to find a financial advisor. If, however, you do know that there are many funds available out there, some of which might go up when the general market goes down and vice versa, and that you can increase your earnings even when you’re investing in a market that goes down, then you are most likely just fine to invest on your own.

When searching out various investment funds, it’s best to know what their average yield has been over the past few years, the fees for the fund, and the transaction costs for your trades. More importantly though, you must know the companies that you are investing in.

Research Your Company

If your neighbor kid came over to you house, put his hand out, and said he could take $20 and earn you $30 in a month, would you do it? I’m assuming that you probably wouldn’t, but for some reason, when we invest money into the stock market, that is almost how blind we are to the investment we are making! When you buy a stock in a particular company, that means that you think that company will increase in value, which ultimately means that it will earn more profits in the future than it is currently. In order to really know if a company is set for growth, you must do your due-diligence and research the ins and outs of the company.

Factor Endowment

What industry is the company currently in? Does it have the necessary resources to grow and improve in their industry? In other words, let’s say that want to invest in a lumber company. How is the wood supply in their current area? Is it abundant or will they soon have to import lumber from another region in order to keep their operation going strong? If they need to import resources, costs will inevitably go up, which means that their profits will be going down.

Strategy, Structure, and Rivalry

What do you think about the company strategy? Does it makes sense? Do you think their structure is set up for growth? How about their rivalry? Do they have many competitors that are fighting over market share? If the strategy is weak and rivalry is high, then this is most likely not a company that you want to invest in.

Demand Conditions

Is there a large demand for the product or service that you prospective investment company is producing? If there is more demand than the current supply, then your company is set to take off. I would say that it’s time to invest (as long as they had the appropriate structure for doing so that is).

Supporting Industries

If you are interested in a new high tech company, but there are not industries that will support the components that are necessary for the production of the product, then your company will no-doubt be a flop. Pay attention to the suppliers of the company and you’ll soon find out the strength of your company.