Much money has been lost on following a friend’s advice, and almost all of them are “a sure thing” in their minds. I have heard one too many stories of elderly people who dumped some of their savings into an “investment opportunity” only to find that it was not a wise investment.
There is much more to investing than just finding a person that has done it before and taking them at their word. Anything bought on a whim is a poor investment , even if you make money. I like when James Cramer says, “I don’t believe in ‘buy and hold’, I believe in ‘buy and homework’.” Any investment can start with good advice, but the best investment is found when it is followed up with a little homework.
When you buy stock in a company, you are buying a piece of the company. You should understand how they make their money, what products or services they offer, how much money they bring in or lose, how much debt they have, and what the future looks like.
You do not have to pay someone to tell you this information. It is all easily accessible from any investment website. You can find a short description of the company by entering the ticker symbol (the 1-4 letter code for each company) into any website where you can get a quote. There should be an overview that describes how a company makes money. There should also be a link to see the company’s financials (Balance sheet) where you can find how much debt they have and most websites on the company profile will tell you how much earnings the company made for each share owned (EPS or Earnings Per Share). You should also be able to find out what paid people (analysts) think about the future of the company with a link as well.
Homework is not rocket science. If you just spend a little time getting to know the company before jumping on the investment bandwagon, you will find the best investment is the one that is not a fluke.
Jamie V. Smith
Founded the Best Investment Center to help new investors get in the game of investing and make money in stocks.