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             28 February, 2021

Category:  Articles » Finances » Investing


Analyzing Investments

         Views: 1588
2009-12-08 06:18:10     
Article by Michael Ki Fai Wong

Unlike gambling, it is extremely difficult to rely heavily on your luck or chance to win in the investment world, if you do so, you are very likely to be a loser. Successful and fruitful investment requires analysis, detailed analysis to help you make the best decision and choose your best portfolio. You many think analysis work of course should be done by you analyst, but do you sometimes feel disappointed even you have taken the advice from your analyst? Why not learn it yourself and you can make your own choice.

At the very beginning, it is difficult for you to just analyze your investment. So, start to understand more about the financial markets by reading the recommendations or journals written by the analysts. Do not just rely on the famous analyst, take a boarder view and watch how the market reacts compared to their recommendations. Learn what is right and wrong from the expert of the financial markets free.

When you have a target or potential investment, what you need to do first is to analyze the industry that your investment is in. Gather information about the industry growth from past history, also, gather information about the future development for the industry. Find out details of your target's competitors, especially the big ones.

Business is run by man through their decisions. Therefore, who is making the everyday decision for your target investment can be important as their decision determine how your investment performs. You need to know about who is in the management team of your target investment and how competent is the management team by reviewing their career history and their actual accomplishment to your target investment.

Next, you need to analyze the financial position of your potential investment. Take a deep look at their financial information especially the cashflow. It is true that even a company is making profits, it is going to be bankrupt when it faces cashflow problem. Review its cashflow position, debt position and its potential supporter (e.g. its shareholders).

Getting return from investment is only possible when it is profitable itself. Therefore, for the very beginning for your analysis, you need to know about your potential investment's profitability and of course its actual and potential growth. Do not just look at the bottom line and think that it is a good investment when it generates a lot of profit this year. The trend is important, you probably do not want to invest into a no or low growth investment. Take a look on its performance over the past 10 years and where the company is going to from its strategies. Also, take a deep look on how its profit is generated, from its core business or non-core business? How big is the portion of profits generated from non-core business? Try to link them back to the company's strategies and growth trends.

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