The recently opened Victoria Falls Stock Exchange (VFEX) will have a great impact in our everyday lives and as it is likely to change our mindset about investing. Many people will begin to question how does the stock market work and which route does one have to take to be successful in his endeavors. I have outlined some of the key points one ought to take into consideration when investing, Let’s dive in.
The idea of investing in a firm can be simply be compared to that of a marriage. When one chooses her lifetime partner, do you just propose to a woman because you have seen her pictures on social media and you have heard her voice? I believe it is deeper than that, you have to know someone‘s personality, her likes and dislikes before you wife her. We ought to take the same route when investing and learn some lessons. If you are buying stocks on the stock exchange being driven by emotions on decision making basing on the daily quotations of the firm expressed by its market price you will always find yourself on the losing team. Always strategize and find reason why the firm is selling at a particular market price before you strike.
We ought not to jump into buying stocks of a certain company because it is the darling of most people. But there are certain aspects which are of utmost importance, like the issuing out of dividends which is the main reason why many investors buy stocks. Will the company issue dividends to its shareholders at the end of certain periods .More so is the company also taking into consideration the unlike future which may befall the company at any stage. It all comes down to whether the company is retaining some profits so as to cover the uncertainty which may befall the company during “rainy days”.
The history and goals of the company also plays a key role when you are investing which involves the proper knowledge of where the company is coming from and heading to. For example if you are going to invest in SEEDCO you ought to research its establishment and future goals including the developments it has undertaken so that it moves forward. By investing in a company you become part of it hence it is wise to have a full idea of your investments.
An investor is well groomed and does a lot of research about the business he is willing to place his money upon. He researches on what the head of the firms are doing to steer the organizations forward so that it continues to be relevant and not be outshined by other competitors. Taking into consideration the changing technological world, there is need for one to know what the company is doing to embrace the change and not be left behind. Research is key for investors as outlined by Benjamin Graham on the ‘The Intelligent investor’, “An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
Taking a look at the financial statement is one of the traits of a good investor. The financial statement constitute of the income statement, statement of the financial position, cash flow statement, and statement for changes in equity and not forgetting the notes.
The income statement outlines the revenues generated by the organization and the expenses which it has to face on a daily basis. The statement of the financial position gives us the assets which are being used by the organization and the liabilities which it ought to repay. The cash flow is an important aspect which shows how cash is flowing into the organization. The statement of changes in equity details the changes in equity over an accounting period by presenting the movement in reserves comprising the shareholders’ equity.
The financials can be used as a benchmark in analyzing the organization they do not tell the whole story. The ‘Dean of valuation’ Aswath Damodaran also made a wakeup call to those who believe in old style value investing outlining that “we will need stories, not mechanical valuations, to truly evaluate companies this year”