Here’s Your Guide to Making Good Investments Always
Common Stocks and Uncommon Profits and Other Writings is a must-read if you are looking for good guidance in making investments.
Common Stocks and Uncommon Profits and Other Writings discusses stock markets and provides advice on ways to ride the waves that comprise the stock market. It provides insights on the things to look out for while investing in stocks and determine our category as an investor; high risk or conservative.
Philip A. Fisher states that the first rule of investment is to invest smartly. Smart investing requires a lot of deliberation and pre-planning and usually focuses on the long term. It is about looking to invest in companies that have the potential to grow to reap long-term profits. Common Stocks and Uncommon Profits and Other Writings provides some simple tricks to identify companies with growth potential.
The first thing to look out for is the products and services of companies. A company with growth potential will generally sell products or services that can sustain high sales volume for at least a few years.
The second thing to look out for is the amount a company spends on research and development. A company that invests in research and development will naturally be in tune with changes in the market.
The third thing is a solid management team and good employee relations. If a company cannot unite its employees to follow the ideals of the company and is lacking in management, then, such a company should be avoided.
Researching before investing
Before investing in a company, it is imperative to do an ample amount of research on the company. Every nitty-gritty on the company needs to be studied and investigated. In this regard, the author provides a method known as the ‘scuttlebutt’ method which will help investors to dig out information on their prospective company.
Firstly, information can be collected from vendors, former employees, customers, research scientists, or even trade executives.
Secondly, the prospective company’s rivals can also lend some accurate information on their dealings and management.
Thirdly, once the information through the roundabout way has been collected, it can be used to formulate questions and approach the management of the prospective company.
If you don’t have time to read the whole book, the text book summaries and audio book summaries of the book is easily available on the best sites for book summaries.
The right time for investment
Also a part of most searched top book summaries, Common Stocks and Uncommon Profits and Other Writings advises that the right time to invest in stocks is when there is a dip in the price of the stocks. Since most companies with the growth potential are innovators, there will be times when the companies will come across hurdles which will lead to a decrease in their stock prices. That is the right time to buy stocks. Furthermore, that is not the only time dips occur. Incurred expenses due to marketing and launching products can also lead to dips. For that, investors need to keep a constant lookout for the stock prices of the prospective companies.
Key points for Conservative investors
Since conservative investors are unlikely to take risks, many such investors prefer moderate profit with gradual growth. As such, the author provides certain knacks and advice to earn profit while not taking many risks.
Firstly, conservative investors should preferably avoid investing in start-ups, despite their potential growth. The author, Philip A. Fisher, advises going for established companies that still have the potential to grow. The key points to look out for when choosing the companies to invest in are; low-cost methods for production, a good organization in the market, well-financed research and development team with a good record, and lastly, good financial know-how.
Secondly, keep a lookout for the employer-employee relationship of the company. A company that values its employees will have additional benefits over others. One reason is that the entire company’s growth depends on the work of the employees and the growth and skills of the employees will proportionately lead to the growth of the company. The other reason is that the productivity of a company can be measured based on this relationship. A valued employee will echo the sentiment of growth of the company and will act accordingly. Ultimately, this will give us a better insight into the expectations of the growth of the company.
Thirdly, before investing, an investor must try to gauge if the company is profitable in the long run. A company needs investment for research and development and marketing. Thus, a company needs to ensure its profitability in the market by launching products that are superior to those of its competitors. This will keep them afloat even when they are tight on cash. As such, it is imperative to invest in a company that takes its future into account and is prepared for the long term.
Common Stocks and Uncommon Profits and Other Writings is also available as free audio book summary on various websites.
Thus, these are some of the tricks that the author suggests if we wish to make good investments.