“Do What You Love” Is a phrase we may hear often. But when it comes to the markets, investing in what you “love” may pull you into losing hundreds or even thousands of dollars. Just because you like shopping at a particular retail store, doesn’t mean that the company will survive in the stock market. Let’s look a couple examples of companies who are failing miserably on their balance sheets.
GPRO (Go Pro, $5.55), a company that engages in manufacturing cameras and camera accessories (wearable sports camera) is a very well known company that people love. Advertised with several players from the NFL, GPRO used to be on the rise, however from the highest stock price climb of $86 (in 2014) has now descended to a penny stock of $5.55. As well as an operating income of a negative of -$163,000,000 and net income of negative -$183,000,000, it’s nearly impossible to continue to see this company as a long term investment if financial changes aren’t a priority.
LB (L Brands, $36.10), is a popular company that engages in ownership of famous retail companies known as Victorias Secret, Pink, Bath&Body Works, La Senza and Henri Bendel. From a stock drop price of $20 since 2015, LB is losing free cashflow and has made a decline of almost 30% in opereating cash flow from 2017. From recent sexual-bias ads that are unapealing to new investors, LB may need to make some changes in order to improve positive cash flow returns.
These are only two of of many companies who have poor managibility of their finances and business operations (Tesla, Southwest Airlines, General Motors and more), . Any company can have a great product to sell, however if they cannot manage their finances, it is doomed to total debt. But good marketing and a pretty desplay can sell anything, this is a case that shows you that loyalty dosen’t always win.
So you just started investing and you purchased your first security, now what?
Whether you’re using an investing app or you opened a brokerage fund account, congratulations! It takes courage to start investing in the stock market and it may often feel lonely. Here a few things you need to understand now that you are a stock investor.
Knowledge is Power
Intelligent investors always keep up political and business news. This is necessary because the news will help you keep up with company announcements, or when to buy or sell. Now, you don’t have to read the newspaper every morning for breakfast like your grandpa does (though that’s not a bad idea either), but this may be as simple as subscribing to a few business apps such as Bloomberg, WSJ ( Wall Street Journal), or Market Watch. Take a few minutes every morning to read about recent earnings reports or business updates on the companies you’re invested in.
Depending on your investing style, DO NOT let the fluctuating prices changes keep you up at night. Many investors understand to not place all of their life savings into the stocks market. It’s crucial to have a separate emergency savings account and investments to hold long-term. This will give you financial stability in your personal finances because that’s what you want, right?
Always keep in mind that when you invest in the stock market, you need to research and view your investment as if your buying a business. However, if you lose money on a bad investment, step back and recreate a strategy that will work for your investing style.
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It’s easy to have a game plan, but if you’re not focused, you will be influenced to get off track from other’s opinions. Here are a few characteristics you can reflect on and see if you have what it takes to be an intelligent investor.
Don’t freak out every time their stock portfolio is in the red.
Do control their emotions, in Bull and Bear markets.
Intelligent investors know that there will be good and bad days. And depending on their portfolio, they will have enough diversity to maintain consistent growth.
Don’t buy a set of stocks just because someone else that has them.
Do have a written strategy of what they want to achieve.
Articles are seen everywhere with titles such as “Buy These Top 3 Dividend Stocks” or “See How I Made $10,000 In One Hour”. While these may have vital information, the Intelligent investors will make their final decision based on what suits their needs.
Don’t buy on impulse.
Do buy valued securities.
Intelligent investors understsand the value of their securites. They understand the importance of investing in a stock or bond that will produce consistent, long-term and lucrative profits. Though they understand the crucial need to have dividends, there is always a chance that dividends may be a cover up for poor financials in a business.
Though these are a few of many characteristics, intelligent investors understand that they are neither right, nor wrong just because a crowd disagrees with them. They are right because their data and reasoning is right. Once said by an Intelligent Investor, “If you ever feel stuck about tour investment, look at the financials, they will never lie to you”.