Future Finance Solutions

Tips on Understanding the Industries You Invest In

September 30, 2016 by · Leave a Comment 

understanding-investingThe most important piece of investment advice you can follow is to invest in knowledge, especially when you’re looking at a new industry to get involved with. There’s something to be said for risk tolerance, but a big part of risk management is understanding the problems you face. Here are some tips to help you develop a deeper understanding of industries before you decide to take a financial stake.

Perform Due Dilligence

“The individual investor should act consistently as an investor and not as a speculator.” – Ben Graham

One of the founding pillars of Ben Graham’s investor knowledge is that one must never put money behind something based on hope. As you perform your due diligence, you should be keenly aware of company financials and the market for that industry. What’s in demand right now? What needs aren’t being fulfilled? Asking these questions as you hunt for opportunity will help you parse the good from the bad.

Justify Your Holdings

“Know what you own, and know why you own it.” – Peter Lynch

Everyone has heard the age old adage that you shouldn’t buy something you wouldn’t own for ten years (a Buffet quote), but it’s easy to interpret that advice as “set and forget”. Don’t be afraid to revisit your portfolio for a reminder of how you thought the stock would do, and a reality check of its actual performance.

Understand Management Aims

“That’s one thing investors always look for: are management interests aligned with investor’s interests?” – Dev Randhawa

Investment goes beyond the stock market, and when you’re evaluating a new property to own it’s crucial that you understand the aims of management. Even at the market level, understanding the management strategy helps you make determinations regarding the future of the company.