How To Choose Your Very First Investment

The very first investment you make is going to influence your entire trading career. It is a really daunting task. There are many things that you have to take into account and always need to be sure that you are going to properly prepare for what happens. While we can offer so much advice, according to most specialists, making the best decision revolves around the following factors.

Value

There are differences between value and price. Never buy while only thinking about price. You want to find those shares that have a price that is as below value as possible. That practically means you buy shares with a discount and you automatically get more value. Just remember that cheap is not always great.

You have to also think about future and past performance. Expected growth or a really great past will be attractive but that is not always sustainable when you want to make a profit on the long run. The companies that have a consistent, steady historic profit growth will most likely continue the trend.

Health

Sometimes a company can sustain debt for really long periods of time but if the situation is particularly difficult, it can easily lead towards fast distress. A company that has really low debt or zero debt usually has a much higher ability to easily withstand a financial pressure that would appear due to problems. Also, this is the firm that will be able to properly take advantage of business growth opportunities as soon as they appear.

Let’s say that a company has been stable but in debt for 6 months. The share price is the same as that of a second company, one that had zero debt in the past 6 months and recently took out a short term business loan for growth purposes (more about the short term business loans here: https://www.merchantmoney.co.uk/small-business-loans/short-term-business-loans/). You will almost always want to invest in the second company in this scenario.

Business Income

Sustainable dividends of a high value will be highly attractive for the investors focused on the long term. However, when we have high dividends, business growth is usually sacrificed. The ongoing increase in share price will normally be quite modest. A company that offers high dividends and high growth is very hard to find in the current economy.

Business Management

You rarely think about management teams when you invest in stocks as a beginner but this is definitely one thing you will want to take into account. That is because a company that has a really high experience management team with great results in the past will most likely help companies and share prices grow on the long run. You want to find the companies that have fairly compensated management with remuneration that is aligned with company performance.

Take Your Time

Last but not least, when you make your very first financial investment, you need to be patient. You have to act when an opportunity appears but only if you are 100% sure that the opportunity is a really good one.