Investment Research: What does the company do?

Investing is all about information and interpretation. There are people who will not agree with me, but there are certain information you have to know before investing. One of them is knowing exactly what the company you want to invest is doing. Do you know what your company actually is producing? What is the main product? How is the industry going? This are just a few questions you have to answer before actually buying in. Do not invest until you entirely understand the business model.

Surveys and personal experience show that especially beginners often do not completely know what their companies are doing. Research is essential for successful investing, unless you are damn lucky. Do not buy stocks, just because they are hot and showed a good performance last year. In most cases it is already to late to buy in. No, you need a different mindset. Always act, as if you would buy the whole company and would have to hold the stock for 20 years. Remember, by investing in a company you become the owner of a small part of the company. It is your company now. So, would you still invest in that little fancy technology start-up, you do not even know what it is producing, just because everybody is talking about it? Check out the business model first, than make your decision. This will preserve bad surprises.

Where to get information from? Surely not from the company’s homepage, because they will always tell you, that everything is going fine and they are producing the best product around. I thing, this applies to most companies, their homepages are simply not informative and objective enough. I would rather recommend you free finance sites like MSN Money or Yahoo! Finance where you find a lot of information about both, financials and a description of the business model. So, do your research well and invest only if you understand the company. If you are not sure, do not invest.