When you hear the term “investor,” you might picture a man in a suit shouting “buy” and “sell” into a cell phone. However, with modern technology, anyone can be an investor – and you don’t need to anxiously watch the stock market to see how your investments are doing, either. The most successful retail investors usually pick a few stocks to invest in and then let them gain value over time.
But what kind of companies should you invest in? Are there some factors that could clue you in to a company’s potential performance? Let’s take a look at some of the telltale signs that a company is worth investing in.
When you buy stock in a company, you’re essentially handing them money to say that you’re a partial owner of their business. When you want, you can sell that stake to another investor and, ideally, turn a profit.
Some businesses further reward their shareholders by paying out dividends. Dividends are period payments the company makes to its shareholders, which offer a consistent stream of passive income for some investors.
If you’re having a hard time deciding which kinds of companies you want to invest in, you should consider those that offer dividends to shareholders. These companies typically show up in tracked indexes, making them easy to find, and most economists consider them attractive investment opportunities.
Many financial institutions offer curated indexes that track specific industries. For instance, if you have a personal interest in the technology industry, you might consider investing in an index that tracks some of the biggest tech companies. These indexes take a lot of the research off you and put it on the financial advisors who manage the portfolio.
Just remember that financial institutions aren’t perfect. An index isn’t immune to market instability, so it’s vital that you diversify your portfolio to withstand downturns in specific industries.
No matter how strong one sector of the economy looks, it’s vital that you diversify your portfolio. If the tech sector has a bad year and all of your money is in companies like Apple and Tesla, you’re going to have a bad time. So, if you’re all-in on one industry, consider paring back your investments in that sector to spread your money out.
There is no surefire way to guarantee you make money on the stock market. It’s impossible for anyone to predict the future. However, you might have better chances of seeing a return on your investment if you follow these tips.