4 tips for your first company investment

 

It’s a big step. Up until now you may have relied upon investing in your standard savings account – and ultimately losing out due to the power of inflation.

Now, you’re entering the big time. Get it right and the riches can be significant. Of course, a wrong choice will result in you losing your initial investment – and this is all part of the game.

We don’t have a crystal ball which can tell you which companies to invest in, but what we do have is some proven advice which can give you some actionable tips to help you along your investment journey.

Location, location, location

Forgive the cliché, but there can be an element of truth to this first point. Like it or not, as this infographic we found on Reddit states, some areas are just more suited to new businesses than others.

Quite often, you’ll have to choose to invest in developed countries or established ones. The former carries more risk, but potentially higher returns, and vice versa with the latter.

As such, this first point is establishing about how much risk you want to take, and then jumping into the market to see what is available.

What does the company prospectus say?

Firstly, this isn’t going to be bedtime reading. Company prospectuses aren’t pretty, but they can tell a very good story on whether or not a particular firm is worthy of your investment.

It will tell you the benefits, any risks and just the general way in which said company is managed. You should also get a glimpse of a business plan and particularly if you have experience of this area, this should signal to you if this company is going places or not.

Don’t go for the short-term rewards

Sure, there are plenty of investments out there that will gift you short-term rewards, but when it comes to investing in companies we would urge you to avoid against this approach.

Instead, try and ride it out for the long-term. If a company is going to be around for the long-term, your investment will gradually increase in value. There will be dips, but those investors who are happy to sustain these are quite often the ones who make the most money. If you are going to be frightened at the first downturn, you are entering the wrong industry. This is a long game, and you have to play it.

Always have an exit strategy

Following on from the previous point, you still need to have some sort of exit strategy.

Sure, you are there to ride the storm, but there can be occasions where this storm gets too much to handle and you will need to dispose of your investment.

Then, there is also the point about finding out when to leave the company along with a healthy profit. If you can pencil out this plan before you invest, you’ll find that it becomes much easier to make decisions when your money is tied up in the company.

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