Important Factors You Need to Know Before Investment - Essay Sample

Introduction

Investing in any business is something that calls for careful consideration in terms of looking at the company that one needs to invest. There is nothing bad like investing in a company and two years down the line the company starts facing difficulties and the investors lose their investment. There are several factors that as an investor one needs to consider before he or she decides to throw his weight into the company. These factors should be looked at carefully and the right decision made in terms of whether it is good to invest in the company and this is usually a risk affair. As an investor I can look at eleven factors and rank them accordingly. These factors are what I can look at and decide before I can put my investment in any company.

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According to me the first thing that I would prioritize is transparency of the company. When talking about transparency I am looking at transparency in both financial and non-financial reports. When a company is transparent it is easy to know what they are doing and it's easy to invest because I will know more about what the company does.The second one is the business model of the company. I have to know what model they are using and if the model that is being used can sustain changes in the business world. This because the business model gives the real picture about the source of revenue, customer base, the products and details of its financing. All these are important in making an informed decision.

The third in my rank has to be characteristics of markets. To be honest the nature of the markets has to be a big factor because it gives the prediction of how much risk the company can face in the business world. Some markets are risky but give good investments while others may be less risky and no good investment comes from them. So as an investor I have to look at the market characteristics.

The fourth has to be Long-term track record. There is no investor who would like to invest in a short-term track record. One has to look at the company's long track record. This shows how the company can do in the long term and it gives the security in the investment market. The company's long-term track record speaks volume of how the company can manage its business.

The fifth in my rank is Customer base. This is very important just like the business model. I have to look at the customer base of the company and whether the base is sustainable and long term. Having a good customer base is very important in making sure the company survives even in hard times.

The next will be overall management approach and for this it is important to look at generally how the company is run and this includes how the management deals with issues that affect the company in terms of dealing with crisis and so forth.

The seventh one has to be the company's approach to risk management. How do they approach and how do they manage risks in the company? Do they have an open plan for approaching and managing the risks or do they develop a plan when the risk occurs?

The eighth has to be exposure to risk. How is the company exposed to risk? Is the company insulated or it can face risk at any time. This means that I have to study the risk exposure that the company is facing at all times. If a company is very much exposed to risk then it is not ideal to invest in it.

The ninth in my rank has to be the track record of the executive directors of which it is very important in that the executive directors make the big decisions and are the ones who have the outlines of the company. Companies that have executive directors who have a good track record in the corporate world are the best because they deal with the issues affecting the company well and professionally.

The penultimate in my rank is the directors' stake in the company. As much as it is important to look at what the directors' own in the company it is not so much important than the above mentioned factors. Although this does not however mean that it is not an important factor.

Lastly, the quality of the non-executive directors come last and this is because the non-executive directors are important but with executive directors who are odd then the company can run well and the company can perform well in the stock market. This means the non-executive directors are not as vital as the executive directors in a company.