8 Things to Look out for When Investing in a Business - continuation 1
- Business Model and Corporate History
Not to put too fine a point on it, but how long has this company been around? And how well have they worn with age?
Corporate history is more than just a number, but companies with decades of experience will often provide more steady growth than new entrants into the field. It's crucial to understand that past results are not promises of future gains, but they also can indicate a company that knows what it's doing and has worked out the kinks in its business model.
- Price History and Volatility
Of course the numbers do matter. Just because we left them toward the end of this list doesn't mean you should blow off the data on how your company has performed in the market.
Look at the price history for your chosen company. How expensive is it? Will that allow you to buy enough of it? Remember that when it comes to stocks, your profit comes from percentages. If you invest $100 into a stock worth $50 and it goes up by one point, you'll make $2. If you invest that same amount of money into a stock worth only $5, you a one point increase will net you $20.
And while you're at it, pay attention to the company's volatility. Make sure this stock's price history matches your risk tolerance. If the price has been all across the map then it might be a good investment for speculators, but maybe hold back any money you can't afford to lose.
