When you buy a property you look at the value versus the
price. You also look at the neighborhood
because you can change the property but not the neighborhood. You also have an inspection done check to see
if the systems are intact (HVAC, roof, foundation, etc.). Lastly you check to see previous owners and
check to see if there are any outstanding liens.
You should do the same for a stock. The old adage buy low sell high always
applies so check to see if the stock is overvalued or undervalued. Instead of
the neighborhood check to see what industry and sector the stock is in. Is this industry declining or going through a
rough patch or is it likely to go up (like the marijuana bandwagon). The “systems” of a stock are the management,
facilities, infrastructure, etc. Look to
see the pedigree of the people running the company, are they competent? How long has the stock been around? What have
the returns been?
Finally, if you are going to put a whole lot of money into
anything make sure it has some value.
The goal is to increase your holdings not to gamble.
