When it comes to investing, there are never “sure things.” Anyone who tells you otherwise is probably engaged in illegal activities, and you want to get as far away as possible, as soon as possible.
The fact that you can never guarantee a return on an investment shouldn’t keep you from investing altogether, though. While there is always some level of risk, there are ways that you can effectively evaluate investment opportunities and make smart choices. In fact, the secret to smart investing usually comes down to a few basic factors — most of which you learn in a Business 101 course.
Trends: The Key to Smart Investments
If you’re a new investor, it might feel like everyone you know has a different approach to choosing which companies in which to invest. However, one of the most effective approaches is to look at trends. Trend investing involves looking at the overall direction of stock prices over time — whether they go up or down — and then riding the wave of upward trends.
Because trend following relies mostly on technical analysis, and looks at overall performance over time, many trend followers don’t pay a lot of attention to the individual factors that often predict how a particular company will perform over time. The most successful investors, though, often use a combination of approaches. By gauging performance with tools found on sites like www.trendsinvesting.com, combined with analysis of business basics, it’s easier to make solid investment decisions that are more likely to create higher dividends.
Business School Basics
Certain basic factors can strongly influence whether a particular stock will maintain its current trend, or change directions in the near future. When evaluating your picks, keep the following in mind:
Leadership
Who is steering the ship? What are their priorities? When a company has strong leadership, that is willing to take risks while still maintaining a strong vision, it’s more likely to perform strongly. Evaluate leadership based on their articulated vision, their goals and how the company performs against those stated goals.
Look at the trends within the company. Do they handle changes in the industry nimbly — even anticipating the changes or leading them — or are they reactionary? A good leader will guide a company through hard times or market shifts without losing momentum, and those are the companies that you want to look at more closely.
Innovation
Again, a company’s ability to understand the overall changes in the market and in society is vital to a company’s success. Organizations cannot simply sit back and watch, and assume that they will always be able to meet customer needs the same way. Companies that are solution-driven, that are ahead of the curve and willing to spend time and resources on innovative products are the ones to watch.
Consumer Trends
When businesses ignore or dismiss overall trends among consumers, they fail to capitalize on opportunities — and generally either end up missing the boat or playing catch-up to try to meet consumer demand. When evaluating companies, look at how they have responded to overall trends within their industry. Companies that stay ahead of the curve tend to perform more positively in the market.
Revenue
It’s quite simple really: Do you want to invest in a company that isn’t making money? Look for companies that operate efficiently, and have cash reserves. Look at revenue projections, as well as planned expenditures to determine how well the company manages its resources and how its financial future looks.
Potential for Growth
Predicting how much potential a company has for growth can be difficult, but by taking all of the previous factors into consideration, you can get a good idea of the business’s potential to grow and expand in the future. The idea behind trend investing is to invest in those companies that are consistently moving upward. Slight dips are normal, and to be expected, but when the overall trend is positive, then you’re likely to see positive dividends. Companies that remain relatively flat over time are usually safe investments, but for gains, you want to invest in companies that show signs of growth.
There really is no “magic formula” for investing, and since no one has a working crystal ball, there’s no definitive way to know whether a company is going to continue a trend in one way or another. By looking at the basic factors that influence a business’s health, though, you can evaluate trends more thoroughly and make investment decisions that will help you meet your goals.
You might also be interested in 5 Alternative Investment Strategies for 2014.
Great starting points. Understanding trends is really valuable. Usually long term trends are the most useful, but you can grab some interesting success on the short term trends.