What do we need to know before buying a stock?

Before you start investing, it will be best to understand your objective. Here are some questions to help you:

1. What is your capital?

2. How will you want to invest your capital? E.g. lump sum or an amount on a regular basis

3. How long will you want to stay invested? E.g. 10 years

4. What is your risk appetite? E.g. How do you feel about short-term volatility?

5. What is your objective for investing?

Once you understand yourself, decide if investing a share is suitable for you. Then start reading the news about the shares and understand its business model. Ensure that it is a company that you will be willing to invest into for the long run.

Here is everything about me and what I do best.

Understand the business model of the company- How is it generating its cashflow and profits-- is this consistent or just one off occurrence.

Next ask if the company has a moat such that its products will always be demanded for and cosumers is unable to jsut switch to another competitor

Before buying a stock, you must know your downside. Make sure you do you due deligence so you know how to react if it gies against you.

Hi there!

Just want to mention that perhaps you may also want to adopt a more macro-view and look at which stage of the business cycle the economy is at. Some stocks tend to perform relative to others at various stages of the business cycle.

For example: you may want to consider buying stocks belonging to the cyclical industries, where they have above-average sensitivity to the state of the economy. Examples include: consumer durables and capital goods when there is an expansion in the business cycle.

Conversely, you may want to consider buying stocks belonging to defensive industries, where they have little sensitivity to the business cycle and are not as heavily as affected as those stocks belonging to the cyclical industries during times of contraction/recession/downturn. Examples include: consumer staples, pharmaceuticals and public utilities.