Skip to content

The Key to a Successful Portfolio

The key to a successful portfolio is to utilize planning and a set of rules to stay on track. Use those guidelines to understand and analyze investment opportunities. An investor needs to have some structure. This will help prevent any pitfalls.

Researching the Company before Investing

The first thing to do before investing in any business is to do some research.

Here are some key questions to go over:

myths of investing - stock marketIs the company’s income increasing?

An example of a tool that helps determine whether an organization’s income is increasing is Fisher Investments. It provides the necessary information to understand and analyze investment opportunities.

The next step is to examine the financial statements. Specifically, look at the company’s inventories and receivables. If the company’s inventory is down, and more emphasis gets placed on collections, it means that the firm is running efficiently and staying competitive. Eventually, the company’s income will increase.

Is the organization making a profit? 

Gathering information on the profitability of a public company is less tricky than that of a privately owned company. Private companies are not required to file with the Securities and Exchange Commission (SEC), so other means of deriving the information has to get utilized.

Dun and Bradstreet (D&B) gathers information from privately held companies for credit rating purposes. Use D&B to compile the necessary information on the profitability of the firm. Please note that when using the SEC as a source of information for public enterprises, from 1993-1996, public companies were not required to file electronically.

The Library of Congress may have historical data on microfiche. If not, you will have to pay certain vendors to access that information.

You can also get basic information about a company’s profit from sources like the S&P Register of Corporation, Yahoo Finance, Mergent’s Handbook of NASDAQ Stocks, and Mergent’s Handbook of Common Stocks. Additionally, the company’s website might have vital information. The American City Business Journal is yet another source of information.

Is the company stable enough to beat its future competitors?

As a prospective investor, find out if the company is keeping up with technological advances. Also, check to see if they have superior products compared to that of their competitors. Additionally, examine their branding and marketing strategies.

Can the company repay its debts?

An example of a way to find out if the company can repay its debts is to utilize Fisher. It is a tool that employs research to determine whether a company can pay its creditors.

Additionally, use debt ratios to determine whether a company can pay its bills. The higher the company’s debt, the greater the financial risk.

You can use historical data of the company’s past stock performance to see how well it will perform in the future.

Is anyone tampering with the books?

Do a thorough analysis to make sure that no one is falsifying the company’s books. One way to find out is via Incentive Schemes. Managers get a higher bonus if the portfolio they manage performs well.

During a slump, some managers may find ways to make it appear as if their portfolio is doing well. Examine the disclosure and exchange filings carefully. There might be clues. It is best to identify those clues before they affect the share price.

In conclusion, understanding and analyzing investment opportunities involve finding out whether the company’s income is growing, or whether the organization is making a profit. Moreover, look to see if the company is stable enough to beat its future competitors. Also, examine if the firm is capable of repaying its debt, and investigate to see if anyone is tampering with the books.



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

Related posts