"There is nothing more frightening than ignorance in action!"
Johann Wolfgang von Goethe (1749 - 1832)
I do not really know how cars actually work. Not really! I know how to drive them, but if you asked me how they work, I would not really know how to explain certain.
That little technical limitation on my part not stop me know if XYZ Autos is a quality company or not. I do not understand the cars they make, but I understand XYZ Autos. Furthermore, this insight is essential for making a decision about the value of their stock.
There are many good and objective ways to value stocks and improve your finances. This involves looking at various financial ratios. However, one of my simplest rules of investing is that you should always understand what you are buying!
This is not original with me. It is a fundamental part of fundamental analysis!
How deep should you study to understand before you invest in is a rather personal decision for a company
Some investors feel fine with just a general concept, while others want to know everything there is to know about the company. I think somewhere in between is perfect.
But you should know what makes a company different from others, and whether that difference adds no real value or not.
Sometimes different is not good ...
Buy what you understand for a reasonable price and you will be well on your way to successful investing!
Copyright © 2005 I.E.C. Haramis
Ioannis - Evangelos (Akis) C. Haramis was born in Athens, Greece in 1951. Studied Business Administration, Marketing and Economics in Athens, Greece, in Chicago, ILL and in Boulder, CO (USA), as well as in Leuven, Belgium. He has been active in the equity markets since 1972 as an investor, broker and consultant for individual investors and various funds. He is Managing Director of New Business Development at a leading Investment Bank and publisher of
No comments:
Post a Comment