Tuesday, March 10, 2009

7 Questions to Ask Before You Buy a Stock

If you invest in individual dividend stocks, then I would recommend that you should ensure that you read the books and articles written by Harry Domash. Domash is well respected as an expert in understanding the investment analysis process and has developed many quality techniques and tools for individual stock analysis. In a recent article posted on MSN Money, Domash outlined 7 questions an investor must ask before investing in any company.

Before investing in any stock, regardless of whether you have been analyzing stocks for 50 years or you are brand new, these seven steps can help to formalize your process. The key is to ensure that you examine all parts of the business before making a decision to invest. Without this thorough understanding, investing in individual stocks is just gambling. Here are the seven questions outlined by Domash in the article:

1. What does the company do?
2. How many widgets is it selling?
3. Just how profitable is the company?
4. Is cash flowing in or out?
5. Is the company submerged in debt?
6. Any bad news lately?
7. Which way are forecasts moving?

Of course, within each of these questions are ratios and analysis techniques that will help you answer these questions. Check out the article and his book, Fire Your Stock Broker, for more detail on how to answer each of these questions.

This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.

1 comment:

  1. All good questions. A few more aspects that I look at are:
    How much is the promoter holding in the company. The more the merrier.
    Is the company in a business for which I feel a need 20 years down the line?


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