9 Things to Consider Before Investing in Equity: A Checklist

Are you planning to invest a fresh amount or top up existing investments in equities/stocks? While investing in equity is a great way to grow your wealth and diversify your investment, it is also a complex investment decision to make. Though you may need professional expertise and guidance to better understand the trends, regulations, pros, and cons of such investments, it is prudent to educate and refresh yourself before proceeding.

You may also find this useful: What Is a PE Ratio and Why Should a Beginner Care Right Now.

You may also find this useful: Portfolio Risk Management for Serious Investors.

You may also find this useful: Rupee at Record Low – What It Does to Your Mutual Fund and F.

So, before further ado, we present you a checklist of key things you need to consider before you invest in the equity market:

1. Products and Services of the company:

The ultimate thing that would impact the price and health of stock in the long-term is the core business the company does. The quality of the product/service, the competitiveness, and availability of alternatives drive the profitability and longevity of the business.  Hence, firstly try to understand the top-selling or major products or services of the company before investing in it.

2. Promoters or Owners of the company:

Once you understand the product, the next thing you need to learn about is the promoters and owners of the company. Get to know more about the credentials and background of the board of directors, MD, CEO, and the management team. Also, it is good to learn about the shareholding pattern of the company as it would affect the market capitalization and profit-sharing of the enterprise.

3. The Profitability of the company:

Perhaps, the profitability of a company matters the most while evaluating a company. However, just not the profitability but the consistency of it is vital for your investment decision. Therefore, you need to research about the profits of the company in the last few years, gross profit, operating and net profit. Additionally, learn more about the profit margin at each level of the business and growth rate of the profit and if it has a stagnant or declining trend.

4. The Competitive Advantage:

How is the company you are interested in placed in the market? Does it have a sustainable competitive advantage over its other compe