February 19, 2006
First things first. As you move forward with your investing you are going to encounter many “hot tips” and “hidden gems.” What are you going to do with this information? Odds are you will do one of two things; Invest or dump. How do you determine which course of action is the wisest?
Two words – Due Diligence. If you don’t know what this means, it is time you learned. Due diligence is the practice of researching prior to entering into an agreement or investing money. Due diligence means you are not depending on “Joe’s” expertise. (Joe is your co-worker, financial adviser, or the milkman.) What do they really know and how did they arrive at their conclusion to buy? Did they listen to some money guru on CNN, or did a fax arrive unannounced that sounded like the opportunity of a lifetime?
The only way to check on validity of an investment is to research it yourself or put your future in someone else’s hands and hope for the best. Do you trust your broker or is he or she only trying to sell you stuff so they make a commission? Do they care about your money like their own? Does your buddy really have money invested in a company or are they just trying to inflate their “expert” standing by blowing hot air?
Check the standing of the company and the industry. Check other analysts opinions, key statistics, SEC filings, etc, etc. This is like hiring a new employee. You want to do a background check, call references and talk to the previous employer or you might end up with a lemon.
I am not going to get too deeply into the steps of Due Diligence (usually abbreviated DD on message boards and in financial stories), but just wanted to bring it up. You are responsible for your investments. Don’t get duped by a slick presentation or caught up in a “you gotta buy now” situation. Investing has to be based on facts and supported by a gut feeling. Going with emotions and a gut feeling may work out sometimes, but research will bring a solid base to your portfolio.
Until next week,
The columns, articles, message board posts and/or any other features provided on Wealth Training Source are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author’s own and there is no implied endorsement by Robert Britt of any advice or trading strategy
copyright Robert E. Britt 2006
