This Company, Can Buy?

“This company, can buy?” is the most common question I get whenever I am chatting with someone about investing.

The answer I invariably give is “It depends”. I am not trying to be a smart alec, but I genuinely feel that the answer to such a question is indeed, “It depends”.

What does it depend on? Well, it mainly depends on whether the investment suits your objective and your style of investing.

Knowing your destination

Before we start any journey, we have to know where we are going. This applies to our car or bus ride. It also applies to our investing journey. We have to know that it takes time to build up your wealth through investing. If someone is looking for a quick buck, investing is really not for you. I would then advise you not to buy any stock.

However, if you are prepared to be invested for a longer time frame, generally over a decade, then we need to understand if the company you are looking to invest in, suits your style of investing.

Arriving at your destination in style

Here are some of the common investment styles among investors.

1)     Investors looking for high growth companies

2)     Investors looking for cheap, under-valued shares; these are typically unloved companies

3)     Investors looking for income generating companies

Why does your style matter? It matters because you might end up worrying about an investment unnecessarily if you had bought a company that you are not entirely comfortable with. This might then cloud your judgment about the company.

For example, let’s say you had bought shares in the fast-growing Sarine Technologies Ltd  (SGX: U77), a firm which develops technological tools and products for the diamond-manufacturing industry. But, if you’re an investor who’s only comfortable investing in more mature and stable companies which generate strong dividends, you might just panic and sell at the worst possible time if Sarine faces a temporary issue with its technologies or if there’s some slowdown in the diamond industry.

Foolish Takeaway

A company suitable for me might not be suitable for you. Therefore, before we start investing in any company, it is best to ask ourselves if that investment really suits our style. If you have not found your style yet, we at The Motley Fool Singapore have prepared a report titled What Every New Singapore Investor Needs To KnowIt is a quick five to 10 minutes read on what’s really important about the share market and is a great guide for both new and experienced investors alike regarding the basics of the stock market. From it, you might be able to seek out what style of investing you are most comfortable with.

Learn more about investing through a FREE subscription toTake Stock Singapore.Sign up here to The Motley Fool’s weekly investing newsletter that will teach you how to GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any company mentioned above