“Look Before You Leap For As You Sow, Ye Are Like To Reap”
Would you volunteer to jump into a body of water swarming with piranhas?
I thought so too.
The same goes for any kind of action regarding decision-making in your life. Think before you act, so that you don´t act before you think. The importance of an analytical thinking process before making a decision of course depends upon the complexity of the decision, the risks included, and the possible final outcome. Over-analyzing simple matters can be as harmful, since it may just lead to procrastination and an inability of decision-making in the first place. But the more complex and responsible the decision, an amount of reflection is beneficial before taking action. When not certain about something, consult someone with more knowledge, and someone you can trust.
In the world of investing, plenty of choices are at hand. There are many forms of investing too, such as investing in intellectual capital and in increasing personal knowledge, investing in human resources, investing in your children´s futures, investing in real estate or buying a home, investing in your personal health, and so on. Here, I refer to investing in different kinds of securities, such as funds and stocks. There are a number of key ratios that investors commonly get familiar with before investing in a specific security, be it a fund or a stock. These include terms such as P/E, TER, ROCE, ROE, QR, Current Ratio, EBITDA, volatility index, asset class, benchmark, small-cap, large-cap, blue chip, maturity, trustee, and the list goes on. For any investor, it is a good idea to have some kind of understanding about the principles of securities investing. If not, better make sure to choose a service provider who is either willing to explain these to you in a comprehensive way – or, choose a service provider who you are willing to trust enough even without understanding. Either way, as a customer you will need to sign agreements where you approve that you have understood what you are investing in.
Before investing/signing agreements, there are a couple of other factors to take into consideration:
– Understanding what the security consists of. I.e. if it is a fund, what is the fund policy?
– With direct stock investing, having access to the company´s annual report, most preferably including an HR report (with information about staff policies, staff turnover rates etc.), and a CSR (Corporate Social Responsibility) report. The CSR report could also be named CSR and Sustainability Report, depending upon the company.
The CSR Report can include a number of themes, such as the company´s philosophy in and towards sustainable business processes, what kind of actions are being taken at different stages in production with regard upon e.g. environmental and human rights issues, governance and transparency structures, codes of conduct, code of ethics. Progressive companies, and “trend setters”, are aligning their reporting practices with e.g. a Global Reporting Initiatives (GRI) and UN Principles for Responsible Investing (PRI).
“For those who are skeptical about socially responsible investing and business practices: There are three steps in the revelation of any truth; in the 1st, it is ridiculed; in the 2nd, resisted; in the 3rd, it is considered self-evident”.
This blog post has been written only for informational purposes, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security, product, service or investment. The opinions expressed in this post do not constitute investment advice. The information provided herein or in any communication possibly linked to this blog post is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Neither the information, nor any opinion contained in this post constitutes a solicitation or offer by the author to buy or sell any securities, futures, options, shares, funds, or other financial instruments or provide any investment advice or service.