One of my key reminders to myself in investing is to always be looking around the corner.
You want to ask yourself questions about the future prospects for the company stock you are considering buying.
What do I think will happen next? The point in asking these questions is to think about where you see this business in three, five, or ten years.
Questions to consider:
What do you know about the company?
How do they make their money? (Do they make money?)
Will they be making more or less in a few years?
Are they part of a new trend that will continue or a fad that will last only a few years?
Will other companies try to copy them and if so, can your company withstand the competition?
Will the story last long enough for you to be a long-term stock investor?
What could go wrong or right?
Don’t try to talk yourself in or out of the investment. Do your best to take an objective view. You may find the process reinforces your position that you are onto something with your idea.
You just want to keep in mind that history is littered with companies that go from boom to bust because markets change every day just as tastes change. You want to make sure you aren’t buying a fad right at the height of its popularity.