Loving a brand doesn’t mean you have to invest in it. You need to pay attention to some points when investing in your favorite brand.
According to Business Insider, stock trader Warren Buffett smokes at least five bottles or cans of Coca-Cola per day. Investing in Coca-Cola at the right time made Buffett a fortune. In 1988, Buffett bought about $ 1 billion worth of shares from the soft drink giant. The value of this investment rose to $ 18.4 billion as of March 2019, according to Forbes.
Just like the legendary stock trader Buffett, the idea of buying stocks from your favorite brands might be wise to you, but it may not be wise when you don’t consider some points.
If you are considering investing in a company that you find close and you have special meanings, you should be more careful. Here are the important points to consider when investing in your favorite brand:
Some companies make use of time to consolidate their position, while others use a trend that is likely to fade at any moment. If you want to buy stocks from your favorite brands, you need to choose the companies that you believe will survive for at least 5 to 10 years and will strengthen its position over time.
For example, Snap Inc., the parent company of the messaging application Snapchat, entered the New York Stock Exchange on March 2, 2017, its shares rose to $ 24.48 and ended the day with a 44 percent rise. The company announced a loss of $ 2.2 billion on its first quarter balance sheet after it went public and was forced to lay off 7 percent of its employees.
Thirteen months after the initial public offering, Snap’s stock price fell 40 percent and dropped to $ 14.11. The company’s share price is currently at $ 11. Only time will tell if the company can recover its losses, but this is a good example of why you need to pay more attention when investing in instant trends.
You want to buy stocks from a company with high growth potential. Companies that appeal to a narrow audience you may be associated with are understandably intriguing, but these companies are often not a wise choice for making money.
In this case, instead of investing, you can continue to support your favorite company by purchasing products and services. If the company eventually diversifies its products and services, you can review your decision not to invest.
For example, GoPro, which designed high-performance camcorders, struggled for a long time to produce a high-quality mass market camera at an affordable price. Analysts, however, interpreted GoPro’s $ 200 new camera as a failed strategy that has been tested with “disastrous” results that could reduce the company’s shares to zero. The failure of a single product, which was expected with great hope, unfortunately caused serious damage to the company.
The stock market requires patience. If you think that the stock market is a system, program or field that enriches rapidly, you are very wrong. Certainly, some investors have gained an astonishing rate, but this is the exception to norms.
Remember Warren Buffett’s Coca-Cola investment. Yes, roughly $ 1 billion worth of shares reached $ 18 billion, but it lasted nearly 30 years.
There is no certain way to predict when stocks will rise to the top, so you should follow up well in every way and expect growth to happen organically.
The right timing can make the difference when buying stocks from your favorite brand. If the business grows fast enough, the stock price will increase accordingly.
For example, when Amazon entered the New York Stock Exchange in May 1997, stocks were bought for $ 18. Almost 22 years later, today, Amazon shares exceeded $ 1,780.
When your favorite brand offers special discounted products and services, you’re first in the line because it’s probably a good purchase for you. However, a cheap stock is not always a good purchase.
Sometimes buying a cheap stock is a really good opportunity, but it can also be a sign of stagnant growth. Likewise, an expensive stock may seem ready to offer high returns, but if you buy at a very high price, you may have to pay much more than its value, and you may eventually lose money.
That is why you should do your research to measure the true value of a stock to find out what the current price should be as well as future gains.
Depositing your money in a stock is very different from depositing it in a bank. Because there is no guarantee on the stock exchange compared to the fact that your money is guaranteed in your bank account.
As long as you continue to receive the best interest rates, you don’t need to do anything while your money is in your bank account. Because you know exactly how much will be in your account today or tomorrow.
The same is not the case for the stock market. It may be difficult to give up your favorite company, but a shift in the wrong direction can seriously damage your investment or even eliminate it altogether. Therefore, you must always take risks into account and gain a habit of control to ensure your investment.