Factor to consider before investing: Keep emotion out of the way.

Individual investors don't has to many tools to evaluate when it comes to investments. Most of the time, their investment is based on emotion sentiments rather than pure valuation. Take a look for example investment in well known company such GE. We all know that GE has been there for so long and assume that it will be there for a while. Combining stock price hammering in the recent time add further incentives in buying the stock. Agreed that 80 percent you will be right and will call a right decision. What if we can add some more information in further strengthening our belief that the investment we make are safe. With this idea in mind, Lets explore some of things we should consider while investing.

The first and foremost thing is the company standing in the market. Lets for example take GE. GE is leader in most of the segment. They are present everywhere, from home to office to finance to transportation to industry. Think for a while any other company which has so large presence in different sector. Based on the fact that GE is someway or the other, has become an integral part of our life. Thus the basic sentiment comes into play, if it is part of my life, I am going to trust the company and invest in it. This is very well thought investment strategy.

The second important thing to consider is the cash flow the company has. In case of start-up company, we don't have any cash reserve but cash-deficit account. But when we come to established companies like GE, we can see how much the company have made profit from the previous investment and how they are utilizing the money in future. Are their investment making a ground for future growth of the company. A quick look at the financial statement will give us an idea.

Another important factor is to consider is free cash flow. Free cash Flow can be calculated as FCFE = net income + depreciation - fixed capital investments - working capital investments +/- net borrowing. You have to take this in consideration with various other factors. A recent articles on thestreet.com [Here] give a better idea for more savvy investor. But for common investor it basically mean that if the company has more cash flow, it signal strong growth.

Another factor to consider is that future growth of the company. For example, is the company investing into those technology which will affect us in future. For example, the Green Power or the renewable source of energy; transportation sector, how we are going to travel in near future, Health sector, etc for a large conglomerate like GE.

Based on various factors some of the above will be able to help a common man to make a wise decision. I am not saying that consider these but take these factors into consideration before you invest. There are more sources to gather before you before you make investment. Use your money wisely.

You can take same view on
Siemens AG SI
Honeywell International Inc. HON
Tyco International Ltd. TYC
The Walt Disney Company DIS
Raytheon Company RTN
Emerson Electric Co. EMR
3M Company MMM


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