Investing takes grit and knowledge. In order to find success as an investor, you can’t be afraid to make mistakes, but you also need to identify and rely on strategies that will mitigate losses over the long term. Many investors consider deep research to be their silver bullet when it comes to smart investments, and you should too. But taking it a step farther is necessary in order to really make it as a successful investor in the competitive world of unique asset classes, fast-moving commodity pricing, and a market that has been hijacked by continuing coronavirus lockdowns and job losses in the short term.
Don’t discount the role of Covid-19.
The coronavirus pandemic has created a unique market condition that is artificially moving market prices across a variety of sectors. Obviously, the travel industry has taken a major hit as a result of Covid-19 precautions and social distance measures. But this isn’t the only space where investments have been upended. Recently, Game Stop, a mostly dead video game retailer has seen a vast spike of over 1,600% to its underlying stock valuation in recent days and weeks (with a tripling in price over the course of one day). Retail investors are upending the way the markets react as a result of a stimulus infusion; the same trend was apparent during the previous round of stimulus cash that the U.S. Federal government doled out last year. Covid-19 has reinvented the way investors approach the market, if only in the short term. Other recipients of this stimulus cash have used their new funding to eliminate debt obligations to lenders and creditors. The unique position that we find ourselves in economically has created a novel condition for investment opportunities across all asset classes.
Understand corporate debt.
Speaking of debt, the interest expense ratio, or TIE ratio of a company is a strong indicator of financial health across a broad spectrum of industries. Learning what’s a good TIE ratio is an important metric for investors looking to create strong stock market growth within their portfolios. Essentially, interest expense considerations revolve around a company’s ability to immediately pay back creditors. The vast majority of businesses in today’s capital-intensive world have borrowed money from a litany of creditors and lenders. Carrying these debt obligations presents a unique financial requirement for businesses that are going to continue operating, especially during this unprecedented time. Corporate income statements give great insight into a company’s ability to pay back this debt, which translates into a measure of cash flow. Times interest earned ratio helps investors uncover whether a company is trading at a high volume or if its sales are dropping off – and therefore its profitability and viability as a good investment. TIE ratio is a simple metric, but one that signals powerful market trends within and across industrial lines.
Keep researching to identify great investment opportunities.
Investing is all about the merger of people and data. Individual business leaders like Malliha Wilson will attest to this need to build relationships and continue growing as a reader, leader, and investor. Focusing on building patterns of recognition and strong relationships within your circle is a great way to identify new and developing investment opportunities before they become apparent to the rest of your competitors. Whether you are considering investing directly in a company or starting your own firm in a new arena, fostering high-quality relationships and continuing to master the information about your investments is a crucial part of finding success wherever you go.
Growing your investment portfolio takes a long vision, but also a commitment to keeping an open mind. Make sure you are always challenging your preconceptions in order to move with the market.