How to Research Investments

If you are interested in investing in a particular business, you need to research the possible investment first.  Primarily, you have to determine if the company is public or private.  A private company is owned by an individual, a small group of carefully selected investors, a family or a partnership- and outsiders cannot purchase stock for that company.  A publicly traded company however, is one that has shares available on the open market.  How do you know whether a company is private or public?

The easiest way to find out whether the company you're interested in investing in has stock available for purchase is to pick up the phone and call them!  Another way you may be able to find out is to visit the company website, as many public companies will have an "investor relations" section on the site to help people who are interested in buying stock- however, if the site doesn't have such a section it doesn't necessarily mean the company doesn't sell stock.

What is a Ticker Symbol?

When you find out that the company you want to invest in is in fact publicly traded, then you must find out what ticker symbol the company operates under.  The ticker symbol will be a series of letters to represent the stock on the market.  For example, Microsoft's ticker symbol is MSFT.

You can find out a company's ticker symbol by calling your broker, or by visiting Yahoo Finance and using the symbol lookup option. 

With a company's ticker symbol, you can use one of the various financial sites to get a quote for the cost of one share of that company's stock.  (Again, Yahoo Finance offers this option).  The quotes may also provide a summary of the total market capitalization, price-to-earnings ratio for the previous year, recent dividend payment and yield information and a variety of other interesting information someone might be interested in knowing before they decide to buy shares of stock. 

Get Financial Documents

if the quoted amounts per share seem reasonable for you, then your next step is to obtain the financial documents of the company.  You'll want a copy of the annual report, the 10k and the proxy statement.  To get these documents, you can either call the shareholder relations department, visit the website to request information, or use a database of annual reports and SEC filings called Free Edgar. 

Look over the financial documents carefully to get an understanding of the performance of the company to determine whether or not you want to invest.

Direct Stock Purchase Plans & More

If after all of your research, you still want to invest in the company, then you might decide an automatic option for investing in the company over a long term period.  You can choose a direct stock purchase plan or a dividend reinvestment program- both options allow you to regularly invest.  The dividend reinvestment program is exactly like it sounds: the investor allows the dividends to purchase additional shares of stock.  The direct stock purchase plan is a program that lets you automatically purchase stock by automatic withdrawals from your savings or checking account- and without the help from your broker.