What is a good investment?

What is a good investment? What makes one stock perform well while others perform poorly? Throughout history the best stock investments have been made throughout a bears market, so it is natural to assume that 2009 will be a time when money is to be made. So how do you go about finding which stocks to invest in? There are 5 simple criteria’s you should use when deciding if a stock is good to invest in or not.

When asking what is a good investment? Ask yourself these questions.

1. Does the company fulfill a need? You want to make sure you invest only in companies that have a purpose. It should be something that is not going to disappear overnight. For example Coke a Kola is not going to vanish. They have millions of customers worldwide.

Another thing I should add here. The company’s product should be something that you can understand. There are many companies out there which there CEO’s do not fully understand. Stay away from these.

2. How is the company managed? There is a strong correlation between companies with good management and companies who have made money for their shareholders. The better a company is ran the more likely it is that they will survive and prosper in the long term.

3. Does the company have little or no debt? The best ran company with the best product will not last very long if they have too much debt. Companies that have very little debt can use their money not to pay bills but to invest in themselves and pay out dividends.

4. Does the company have increasing/stable earnings? It is a good sign if a company is continuously increasing their earnings. That shows they are growing and hopefully that growth will spread to the shareholders as well.

5. Is the stock Undervalued? The concept of investing is simple, buy an undervalued stock and wait for it to increase in price. The best stock investments for the long term can be found by conducting fundamental studies such as P/E ratios, PEG ratios, and Price to Book ratios.

So, what is a good investment? A strong company with a strong product that is undervalued will normally outperform the market in the long term.