Understand the business
Imagine you’re looking at a list of shares on Bursa Malaysia. How do you choose which one to invest in?
Well, you can start by choosing a company you know about. Then, you need to learn more about the business the company is in.
For example, MR.DIY is a company that sells household items. It makes money by getting items from suppliers and selling them to the public at low prices. Nestle makes food and drinks that you’d usually find in supermarkets and sundry shops.
Now that you know what business the company is in, you need to understand how well it is doing. Apart from looking at the company’s financial performance (which we’ll cover in the section on How well is the company performing financially? of this Guide), you could check out some other information about the business:
- Observe the business in action: If it’s a physical store like MR.DIY, you could visit its stores to see how busy it is. A busy store could mean that the company is doing well.
- Compare the business against its competitors: If you can, compare the company’s products with products of their competitors to see which one is better.
- Look at customer feedback: Another way is to speak to customers of the company or by reading online reviews of their products (basically anyone who has bought products from the company). Satisfied customers are a good sign, but if customers are always complaining about the products, it might not be a good company to invest in. If the company sells its products or services to other companies and not individual customers like you, for example, a company that sells IT products and services to other companies, you could Google the company to see what people have to say about the company.