Not All Investments Are For All People
What to invest in can be a very personal choice when it really shouldn't be at all.The problem is that we are all human, we like things that others do not and we have a habit of trying to support those things that we like while avoiding the things that we don't like.
Alcohol is a perfect example.There is a large segment of the population that sees alcohol as a sinful device of the devil that leads to all sorts of sinful acts including fornication, lying and murder.Those people who are against alcohol would never invest in a company that they knew sold alcohol.The problem is that alcohol companies tend to do super well during economic downturns and during economic successes.During the former, people are drinking to forget about their problems and during the latter, people are drinking to celebrate.Someone who sees alcohol as undesirable will not be able to take advantage of the corresponding stock price increases and the stability that these companies offer.
It isn't necessarily a bad thing to be socially conscious as an investor, but it is important to know what opportunities that you might be missing out in if you choose to exclude certain companies in favor of other companies.
Of course, socially conscious investors are not out just to make a dollar, they want to support the businesses that support their beliefs.A company that is moving forward with green initiatives will get more environmentally aware people to invest in its stock.This will, in turn, allow the company to more aggressively pursue an environmental agenda as they will not necessarily have to please stock holders who want an ever increasing return on their investment.Instead it will be able to please stock holders by showing off its green program.
Other investors may choose to invest in what they know.People who know media will look at Disney or Time Warner or any of a number of other stocks and choose the ones that best suit them and what they believe about media and how it should be run.
The most important thing that investors should look at is how the company is being run.This is an easy indicator of financial success or distress.Companies that have a clear plan and a person who knows how to drive company success can easily succeed in today's markets even with all of the challenges - think Steve Jobs and Bill Gates or old school Lee Iacocca.
Another good thing that investors should look for is how unique the product is.Time Warner can make movies, but they can't make movies starring Mickey Mouse.The more unique a product is, the less likely that someone else can undercut the market, and nothing is more unique than intellectual property.
While all of these things seem to point to different investments, it is important to remember that nit every investment is right for every person.Someone who is younger or has a lot of money may be able to afford to make a riskier investment than someone who is older and does not have a lot of money.
Because people use and see money differently at different stages in life, it is important to review investments in depth on a regular basis.If you have someone in charge of your portfolio, you should still make sure that person is providing the service that they said they could.Nothing is worse than trusting a person with your money than finding out there is nothing there when retirement rolls around.Frequent reviews, even on a quarterly basis, can help you keep your goals.