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Five questions to ask yourself before buying a stock

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By Michael O’Connor, theislandinvestor.com

When it comes to investing, nothing is certain.

There are no perfect stocks to buy because there's no way of predicting the future with 100% accuracy.

The truth is, investing is hard, and building a portfolio of top stocks that beat the market is something that even financial professionals have trouble doing consistently.

For most people, investing in index funds is the perfect hands-off approach, providing broad exposure to the stock market at a very low fee. Even my own personal portfolio is made up of roughly 70% ETFs despite the fact I invest in the market for a living.

But I believe some stock picking is a good strategy for many hands-on people.

Taking a small portion of your overall portfolio and diligently selecting a small number of companies to invest in gives you an opportunity to learn about the investing process and fully understand the businesses you are investing in, which helps to build conviction in your positions.

From a psychological standpoint "collector's instinct" kicks in, enabling people to participate and invest more money over time.

Lastly, for Irish investors, there are tax benefits to consider. If you invest in individual stocks, you are taxed at the CGT rate of 33%, and the first €1,270 of your gains are exempt from CGT each year. When investing in index funds or ETFs, you are taxed at the exit tax rate of 41% with no annual exemption.

For those interested in picking individual stocks, here are five questions you should ask yourself before investing in any company.

Do I understand the business?

Too many people invest in businesses they don't understand because it 'sounds good'. If you have no idea how the company works, you won't have the conviction needed to hold onto the stock when an inevitable downturn comes.

Can the balance sheet withstand severe, temporary adversity?

This seems obvious, but so many people invest in companies without understanding how much money a company holds and who they owe money to. Economic cycles are guaranteed. You must ensure that the company has enough cash-on-hand to avoid becoming obsolete when activity slows.

Will the company benefit from long-term trends?

Make sure the company will remain relevant into the future. If the stock is cheap now, it may be cheap for a reason.

Is the company enjoying profitable growth?

Not growth at all costs, but a combination of sustainable growth and value. All this information can be found online at sites like stratosphere.io.

What are the risk factors?

Is the company trying something new and untested? If yes, who are its competitors and how successful are they? If other players are more established, this company may have a tough time breaking into the market.

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Fassbender ready for second Le Mans appearance

Local Hollywood A-lister Michael Fassbender is in the final preparation stages for his second appearance at the legendary 24 Hours of Le Mans. The iconic endurance race is celebrating its […]

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Local Hollywood A-lister Michael Fassbender is in the final preparation stages for his second appearance at the legendary 24 Hours of Le Mans.

The iconic endurance race is celebrating its 100th edition next weekend.

The Fossa star has already arrived in the famous French twon where he is involved in a week-long series of engagements including drivers’ parades, autograph sessions and more serious appointments like car safety checks, practice and qualifying.

Like last year, when he finished 16th in the LMGTE Am class, Fassbender has been entered in to the event by the German Proton Competition team with Estonian Martin Rump and the Austrian Richard Lietz.

Fassbender dreams of following the trajectory of fellow Hollywood actors Patrick Dempsey who was second in LMGTE Am class in 2016 and Paul Newman who finished second overall in 1979.

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Ireland’s oldest citizen has Killarney connections

Ireland’s oldest woman met with President Michael D. Higgins at Áras an Uachtaráin this week. Máirín Hughes, who turned 109 on May 22 has strong Killarney connections. The previous record […]

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Ireland’s oldest woman met with President Michael D. Higgins at Áras an Uachtaráin this week.

Máirín Hughes, who turned 109 on May 22 has strong Killarney connections.

The previous record was held by 107-year-old Nancy Stewart who died on September 10 2021.

Although born in Belfast, Máirín went to school in the Mercy Convent. Her father was a customs and excise officer and the family moved around a lot eventually coming to Killarney after spells in County Down and Dublin.

Her mother came from the Rathmore area and her father was from Newmarket in County Cork.

She attended the Mercy Convent and has, in previous interviews, recalled growing up on the shores of Lough Lein.

“Neighbours who had three children were given the job of taking me to school,” she said. “They were annoyed because the children were going to school for two or three years but I was put in to the same class as them – my mother had taught me.”

In 2021 she featured in the book ‘Independence Memories: A People’s Portrait of the Early Days of the Irish Nation’, sharing stories of being kept in school in Killarney during an attack on the RIC barracks down the road.

In 1924 she started a degree in science and a diploma in education at University College Cork, before working in the pathology lab in University College Cork’s Department of Medicine for 16 years.

last year she recalled her story on the podcast: ‘Living History – Irish Life and Lore’.

During the broadcast she talked about her parents’ membership of the Gaelic League in 1910; the Spanish Flu in Ireland in 1918; The Black and Tans in Killarney in 1921; the early days of the new Free State; Eucharistic Congress in Dublin in 1932, visiting the Basket Islands in 1929; and working in the UCC medical laboratory from 1932 until 1948.

This week President Michael D. Higgins hosted an afternoon tea event to celebrate the important role that a variety of people have and can play in different communities and Máirín was among the guests of honour.

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