Day 9 - Tips & Tricks

Day 9 is here and the Stock Market is getting increasingly flooded with options. As LinkyW won't be able to cover extensive articles on each of them, we will now give you some tips and tricks that might help you make financially sound decisions on the stock market.

Align Your Goals

Firstly, you should consider what you want from the investment. Is it a short term investment where you hope to exit the company early on with a quick profit? If so, you need to look for companies with focus on rapid growth. Are you looking to invest long-term? Then you need a dedicated CEO and long term plans of expansion for the company. Are you looking for dividends (gold income at a steady rate while not needing to sell your shares)? Then you need to make sure the company has a clear plan for dividends, sacrificing some growth to accomplish it. The list goes on.

Finances

An essential part of a company is their finances. Do they have enough assets to accomplish their goals, and is the price of the share equivalent to ownership? If the company has 100 shares, then 1 share gives you ownership of 1% of the company. This is important, because if the company has 100g worth of assets, your share is then valued at 1g and should not be purchased at a significantly higher price. This is of course not accounting for potential growth, but can be a good baseline for the evaluation. Once the stock companies start making profits and can make projections on future profits, using a so called Price-To-Earnings ratio (P/E) will be a good way to compare companies.

Ownership

Another essential part of a stock company is its ownership and how that ownership was acquired. Starting up a holding costs 50g, giving the founder 100 shares. With no initial gold in the holding. That's an initial investment from the founder. Some CEOs will then create X amount of shares that they give to themselves that they then sell on the market. What this does is giving all the gold spent on purchased shares to the CEO, and not to the company. This is not an ethical way to run a holding, because there is no gold for the holding in this arrangement and if the CEO wants to, they can keep all that gold for themselves. Therefore make sure that the shares are sold by the company and not the CEO or investors in a startup. If the CEO buys these shares from the stock company at market price however, the CEO is contributing to holding funds, just like any other investor. It's important that the CEO is connected to the outcome of the company. If the company and its investors do poorly, so should the CEO. If the company and its investors make profit, then so should the CEO.

Transparency

Make sure that the stock company has information publicly available, such as shareholders and rights issue history. This assures that you have as much information as possible about the company. A legit stock company should always be as transparent about their practices as possible.

We will revisit some of these methods in the future, as the stock market and its functions improve. Please let us know if there is anything you'd like expanded upon in the future.

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