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Investing Checklist: A Smarter Way To Trade

26 May 2015 in Investing Insights

Have you ever made a spur of the moment trading decision without fully thinking things through and later come to regret it? Do you feel like your investment decision-making process could use some help?

Utilizing an investing checklist is a great way to develop a systematic, organized, and thorough approach to trading. Not only does this prevent you from making rash decisions based on emotion, impulse, or rumors, it can help you learn how to make informed trades. Referencing an investing checklist can also make it easier for you to make decisions on when to buy, hold, sell, and reallocate into new investment opportunities.

With your investment checklist in hand, explore investing ideas from the catalog or build your own motif from scratch.


Before making your next trade, try to answer “Yes” to as many of the questions shown below as possible. If you find yourself answering “No” to some of the questions, consider seeking out subject matter experts to gain further insights, gather more information on your own, or look at other alternatives.

Familiarize yourself with the products and services.

The more you understand what companies are producing and offering to their customers, the better your chances are of determining if demand and growth could be sustainable in the short and long-term. Do a basic search of their products online. Visit their website. Read through FAQs, About Us pages, reviews, and press releases. Watch recent sales and marketing videos. Then ask yourself these investing checklist questions:


Do you understand the overall purpose of the industry? Yes No

Does the business model of the company make sense? Yes No

Is their current mission focused and in line with their brand? Yes No

Do you know the history of the company? Yes No

Do they offer unique features? Yes No

Is the company making an impact? Yes No

Are you familiar with the resources required for the business to operate? Yes No

Have you researched how they make money? Yes No

Learn about the CEO and management team.

Great management is key to picking a winning investment. Almost all of us are minority shareholders with no say in the strategy and operations of a company we are investing in. As a result, we must believe and trust in management to make winning decisions for the good of all shareholders.

Management pedigree can easily be researched through popular sites such as LinkedIn if you aren’t able to land coveted 1X1 meetings by institutional investors. Consider attending a quarterly shareholder meeting or dialing into quarterly management calls online to make your own observations about management quality.


Do you know who the CEO is and how long he or she has been in office? Yes No

Is the management team well respected and trustworthy? Yes No

Are the executives compensated fairly? Yes No

Has the management team made smart decisions in the past? Yes No

Has management been open and forthcoming with shareholders and the press during their quarterly results? Yes No

Have recent articles and news clips about the management team been positive? Yes No

Get to know the customers.

Companies can’t survive for long without customers who love and share their products and services. Build a strong understanding of who the consumers are and what they want. The better you understand the target audience, the better you can determine if the investment is likely or not to meet their needs.


Do you know who the customers are? Yes No

Are you a customer? Yes No

Do you want to be a customer? Yes No

Is the majority of the customer base loyal? Yes No

Review the investment’s performance and risks.

Familiarize yourself with the financial health of a company and its industry before making an investment. Key financial statements such as the income statement, cash flow statement, and balance sheet are becoming more readily available at large finance sites such as Yahoo Finance. You can usually get a company’s latest financial statements from its Investor Relations department online as well.

Depending on the type of company you are investing in, some metrics to observe include:

1) Top line revenue growth

2) Operating profit growth

3) Net profit growth

4) Gross profit margins

5) Operating profit margins

6) Cash on hand

7) Dividend payout ratio

8) Inventory turn

9) Latest valuations

10) YoY, MoM, or QoQ performance comparisons

11) Actual earnings versus expectations

Financial status

Have you reviewed the performance history? Yes No

Did you compare the performance to competitors and relevant indices? Yes No

Do you know the earnings announcement schedule? Yes No

Are you familiar with the financial health of the company? Yes No

Have you reviewed various forecasts by analysts and other experts? Yes No

Are the profit margins steady or increasing? Yes No

Have you reviewed the financial statements? Yes No

Is the outlook for the company favorable? Yes No

Size up the competition.

Many industries are highly competitive and companies can get squeezed out if they mismanage their finances, execute poorly, make bad hiring decisions, and lose customers to competitors. Before making an investment, take some time to size up the competition and ask yourself these investing checklist questions:


Do you know who the industry leaders and lagers are? Yes No

Does the company offer unique features from the competition? Yes No

Is there a high barrier to entry? Yes No

Is the market share of the competition declining? Yes No

Figure out your exit plan.

Have you thought about why you’re interested in making a trade? Or how long you anticipate holding the investment? Having at least a general sense of what you want to accomplish with each investment can help you reach your goals.

For example, perhaps you’ve got a target share price you want to hit based on technical factors. Or maybe you have a forward P/E multiple target you believe the company can achieve where you’re willing to sell. Finally, maybe you’re looking to hide out in the investment, which you think will outperform during volatile times. Figuring out when to sell is just as important as figuring out when to buy. Here are some other investment questions to consider:

Do you think the company is good value? Yes No

Are you confident in making a trade? Yes No

Would you recommend it to your friends or family? Yes No

Is the investment suitable for your goals? Yes No

Do you know how much you’re willing to lose? Yes No

The above investing checklist is a useful guide you can use when making trading decisions such as picking stocks and ETFs for your very own custom motifs. If you prefer to leave most of the background work to the professionals, search our catalog for professionally created motifs that make it easy for you to consider investments based on your interests and the big ideas that excite you.

Photo Credit: https://www.flickr.com/photos/mufidahkassalias/10519774073

  1. 28 May at 12:14 am

    I love investing check lists.

    In addition to the questions above, I ask these two important questions.

    1. Is there signs of earnings management? Or potential fraud? Is the management being fully transparent?

    2. What are the things that could destroy my investment idea?

    The first question is sometimes quite hard to answer because fraud is difficult to detect from financial reporting alone. However, if I spot inconsistencies in the numbers throughout time, surreptitious changes in accounting policies, or changes in definitions then I would be quite wary.

    The second question is also difficult but a very important question to answer. I usually hypothesize certain scenarios that would hammer the company including change in regulation, disruption in the supply chain, economic recession, and intense competition.

    Happy investing 😀