Wealth-Coaching

Part of making good choices in investing is making sure you take a risk that you are willing to live with. All investing has a level of risk but you don’t want it to be due to poorly run or managed companies which could lead to a very poor investment.

We will look over the next few days at several warning signs that a company may be headed for trouble.

(one) Be sure your company isn’t dependent on key suppliers. This means that the company will manage their inventory well and keep it at an optimal level. They will also not overdo the inventory levels that could jeopardize their cash supply.

To much of a dependance on a key supplier could damage sales if the supplier was not able to supply a great selling product.

Apple Computer was in this position in 1999 when Motorola was the company’s sole supplier of the G4 PowerPC chip. Practically speaking, had Apple experienced a tremendous increase in demand for its product, all of those sales could be jeopardized by a problem in the factories of its supplier (strike, shortage, etc.) Thus an investor considering acquiring Apple shares would have been wise to examine the condition Motorola as well.

Tomorrow, we will continue to look at how to pick a good company, well, at least how to see if one is heading down the wrong path.

Be sure to get good advice before investing in any company.