Factors to Consider when Buying Shares of a Company

1. Economic conditions of the country and other non-economic factors e.g. unfavorable climatic conditions and diseases which may lead to low productivity and poor earnings.
2. State of management of the company e.g. are the B.O.D. and key management personnel of repute? They should be trusted and run the company honestly and successfully.
3. Nature of the product dealt in and its market share e.g. is the product vulnerable to weather conditions? Is it subject to restrictions?
4. Marketability of the shares – how fast or slowly can the shares of the firm be sold?
5. Diversification i.e. does the company have a variety of operations e.g. multi-products so that if one line of business declines, the other increases and the overall position is profitable.
6. Company’s trading partners (local and abroad) and its competitors.
7. Prospects of growth of the firm due to expected growth in demand of products of the firm.

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