What are the most critical factors to consider while picking a stock?

What are the most critical factors one should consider while picking a stock?
- Kanu Agarwal

There are three to four factors that one should consider while picking a stock. It should be a rapidly growing and scalable business that is making money, i.e., having reasonable profit margins and is run by a great set of people. The last parameter is important because you become a partner with a set of people when you buy a company's stock. These people are partners in the company and run the business or entrust other people to run the business, but they have undue influence over the people who manage it. So a good set of people must manage the business; otherwise, you risk investing in a company where some people might steal money, putting a dent in the growing earnings and profits.

Apart from this analysis, another factor is buying the stock at a reasonable price. If you buy a great company at a fancy price, you will never make money. Because that way, you already pay the price reflective of many years of its future earnings.

This article was originally published on December 20, 2021.