Summary
When researching an investment, it is generally a good idea to at the least, research these factors.
- Geo-political factors
- National factors
- Economic factors
- Industry factors
- Company Factors
- Financial factors
- Social factors
Introduction
Before you invest into anything, you should research exactly what you are investing into. This does not matter whether this is a T-bond, shares or a currency. Read up on it, understand the problem that it tries to solve, and how viable the investment is for the current market. A number of factors to assess are listed below.
Geo-political factors
The effect of politics between countries on companies and investments. For example it may not be a good idea to invest in Qatar airways currently due to the border closures. Equally, South Africa has had a lot of issues with attacks against foreign workers, which has lead to a substantial decrease in investment in the country (le Cordeur 2015).
National factors
Looking at the problems and benefits of a certain country, their laws and regulations. For example, New Zealand is seen as an excellent country to start a start up due to the reduction of regulations and red tape.
Economic factors
The effect of economic factors on the economy of a country. For example an economic factor would be the amount of debt per capita a country has in respect to it's interest rate. This also includes a countries debt to GDP ratio.
Industry factors
The effect of economic factors on the economy of an industry. For example the effects of fracking have reduce the crude oil price to a point where oil is cheap due to an increase in supply in the market. Another would be the sugar market, the subsidiaries that the EU gives to sugar farmers in the EU allows for them to remain afloat and to sell sugar at a reduced price, however makes it harder for countries, such as Haiti, from competing at such a low price (System Administrator 2016) .
Company factors
The effect a companies' structure has on it's ability to adapt to the market. For example, Amazon after the GFC focused on its logistics and its ability to be efficient and reduce costs (Business Insider 2017). This has allowed it to out compete most of its rivals to the point it is able to enter other markets with relative success. Other factors can include it's management structure, it's goals and how well they align with the problem they seek to solve.
Financial factors
The effects of a companies finances on a companies' ability to perform relative to the market. This you can get by looking at companies' balance sheets, income statements, how much it is leveraged (i.e. the amount of money it has borrowed relative it it's income) and so on. These can be found in a companies' Annual Report that they issue to shareholders every year. Looking at the share price numbers can also be a good indication, for example a healthy company in a competitive market will have a price earnings ratio between 15-30.
Social factors
The effect of social issues on a companies ability to perform it's duty. This usually comes in the form of corporate social responsibility - making sure the company is seen in a good light to the public and investors. An example of social factors in play is back in 2016, news occurred of suicide of dairy farmers committing suicide due to the stress of work. Although it may be difficult to find out whether the rate was increasing or was normal (Fact Check 2014), consumers purchased more expensive brands of dairy milk (Graham 2017). The short term effects were cheaper milk, usually the supermarket's own brands, having a reduction in the revenue they generated as a result.
It should be important to note that at the time, the term 'dairy farmers' was generalized. To my understanding, they did not discern whether it was supermarket brand milk farmers or independent brand milk farmers that were in trouble, therefore the news may have negatively affected the farmers most vulnerable. This is because supermarket brand milk farmers have to produce a lot of milk and sell at the cheapest price currently ($1AUD/L).
Sources
Business Insider Intelligence 2017, 'Amazon's earnings highlight expanding logistics network', Business Insider, retrieved 19 June 2017, http://www.businessinsider.com/amazons-earnings-highlight-expanding-logistics-network-2017-2/?r=AU&IR=T
Fact Check 2016, Fact check: Does a farmer die by suicide every four days in Australia as Bob Katter says?, ABC News, retrieved 19 June 2017, http://www.abc.net.au/news/factcheck/2014-10-16/farmer-suicide-rates-bob-katter-fact-check/5805450
Graham D 2017, 'Consumers sending big to support dairy farmers', Choice, retrieved 19 June 2017, https://www.choice.com.au/food-and-drink/dairy/milk/articles/consumers-buying-more-branded-milk-to-support-farmers
Le Cordeau, M 2015, 'Xenophobic attacks will hurt foreign investor confidence - economist', fin24, retrieved 19 June 2017, http://www.fin24.com/Economy/Xenophobic-attacks-will-hurt-foreign-investor-confidence-economist-20150414
System Administrator 2016, 'Agricultural Subsidiaries', APHG, retrieved 19 June 2017, http://lewishistoricalsociety.com/wiki2011/tiki-read_article.php?articleId=138