Buying shares is both exhilarating and frightening at the same time. It is frightening because you are putting your hard-earned money at stake, but it is also exciting because you know that if your investment is a good one, it could yield substantial profits. However if you want to make consistently profitable investments there are two questions you should always ask yourself.Firstly when you find a company that you may be interested in investing in, you should pretend that you’re a billionaire and you’re actually taking over the company yourself. This is a tip I picked up from Robbie Burns, who is arguably one of the most successful investors in the UK.It works a treat because what this does is it enables you to effectively value a company and therefore decide if it’s cheap enough to invest in at it’s current price. You can do this by first of all identifying the market capitalisation of the company and then looking at the net profits for the year (and projections for future years).For example if the profits for the year are $50m and the market capitalisation is $500m then this is a solid investment because it would take just ten years to recoup your initial investment (and even less if you factor in any growth in profits). However if the market capitalisation is currently $1000m then it would take twenty years to recoup your investment which is obviously a lot less appealing from an investment point of view.The general rule is to look for companies whose market capitalisation is less than 15 times net profits, although I personally prefer to seek out companies whose market capitalisation is less than 10 times net profits, particularly at the moment when share prices are low.The second question you should ask yourself before investing in a company is whether you would be happy to hold on to shares in this company for the next ten years or so. You have to ask yourself whether profits (and dividends) will continue to grow in the coming years or will the company be overtaken by competitors. You ideally want to look at market-leading companies who are at the forefront of their industry and who have a long track record of increasing both earnings and dividends.So to sum up, if you want to make profitable share purchases, then you won’t go far wrong by asking yourself these two key questions before investing in a particular company:1. If I was a billionaire and money was no object, would I be prepared to take over the company based on it’s current market capitalisation?2. Am I prepared to hold on to shares in this company for the next ten years or so?
If you’ve ever earned enough money to put some aside, like most people you’ve probably invested it with an eye toward security – since, perhaps, you can’t imagine yourself ever getting rich.”Most people dream of becoming rich, but it isn’t their first choice,” Rich Dad said. That’s because the effort to make money and uncertainty of becoming rich disturbs them and they seek refuge in the easier goals of security or comfort.People who make security and comfort their first and second choices are often seeking a single ‘hot investment tip’ to make money – a simple, risk-free way of getting rich quick. Some people do get rich on one lucky investment, but all too frequently the money they amass is later lost. by Rich Dad, Poor Dad by Robert T.KiyosakiRobert T. Kiyosaki’s demonstrates through variety of products(games, books and audio products) how ordinary people can enrich themselves with the necessary skills to make money, attain financial freedom and master individual financial opportunities open to us through opening business, investments, Real Estate investments and Various financial instruments..The E-Game(cashflow) 101 and 202 and cashflow for kids are the essential games from Rich Dad, Poor Dad, which I would rather refer to as investment/financial educational tools, are very valuable. It is the only educational tool that combines investing/money making ideas and also improving ones understanding on cashflow principles (money going “in” and money going “out”) at the same time. There are also books on business and real estate investments etc and audio CDs/DVDs on various investments, turning bad debts into good debts, real estate riches and retiring young.