কেনার আগে যে পাঁচটা প্রশ্ন Five questions before buying

Almost everybody makes the buying decision backwards. First they hear a name, then they look for a reason. The right order is the reverse: your own situation first, then the company, then the price, and the order ticket last of all.

This lesson gives you five questions. They are in sequence, and the sequence is the point: if one of them fails there is no need to reach the next. This will not pick good shares for you, but it will stop most bad decisions, and for a new investor the second is worth more.

Why the sequence matters

Notice that the first two questions do not mention price. Because if you start from the price you will always find a reason. The human mind is remarkably good at manufacturing arguments for decisions it has already made. The sequence denies that talent a place to work.

Question one: is the money genuinely free

This is not a question about the company, it is a question about your life. Money you might need within three years, put into shares, forces you to sell at exactly the wrong moment, because needs and markets run on separate calendars.

The lesson get the money side in order first sets out the sequence: emergency fund first, expensive debt cleared next, investing after that. If this question fails, knowing the answers to the other four buys you nothing.

Question two: what does the company do

Write three sentences: what it sells, who buys it, and where the money comes from. If you cannot write them, you have not understood the company, and putting money into what you do not understand is gambling, and worse gambling than a casino, because a casino at least tells you the rules.

Question three: do the earnings explain the price

The PE ratio is the first coarse filter here. The company is on 20, the rest of its sector is on 10. You now have a question you must answer: is this company genuinely twice as good as the others, or merely more popular?

The answer is usually no and occasionally yes. Where it is yes, the reason can be written down: higher margins, faster growth, less debt, a stronger brand. If you cannot write the reason, the answer is no.

Question four: what happens if you are wrong

This is the question most often skipped. Assume your reasoning is wrong and the price falls 30%. What share of your total money is in this one holding? What does that do to the whole portfolio?

A workable rule: no single decision going wrong should cost more than about 2% of your total money. That way five consecutive mistakes still leave you in the game. Someone who puts everything into one share does not have room for even one mistake, and in a first year mistakes are certain.

Question five: why today

If the answer is that the price is rising, that is not a reason to buy, that is crowd behaviour. If the answer is that somebody told you, then two questions come first: what do they know, and why are they telling you. If the answer is that today is the day you put money in every month, that is the best answer of all, because it is a rule rather than a feeling.

The order comes last

Only when all five questions pass do you think about the order. A limit order, close to the market price, and not the whole amount at once. For the first few especially, building the position in two or three instalments is better: you lose less if you are wrong and gain slightly less if you are right. For a beginner that trade is almost always worth taking.