Choose Financially Healthy Companies Before Investing — Advisor

By: Solomon Nartey Tetteh

Investment Advisor Patrick Baah Abankwa has cautioned investors against approaching the stock market with a quick money mindset, stressing that shares are fundamentally long-term investments.

Speaking on the Business Breakfast show on Zed 101.9 FM, Mr. Abankwa said many investors, including himself at times fall into the trap of expecting instant profits from the stock market, a mistake that often leads to disappointment.

“When you go into shares thinking it’s a quick-fix approach and you want to make quick money and move out, you will be disappointed. Shares are long-term in nature. If you are going into it, you must understand that,” he said.

He explained that investing in shares comes with risks that investors must carefully evaluate. According to him, there are three to four major risks to consider, beginning with market risk.

“Market risk refers to the possibility that the stock price may fall in the future due to factors outside the company’s control, economic changes, shifts in government policy and other external influences. These can all affect your investment,” he noted.

Mr. Abankwa also highlighted inflation as a critical but often overlooked risk.

“If your investment returns do not exceed inflation, the real value of your investment goes down,” he said.

He urged investors to assess these risks and adopt a long-term strategy, rather than chasing short-term gains, to safeguard their investments and build sustainable wealth.

Mr. Abankwa also advised prospective investors to prioritise companies with strong financial health, consistent profitability and credible management when selecting shares.

He noted that investors should see themselves as partners in the companies they buy into, making it essential to choose firms with solid long-term prospects.

“As an investor, you want to be a partner of a financially healthy business. You want to put your money into a company that has the potential to give you more,” he said.

Mr. Abankwa advised investors to review a company’s financial statements to determine whether it has made steady profits over several years.

“You can easily check their net profit in their annual reports. Look at the last five years. How much profit has the company made, and is it growing over time,” he said.

The Financial advisor said that while not every strong company pays dividends, those that consistently do tend to demonstrate financial stability.

“Companies with a history of reliable dividend payments show that they are financially stable,” he explained.

He encouraged investors to take advantage of publicly available information and conduct proper due diligence before choosing where to place their money.