Understanding the Business You’re Investing in – or Hiring Someone Who Does

by Stacy Francis, CFP®, CDFA

Flipping channels last night, I came across one of those corporate ads that are so vague and nondescript it had even me scratching my forehead, wondering what the company in question really did. Because the thing is, while some businesses are easy to understand (manufacturing comes to mind), in today’s world of service and high tech and diversity, many are so complex it is almost impossible to evaluate them. GM, for instance, has traditionally been a car manufacturer. But these days, they make more money off the financing side of their business than the car side. And how do you deal with software companies or biotech?

My point is not to try to explain every business out there, but rather to remind you that if you don’t understand the business you are investing in, you will have an extremely difficult time making rational choices, and even harder trying to sleep well at night. If you are a biotech guru and know all about Elan’s latest product, you may know whether it’s worth your money or not. Alternatively, if you are Bill Gates’s brother, you may know what works and doesn’t work in software. But if you want to venture into industries you do not grasp fully, you can lower your risk substantially by hiring someone to analyze it for you.

We all know it’s a bad idea for blind people to drive cars. Throwing your hard-earned money around you randomly can be just as perilous.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.