A Good Quality Stock?

How can you know a good quality stock versus one to skip and avoid? How about a piece of real estate worth investing in?

Karl Johnson spoke to me about the issue when he answered my question on whether or not to pay off a mortgage early or invest extra payments.

"I'm an investor, not a speculator," Karl told me. "I ask myself if this is a good quality investment with a good price and do I expect the underlying asset to perform."

So here are three variables to judge:

The quality of the investment: if it's a stock, does the company make a product or provide a service that's needed now and will be needed in the long term?

Good price: is it overvalued or on its way up?

What is the underlying asset and how will it perform?


Karl said if he's dealing in stocks and he chooses a good company, then he's not concerned if the price drops. He knows it will increase in value. However, there's a point when the stock price could go so high (or the real estate cost in California) that it's not worth chasing a value that continues soaring.

In the next post, we'll contrast this with investing in FOREX.