What You Need to Know
When buying a car, a washing machine or a piece of furniture, verifying the product’s quality is usually high on a shopper’s checklist. The same goes for stocks. Just as a big-ticket purchase is expected to function well for years, the companies in an equity portfolio should also stand the test of time.
But how can an investor know if the stocks held in a portfolio are truly durable? It’s not as simple as searching for consumer reviews about a TV. Instead, you need to find out how a fund manager evaluates the business attributes of the underlying companies and chooses the stocks for your portfolio. Dominant businesses, competitive advantages, innovation and management skill are just some of the features that define high-quality businesses that can deliver dependable cash flows over time.