The 12 Factors We Use to Judge Trusts

Article Excerpt

In evaluating investments, many investors focus on what we’d call ‘investment outputs’, such as earnings, dividends, cash flow, return on equity, sales growth and so on. These are all important, of course, but you shouldn’t focus on them to the exclusion of what you might call ‘investment inputs’, such as the factors we use in assigning our Successful Investor quality ratings. Investment inputs are harder to work with than investment outputs, since it takes a judgment call to determine their risk or value. To give you a better idea of what we mean, here’s a list of a dozen investment inputs that we look at before recommending an income trust: 1. Do you have any doubts about the integrity of the insiders? (If so, there’s no reason to go on to any of the following.) 2. Is the trust an existing company that has undergone a trust conversion, or a new issue? A new-issue trust tends to be riskier than a converted company. A..

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