People ask me two questions about money more than any other. In Jamaica: “Should I buy shares on the JSE?” In Norway: “Is it too late to start investing?” My honest answer to both is the same: don’t start with the question “what should I buy?” Start with “how will I decide?”

So I built myself a routine. It works on the Jamaica Stock Exchange in Kingston and on the Oslo Børs, and it fits on one page. This isn’t a list of tips. It’s a way of thinking you can use for the rest of your life.

This is education, not financial advice. I’m sharing how I research, not what you should buy. Speak to a licensed adviser before you invest.

Two markets, two personalities

The Oslo Børs is heavy with oil and gas, salmon, shipping and banks. Those industries ride world prices: a good year for salmon or tankers can be followed by a hard one. Norwegian companies are known for paying solid dividends.

The Jamaica Stock Exchange is smaller and more personal. Financial groups and household names in food, drink and manufacturing dominate it. Many shares trade only a little each day, which means buying is easy but selling at a fair price can take patience. It also has the Junior Market, built for growing companies, which comes with a special tax break (more on that below).

Because the two markets are so different, I never compare a Jamaican company with a Norwegian one directly. I compare each company with its neighbours on its own exchange.

Step 1: Remove the obvious no’s

Before I look for winners, I clear away what I won’t touch:

• Companies losing money. Some will recover. I’d rather let someone else find out which.
• Shares that hardly trade. If almost nobody buys or sells it, you may not get out when you need to.
• Businesses that go against your values. Some people leave out tobacco, gambling or alcohol. That’s a legitimate choice. Make it on purpose, before the numbers tempt you.

Step 2: Ask five questions of every company

Every company that’s left gets the same five questions. You’ll find the answers in the annual report.

1. Is it a good business? (Quality) How much profit does it make on the money shareholders have put in (return on equity), how much of each dollar of sales does it keep (profit margin), and how much does it owe?
2. Is the price fair? (Value) How many years of today’s profit am I paying for (the P/E ratio), and how does the price compare with what the company owns (price-to-book)?
3. Is it growing? (Growth) Are sales and profits higher than last year?
4. Does it share its profits? (Income) What dividend does it pay, compared with the share price?
5. What does the market think? (Momentum) Has the share price risen or fallen over the past year?

No single answer decides anything. A company that’s cheap but shrinking is a trap. One that’s growing but wildly expensive is a gamble. What I’m after is a company that answers well on most of the five.

Step 3: Decide what you are investing for

A pensioner who wants a steady income and a 30-year-old building for the future shouldn’t weigh those five questions the same way. If you want income, lean on dividends and quality. If you want growth, lean on growth and accept smaller dividends. If you’re a bargain hunter, lean on value, and be extra strict about quality, because cheap shares are often cheap for a reason.

Step 4: Look for the red flags

This is the step most people skip, and it’s the one that saves the most money. Before going further, I check for:

• A dividend bigger than the profit. A company paying out more than it earns can’t keep it up for long.
• A dividend that looks too good to be true. A very high yield often means the share price has fallen because the market expects trouble.
• Heavy debt. Outside banks and insurers, borrowing more than twice what shareholders own makes a company fragile when times turn.
• Falling profits, especially more than a fifth in a year, and you don’t know why.
• One-off gains. A big jump in profit can come from selling a building or revaluing an investment rather than better business. Read the notes.
• The Junior Market tax holiday. Junior Market companies pay no income tax for their first five years and half for the next five. When the holiday ends, after-tax profit can fall sharply even if nothing in the business has changed. Always find out when it ends.

Step 5: Do the homework the numbers can’t do

The first four steps give you a shortlist, not an answer. For each company on it:

• Read the latest annual report and the last two quarterly reports. Does management explain bad news plainly, or hide it?
• Explain how the company makes money in one sentence. If you can’t, leave it.
• Look at five years, not one. Salmon farmers, shipping companies and anything hit by a hurricane can look very different from one year to the next.
• Compare it with its own sector. A normal level of debt for a bank would be alarming for a food company.

What Yard and Fjord can teach each other

Norway taught me patience. Many Norwegians invest a fixed amount every month and don’t look at it again for years. The country itself does the same: its oil fund invests for generations not yet born. In Norway an aksjesparekonto (share savings account) also lets you buy and sell shares and equity funds without paying tax until you take out more than you put in.

Jamaica taught me to know the business. Jamaicans are natural entrepreneurs. We understand a patty shop, a wharf or a cement plant because we’ve seen them, used them and talked about them. That instinct is worth something: invest in what you understand.

Put the two together and you have a sound approach: understand the business like a Jamaican, and hold it like a Norwegian.

A few rules I keep

• Never invest money you’ll need in the next five years.
• Keep any single company to a small part of what you invest. For most people, 5 to 10 per cent is plenty.
• Think about currency. Jamaican shares mostly earn in Jamaican dollars, Norwegian shares in kroner. Which currency will you spend in?
• Check the tax. If you live in one country and own shares in the other, dividends may have tax withheld. Find out before, not after.
• Buy through a regulated broker: a JSE member dealer in Jamaica, or a bank or broker supervised by Finanstilsynet in Norway.

A closing thought

In the parable of the talents, the servant who buried his money out of fear wasn’t praised for being careful. The ones who put it to work wisely were. Good stewardship isn’t recklessness and it isn’t fear. It’s doing the homework, being patient and staying humble about what you don’t know.

Start small. Learn the routine. Let the years do the heavy lifting.

Do you invest in Jamaica, in Norway, or both? What did you learn the hard way? Share it in the comments. Someone reading needs to hear it.

This article is for education only and is not financial, tax or investment advice. Share prices can fall as well as rise, and you can lose money. Speak to a licensed adviser about your own situation.