Debt Free Zone

Index : 1,733 | 1Yr : +13.41% | 1Mo : +4.76%

Category : Investing Strategies

Min Investment : 9,538

Sharpe Volatility Trend

In Warren Buffet's famous quote,' Only when the tide goes out do you discover who's been swimming naked.' Or in other words, when the economy and stock market go south is when debt ridden companies will really face the music. Economic slowdowns can hit companies' revenues and profitability hard. With added burden of substantial borrowings, it can cast a shadow over their future.

Companies that have steered clear of the debt storm by either having little debt to begin with or having repaid all existing loans stand to benefit, in turbulent times and in the long-run. Such companies find it easier to raise funds, thereby having more growth opportunities in comparison to their over-leveraged peers. Due to a combination of these factors, they also tend to enjoy higher valuations. However, this is largely dependant on their growth rates.

Invest in companies with strong fundamentals that are growing on the back of increasing profits and have simultaneously repaid all their loans to become debt free over the last few years.

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