It's crucial to investigate your investments before you commit your hard-earned dollars. During a strong economy, you might find it easy to pick profitable investments, but without adequate research, you're likely to struggle during more challenging economic circumstances.

Getting the most important facts can help you quickly determine if a potential investment is worthy of additional research.

Consider these facts regarding any investment opportunity:

1. How much risk are you willing to accept? The greater the risk, the greater the potential profits. How far into the future are you planning to invest? Do you need the money back from your investment at the end of the year, or in 25 years? What will the money ultimately be used for?

2. How does the company make money? By understanding this simple fact, you're in a much better position to make intelligent decisions regarding the viability and outlook of the firm.

• It's challenging to invest in a company you don't understand. This is...