Brands are very important to developing trust with not only customers, but also investors.
So chances are, if you know of, or use a service or product from one particular company, you'll be more likely to consider it as a worthwhile investment.
For example, when I first began investing in the local stockmarket, Westpac Banking Corp (ASX: WBC), was one of the first businesses I put on my watchlist. I didn't bank with them personally, but I knew their brand and the service they offered.
However, it was only after I learned about the ins-and-outs of the banking sector, how to value them, and when to buy, that I realised I probably shouldn't own Westpac shares.
Same with Qantas Airways Limited (ASX: QAN). While I've always been a Jetstar kind of person, the 'Flying Kangaroo' is one of – if not 'the' – most recognisable Australian brand internationally.
Still, whenever I've considered buying shares in Qantas – or any airline for that matter – I can't help but remember Virgin founder Richard Branson's famous quote: "If you want to become a millionaire, start with a billion dollars and launch a new airline".
Although the idea of holding Qantas shares is appealing to me, and they've done very well recently, I know that choosing to hold airlines in my portfolio could turn out to be a terrible investment decision. Many (all?) airlines have extremely high fixed – and uncontrollable – costs, are at the mercy of regulators, boast low profit margins and usually carry heaps of debt.
Another company almost every Australian will know is Myer Holdings Ltd (ASX: MYR). Myer's department stores have – at least historically – been a very attractive destination for fashion-conscious consumers.
However, among other things, disruption from cheap online channels has hurt the company, and Myer recently announced a significant turnaround strategy which seems mildly positive for its shareholders.
Unfortunately, as fellow Motley Fool writer, Sean O'Neill, recently wrote: "That said, Myer also has a record of market underperformance that will be easy to live up to and difficult to replace, which is why I'm steering well clear of the company even now."
