Investing - The Basics

Re: Investing 101 - Getting Started

Postby winston » Mon Jun 20, 2016 1:41 pm

The 10 Commandments Of Investing

By Andrew Beattie

Source: Investopedia

http://www.investopedia.com/articles/ba ... yptr=yahoo
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Re: Investing 101 - Getting Started

Postby winston » Wed Jul 06, 2016 2:13 pm

Ten Worst Mistakes Beginner Investors Make

By Poonkulali Thangavelu

Source: Investopedia

http://www.investopedia.com/articles/in ... yptr=yahoo
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Investing 101 - Getting Started

Postby winston » Tue Jul 12, 2016 1:35 pm

The 4 M's Of Successful Investing

By Dave Bradley

Source: Fox Business

http://finance.yahoo.com/news/4-ms-succ ... 00206.html
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Re: Investing 101 - Getting Started

Postby winston » Mon Jul 18, 2016 2:22 pm

Where to Invest Your Money? 10 Steps to Financial Success

By Brian Mathews

Source: Investopedia

http://www.investopedia.com/articles/in ... z4EjrLetBC
Follow us: Investopedia on Facebook
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Re: Investing 101 - Getting Started

Postby winston » Tue Jul 19, 2016 8:23 pm

Don't Buy That Stock... Until You Answer These Three Questions

By Kim Iskyan

Legendary investor Peter Lynch once said you should spend as much time figuring out which stock to buy as you do picking out a new refrigerator.

The thing is, few people spend that much time thinking about their stock purchases.

We recently talked about three questions you should ask yourself before you buy an asset – whether it's a refrigerator, a beach house, or a stock. Those questions are a good place to start.

But when you're buying a stock, there are a few more questions to ask before you begin to dig more deeply. The wrong answer to any one of these questions is a sign you should look elsewhere...


1) How does this company make money?


Lots of companies make a lot of money doing very complicated things. And that's good for them. But if you can't explain what a company does – and how it makes money doing it – in a way that a child could understand, then you should probably look elsewhere.

There's a very good reason for this. Simple businesses are more difficult for bad managers to mess up. The more "idiot proof" the business, the lower the execution risk. (That's the danger of management not being able to do its job.)

And as an investor, if you can understand how the company works, you'll have a better sense of what's really going on at the company.

Of course, what is "simple" to you might not be "simple" to others. If you're a biochemist, you might understand what a pharmaceutical company does in a way that most people can't. If you're a financial analyst, reading a bank's balance sheet might be easier for you than boiling water. You should use that special insight and expertise to your advantage.

But whether you're a rocket scientist or a truck driver, use your edge – and stick to what you know.


2) Is the stock already "done"?


A few hints that the stock you're looking at has already enjoyed its day in the sun:

• If your great idea is on the "Focus List" of the big brokerage house where you trade, don't buy it.

• If your broker sends you a thick research report on a stock, with "Buy" stamped on the front, don't buy it. (I used to write this sort of report for hedge funds and mutual-fund investors. They're 95% worthless to most people.)

• If you discovered your great stock idea on the cover of Forbes or Fortune magazine, it's already over. Don't buy it.
You don't want to buy the stock that everyone has already picked over – a stock that most other investors have already digested and acted on. Remember, a stock will only go up if there are more buyers than sellers.

If your broker's largest clients have already bought the stock, there's not much left for you. If it's an idea big enough to make the cover of a magazine, then it has already been acted on by countless others. And those earlier buyers will be selling to you. Being the "last buyer" of a stock is a bad place to be because there won't be anyone else for you to sell to.

One exception here is if you're wrong about a stock being "done." You might have some unique insight on an industry that you think everyone else knows – but in fact few people at all know.

So treat your own ideas with more respect (than you might otherwise) if they're from direct professional experience. And in this special case, don't assume everyone else knows what you know.


3) Is management on your side?

There's a big difference between just earning a salary – and owning the company you're working for. If a lot of your personal wealth is tied up in the success of your enterprise, you're going to work a lot harder than if you just collected a salary.

Few investors see it this way – but when you buy shares, you're actually buying a small portion of a company. You're not collecting a salary. You make money only if the company does well and the share price increases.

What you want is a management team that also has a lot of reasons – and financial incentives – to make the company grow and the share price rise. The senior management of the company should own a lot of shares of the company and should buy more all the time. If they don't, you should look elsewhere.

These questions are just the first steps in figuring out whether a stock is worth adding to your portfolio. But if you don't completely understand how a company makes money... if the stock already has all the exposure that it's going to get and is "done"... and if management isn't laser-focused on making the share price go up... then you should move on.

Source: Truewealth Asian Investment Daily
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Investing 101 - Getting Started

Postby winston » Sat Jul 23, 2016 4:49 pm

"Start with the big picture before identifying and working your way down to the country, sector and finally, individual stock or exchange-traded fund (ETF) that you want to invest in…

The bottom line is to take a top-down look and understand what’s happening at the macro level before drilling down into the countries and sectors, so you don’t get caught in a place where you are uninformed when going into an investment.”

Victor Jones
Director of Education
TD Ameritrade Asia
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Investing 101 - Getting Started

Postby winston » Sat Jul 23, 2016 8:14 pm

5 Statements Commonly Made By Amateur Investors

By Amy Fontinelle

Source: Investopedia

http://www.investopedia.com/articles/ba ... yptr=yahoo
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Re: Investing 101 - Getting Started

Postby winston » Mon Jul 25, 2016 8:58 pm

The Recipe for Long-Term Wealth Creation

By Mike Barrett

Investing in businesses that
1) meet basic human needs like food, drink, and health care,
2) cater to vices like smoking, eating candy, and drinking alcohol, and
3) supply beauty products that help women look their best
can be a great way to build long-term wealth.


Source: Extreme Value

http://dailytradealert.com/2016/07/25/t ... -creation/
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Re: Investing 101 - Getting Started

Postby winston » Tue Jul 26, 2016 2:55 pm

The 7 Classic Virtues of Investing

by Tom Sightings

Source: U.S.News & World Report

http://finance.yahoo.com/news/7-classic ... 00859.html
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Re: Investing 101 - Getting Started

Postby winston » Tue Jul 26, 2016 5:08 pm

6 Rules for Making Any Investment

By Simon Black

This morning as I glanced at the headlines, I had to sit back and wonder — when did the world get so crazy?

Interest rates across the West are at zero or negative.

Bankrupt governments are selling 100-year bonds with tiny interest rates, while others have convinced investors to pay for the privilege of loaning them money.

What really gets me is that people aren’t laughing. Serious investors are buying up the $10+ trillion worth of negative-yielding debt issued by bankrupt governments as fast as they can.

After all, everyone else is doing it.

But everyone makes mistakes in investing.

For example, back in 1999 when I was 20 years old and in the military, I borrowed $22,000 through an army bank loan and did what everyone else was doing at the time — buying Internet stocks at the height of the dot-com bubble.

Of course, I didn’t have any real investment education or experience. But hey, I was 20 years old and thought I knew everything. So I took the money and went into debt.

That turned out to be a HUGE mistake.

Rather than take time to invest in my own education and learn from the most successful investors I could find, I dumped the entire loan amount in the stock market.

At first, the portfolio did well, and it only encouraged my arrogance. Every dollar I made reinforced the absurd self-belief that I was a masterful investor. Unfortunately, the dot-com bubble was about to peak.

Warren Buffett had famously warned investors that the market was in a massive bubble. And I remember thinking, “Who is that stupid old man, and what the heck is a bubble?”

Then the bubble burst. And not only did my profits evaporate, but even the principal amount started to shrink.
Desperate to recoup my investment losses, I started making even dumber decisions, like buying collapsing dot-com stocks on margin.

In other words, I borrowed more money and combined it with the money I had already borrowed to buy the shares of terrible companies with no assets. Genius.

Unsurprisingly, within about a year of taking the original loan, I had lost it all. Every single penny.

And I vowed to never make that same mistake again.

That’s why ever since I left the military more than a decade ago, I’ve dedicated a huge portion of my time, money, and effort toward learning from the sharpest people I could find.

I traveled to nearly 120 countries to build relationships with brilliant mentors in order to learn what I never could in school.

For example, I never went to business school.

But based on what I learned from my business mentors, I’ve been able to build five successful companies that now employ over 125 people on four continents.

From my investment mentors, I learned how to not be such an idiot… how to ignore the crowd and focus on the core fundamentals of a business.

One of my mentors explained to me that if you’re going to invest in the stock market, you should buy a single share as if you’re buying the entire business. He then laid out six rules to follow when making any investment:


1. Always consider the risks before even thinking about how much you can make

Sometimes it’s worth taking huge risks where there’s a good chance you’ll lose everything.

Startups are a great example; there was a 95% chance that Google was going to fail when it first launched. But the return has been more than 100,000x the initial investment.

Clearly, that kind of return is worth the risk.

Conversely, if you buy and hold 5-year Japanese government bonds right now, you’re counting on the second-most-bankrupt government on the planet to pay you back.

Bear in mind that Japan’s government is so broke they spend 40% of tax revenue just to service the debt.

And in exchange for taking on such substantial risk for five years, your reward is a whopping NEGATIVE 0.25% per year.

In comparison, it hardly seems worth it. Know the risk, and make sure the reward is worth it.


2. Don’t invest unless you know WHY

Before making any investment, have an objective. After all, there are a lot of different reasons to invest.

Sometimes you might be seeking income, i.e. buying rental real estate for the cash flow.

Capital appreciation is another common goal; people are typically looking to turn a $100,000 investment portfolio into $500,000.

But there are other reasons as well: Asset protection. Hedging against financial/systemic risks. Reducing taxes. Estate planning. You can even invest to gain citizenship.

To accomplish any goal requires careful planning and disciplined execution, whether you’re trying to lose weight or save for retirement.

But you can’t ever create a plan unless you start with a clear objective.


3. Invest in people of integrity who have a track record of success

Most investments are ‘managed.’ Apple is managed by CEO Tim Cook and the Board of Directors.

Investments in government bonds are essentially ‘managed’ by the Treasury Department and all the politicians and bureaucrats.

Any investment with dishonest or incompetent management will ultimately become worthless. It’s simply a question of time.

A great asset managed by cmpetent people of integrity will be a winner.
o

4. Buy assets that generate vast amounts of cash flow


No exceptions. A profitable business (or any asset that produces safe, strong cash flow) makes sense in any environment: inflation, deflation, stagnation, etc.


5. Avoid excessive debt

Borrowing can be a good thing, especially when interest rates are low like they are today.

But too much debt leaves a company (or government) vulnerable and unable to pay its stakeholders.


6. Know the value of what you’re buying, and never overpay for it

The bonds of bankrupt governments are selling at record levels right now. Tech companies like Uber that lose hundreds of millions of dollars have valuations in excess of $60 billion.

None of this makes any sense.

There’s something to be said for investing in growth, especially when you can get in at a very early stage (like being an early investor in Google).

But paying out the nose to buy losing companies or bankrupt government bonds makes no sense.

Know exactly what a company is worth. With stocks, for example, you can look at a company’s “net tangible assets” — all of its physical, disposable assets minus its liabilities.

For example, if a company has $1 million in cash, $1 million in inventory, and $500k in debt, then its net tangible assets equal $1.5 million.

Buying well-managed, profitable companies that sell near (or even below) the values of their net tangible assets provides a substantial margin of safety.

This is a core principle of value investing. The whole concept is to essentially buy a dollar for 80 cents.

The idea is incredibly simple, and its proven long-term track record outperforms all the other popular hotshot strategies.

Learning about value investing means learning about the inner workings of business, money, and cash flow.

It’s a fantastic foundation to your financial education, which is truly one of the best investments you can make.

Source: ETR
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