Investing - The Basics 01 (Jun 09 - Jun 16)

[kennynah]

it's ok... just that i thought it would more encouraging for people starting out on this road not to feel "belittled", if we didnt refer to them as "newbies"....but it is a small issue... people coming into this trade should at least have some humility in them anyways..

[Musicwhiz]

Even with 4-5 years of experience investing in the stock market, I still consider myself a "newbie". It's nothing deragotory, I just feel there's so much more to learn in order to refine my skills as an investor.

[kennynah]

you might be right MW,

even after 20 years...still have to keep on earning.... so in that sense.. it is better to be known as a "newbie"... as a reminder not to be complacent...

[HengHeng]

I read in a book and my seniors always tell me one thing , you are as good as your last bet. It doesn't mean that you got it right this times means you will get it right in the future.

Even a veteren of 20 years can make beginner's mistakes less to say people with 4-10 years of experience. Act like 4-10 years alot ( one full market cycle also don't have)? Even I got 12 I also think I small boy as compared to seniors in the forumn. I'm still sticking to my view you are as good as your last bet

In the world of investment , there is only two kind of people winners and losers. Of course still got the pah xi beh toh kind lah.

But alot of my seniors teach me one age old method which I still hold dear to my heart , if you dunno how to win or become rich ..... Learn from those that are winning or rich follow what they do ( use brain learn not blindly follow )

still waiting for people to teach me how to win toto top prize

[kennynah]

Dollar Cost Averaging....whose acronym, DCA, also stands for

die c**k Standing ...ok, ok... one letter off... but hey, 2 of them match....

[Aspellian]

Dollar Cost Averaging....whose acronym, DCA, also stands for

die c**k Standing ...ok, ok... one letter off... but hey, 2 of them match....

knn- you are really damn full of bull-shxx!! damn funny!!!!
you should go NTU, SMU and NUS to teach 101 on Financial Management/Corporate Finance and bring a fresh perspectives on what really works!! hahaha!! in fact MM can also join you too based on the "Investment Myths Busted" series! lots of brilliant, indepedent and unconventional minds in this forum!


Investment Myths Busted thread: -
viewtopic.php?f=16&t=949

[winston]

Investing 101: Six Factors That Determine Your Investment Portfolio Value by Alexander Green

Imagine trying to tackle algebra, geometry, or calculus without understanding basic mathematics.

Clearly, you wouldn't get far.

Yet it's not uncommon to run into investors who are knee deep in option trading, currencies, short selling, or sophisticated arbitrage strategies without mastering or even understanding basic investment principles.

Even seasoned hands can benefit from a refresher course from time to time.

So today we're going to revisit Investing 101 and talk about the six factors that will determine the future value of your investment portfolio, whether it's worth $10,000 or $10 million.

Six Factors That Determine Your Portfolio's Future Value

Those six factors are:

The amount of money you save. To put it bluntly you have to start by maximizing your income, minimizing your outgoing and paying yourself first. Why? Because expenses always rise to meet the income available.

As soon as you get a raise or a higher paying job, you'll find that you need a new car, a bigger house, better furniture and a new set of Callaway irons. But you have to draw the line somewhere. You can't save a pittance and expect your portfolio to perform miracles each year.

The length of time your money compounds. The sooner you start investing the better. And the longer you leave it alone the better. If you start too late or raid your portfolio to redo the kitchen or take the kids to Disney you're going to have a lot of catching up to do down the road. The old chestnut is true: Don't touch your capital. It's like eating your seed corn.

Your asset allocation. Studies consistently show that how you divide your portfolio among non-correlated assets stocks, bonds, real estate investment trusts, precious metals, etc. determines 90% of your portfolio's long-term return. (The rest is due to security selection.)

If you're too conservative or too aggressive to stick with your program you simply wont meet your goals.

Your assets annual return. This, of course, is the great unknown. Not even Warren Buffett or Ben Bernanke can say what their portfolio will return each year. But the better your security selection and asset allocation decisions, the higher your annual compounded returns.

What you pay in expenses. Dont be oblivious to what all those financial intermediaries are charging you. You can sacrifice far too much in commissions, bid/ask spreads, wrap fees, management expenses and other costs. All things being equal, the lower your expenses the higher your net returns.

How much you pay in taxes. Too many investors are oblivious to the tax ramifications of their investment moves. When possible, put your high-yielding investments in your tax-deferred accounts and your tax-efficient funds and individual stocks in your non-retirement accounts. (I call this your asset location strategy.) Hold positions 12 months or more to qualify for the lower long-term capital gains tax rate. Offset your capital gains with capital losses if possible.

Only one of these six factors is beyond your control: your assets annual compounded return. That means it only makes sense to focus on the other five.

Investing 101: Dont Worry About The Market¦

So instead of worrying about what the market will do between now and year end – something you cant possibly know and has nothing to do with what your portfolio will be worth five or 10 years from now focus on:

Saving more,
Leaving it alone longer,
Getting your asset allocation right,
Lowering your expenses
And keeping a close eye on taxes.

Get these big questions right and you’ll find the details will take care of themselves.

Better still, in your golden years, your portfolio will take care of you.

[winston]

Recommended Investment Books: Nine Invaluable Resources For Every Investor by Marc Lichtenfeld

Heaven help me… Mrs. L is on a mission.

My house has been turned upside-down, as she prepares to redecorate several rooms. Fortunately for the household, my input is neither required, nor requested.

Undeterred by the recession, the missus has made Pottery Barn her second home. And look for Williams Sonoma’s (NYSE: WSM) earnings to cruise higher next quarter, thanks to her spending there.

Trouble is, when I return home from work, the items I expect to find in their regular spots are gone, replaced by new stuff.

Yesterday, I found my books lined up in the hallway and was asked to donate the ones I don’t want anymore. However, a good chunk of my library consists of investing books, which I like to consult from time to time.

I’m often asked for recommended investment books, and as I transferred the books from the floor to the new bookshelf (excuse me, escritoire), I revisited some of my favorite titles. Here are the ones that I’ve found most valuable in my career…

Let These Authors Propel You Towards Greater Investment Success

Make some room on the bookshelf – because you’ll want to add these investment books to it if you want to increase your chances of investing success…

Contrarian Investment Strategies – The Next Generation (David Dreman): My colleague Louis Basenese mentioned this in his investing in small-caps column earlier this week. Like my beloved Yankees, Lou has been knocking the cover off the ball, thanks in part to Dreman, who is considered the father of contrarian investing.

As an analyst, I worked at a strictly contrarian research shop. In fact, I wasn’t even allowed to initiate coverage on a company unless it went against the consensus. I trained with two of the greatest contrarians in recent decades. So believe me when I tell you that Dreman’s book is a must read. It shows you how and why contrarian investing works.


Understanding Wall Street (Jeffrey Little): This is the first book I ever read about investing. It’s terrific for beginners. Written in an easy-to-understand language, it explains what stocks and bonds actually are. If you’re new to investing, I cannot recommend this book enough.

The Little Book That Beats the Market (Joel Greenblatt): The author is an extremely successful money manager, who shows investors how to beat average market returns with a value investing approach. You can read this in one afternoon, yet it contains as much valuable information as you’d find in most 500-page tomes.

Get Rich With Options (Lee Lowell): If you want to know how to make money with options, learn from the guy who did it and retired in his 30s. Mt. Vernon Research’s resident commodities specialist, Lee Lowell, shows investors the most profitable strategies and tools to use. The second edition of the book is due out in September.

One Up on Wall Street (Peter Lynch): This classic teaches investors how to use what they are already familiar with to make money. Lynch takes a long-term outlook as he guides investors through the analysis process of companies that we interact with every day.

The New Market Wizards (Jack Schwager): Profiles successful traders such as Stanley Druckenmiller, Linda Bradford Raschke and Blair Hull. I like that the traders open up in these interviews, letting readers in on their processes and hearing about their failures just as much as their successes. Schwager does an excellent job of selecting traders in various markets with different trading styles.

Reminiscences of a Stock Operator (Edwin LeFevre): No investment book list would be complete without this. Originally published in 1923, it’s the marginally fictionalized biography of legendary speculator Jesse Livermore. It’s believed that Livermore actually wrote the book with LeFevre’s help. Livermore walks the reader through his considerable ups and downs. It’s a fascinating tale and a really insightful look back at market speculation in the early 20th century.

Technical Analysis of the Financial Markets (John Murphy): While technical analysis can sometimes sound very complex, Murphy does a great job explaining the theories and indicators in a simple language. If you ever look at charts, you need to read Murphy’s book first – it’s the bible of technical analysis.

The Secret of Shelter Island (Alexander Green): Once you’ve read all the investing books and amassed a fortune, Alex will illustrate why money is not the most important thing in life. A compilation of his popular Spiritual Wealth essays, Shelter Island provides inspirational, whimsical and sentimental stories that remind the reader what is truly important.

[sidney]

Problem for compounding is you need a xx interest for compounding + xx amt of horizon. Its the black swan event, that happens during the horizon which can potentially screw up everything. Maybe that's why currently my mindset is more of tactical allocation. Moving money where the story goes.

In theory, compounding is one of the best passive method to get rich. Another issue is, i am not sophiscated enought to identify investments which generate Annual returns 6-8% which are *safe* and consistent.

If wants margin of safety, go for FD. Draft a will, use your 1% interest and compound 1,000 years, pray your bank do not collaspe under subprime(part2) in year AD3009. . Then your 10th generation great,great,ggggggggrandson will benefit. lol.

[sidney]

As the titles are filed alphabetically, I will need to change the title of this thread. It is now filed under "G" and has no relevance to the discussion.

How about, "Newbie Investing" ? If there's no objection, I will change the title in the afternoon.

How about Investing 101 - Getting Started...

"newbie" sounds derogatory ...just a suggestion...

Heehee, how about more auspicious thread name, Investing 101 -Start Right and Huat!