Money Matters

The Essential Dos and Don'ts in Money Making : This blog strives to provide CRITICAL INSIGHTS and knowledge on wealth creation. Since no effort is free of mistakes, or,can be fool proof, the primary condition, always, is - that Reader must take total responsibility on himself for investments or other use he makes of info on this blog by making sure of the info from other sources too. The blog will remain receptive to any corrections, comments, suggestions etc from readers.

Saturday, January 23, 2010

INVESTOR EDUCATION = Warren Buffet,, the Wisest Investment Guru! =GREAT QUOTES

INVESTOR EDUCATION SERIES

WARREN BUFFET'S

INVESTMENT STRATEGIES

No discussion on investment strategies in the stock Markets will ever be complete without paying due respects to the words of Warren Buffet.

Simplest words expound his most successful strategies, which we find, are also the most practical ones on the Stock markets. Let us take a look at a few of his Gems, which I present here, to the best of my understanding. Those in quotes are his words and those outside are my comments.

"A public-opinion poll is no substitute for thought."
"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right."

My comments :Do not be deceived by crowd behaviour. Make your thorough analysis and research and form your own judgment about the company you are looking at. Your data and reasoning must be adequate and to your satisfaction. Do not expect the crowd to agree with you; they have not done your analysis. You have. Once you find your data and reasoning to be adequate and to your satisfaction, go ahead and invest.

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

My Comments : It is in the nature of markets to fluctuate. There are Bulls and there are Bears.There is a see-saw all the time. You can't despair by market fluctuations. You must play the game and profit from the same fluctuations intelligently. Market men make mistakes and commit follies, all the time. Not every one has adequate information. There is no perfection in the market. Do not therefore participate in their folly. Make use of their folly intelligently to profit in the market.

"Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."
"Always invest for the long term."
"Our favourite holding period is forever."

My Comments : Select the best companies for investment after adequate thought, study and research. Ask yourself the above critical questions of Warren. Will this company live and prosper for 10 years? Will it give me good returns and capital appreciation for a long, long time to come? Is the Management competent? Ask questions of this nature and satisfy yourself that your investments will prosper in the company for long, or rather, forever, and only when satisfied,invest in it.

"Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell."
"Wide diversification is only required when investors do not understand what they are doing."

My comments : Once you select the best of companies and invest in them, do not go on shuffling them every now and then. You don't need to. Good companies pay more on long term. If you frequently buy and sell and shuffle, the final averages may (in fact, most usually, they do) work out to your disadvantage.

For most people, resisting the temptation to frequently sell some thing and buy another is TOO MUCH, and they are in FREQUENT REGRET of losing this, that or other opportunity. Activity some times is more sin than inactivity in stock Market. We must learn to keep quiet and just watch the UPs and Downs.Every time, your stocks move down, they will touch a higher resistance than earlier and then, keep moving up and down above that. In the long term, you will notice that the stock has moved up considerably and is trading in a range around a historic high.

Secondly, once you are sure of your BEST STOCKS, do not go beyond them.You don't have to put your EGGS in too many Baskets.Best stock is the Best stock and will yield Best returns. Limit the Baskets in which you put your Eggs.

"You only have to do a very few things right in your life so long as you don't do too many things wrong."
"We enjoy the process far more than the proceeds."

My comments : With the best of Planning, a certain amount of failures are always likely in the stock market. If you do not do too many things wrong, your investments will yield very good results. You don't have to be, and you can't be, right every time in every investment. Take it easy. Watch your success Rate and learn from that.Enjoy the investing process and enjoy your successes and your failures, which are part of the same.

I am sure readers will have valuable comments based on their experience. Please share though this blog (comment)

Other Articles in CUSTOMER EDUCATION SERIES can be read at the following URLs :

1. 1. MONEY FASCINATES:

http://wiseinvestmentideas.blogspot.com/2010/01/money-fascinates.html

2. MARKET INVESTMENT : ESSENTIAL RULES FOR SUCCESS:

http://wiseinvestmentideas.blogspot.com/2010/01/stock-market-investment-essentail-rules.html

3. SELECTING A GOOD SCRIP FOR INVESTMENT

http://wiseinvestmentideas.blogspot.com/2010/01/selecting-good-scrip-for-investment.html

4. INVESTMENT STRATEGIES OF WARREN BUFFET: (5 ARTICLES)

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet_05.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet_04.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffer.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet.html

6. WORDS OF WISDOM FROM WARREN BUFFET: ( CURRENT BLOG POST)

http://wiseinvestmentideas.blogspot.com/2010/05/warren-buffet-wisest-stock-market-guru.html

7. DOLLAR (RUPEE) COST AVERAGING :

http://wiseinvestmentideas.blogspot.com/2010/05/win-with-dollar-rupee-cost-averaging.html

8. PRICE TO EARNINGS RATIO :

http://wiseinvestmentideas.blogspot.com/2010/05/price-earnings-ratio-investor-education.html

9. GROWTH STOCKS vs VALUE STOCKS :

http://wiseinvestmentideas.blogspot.com/2010/06/growth-stocks-value-stocks-two-great.html

10. CANSLIM TECHNIQUE :

http://wiseinvestmentideas.blogspot.com/2010/06/investor-education-canslim-technique.html

11. PRICE TO BOOK VALUE RATIO

http://wiseinvestmentideas.blogspot.com/2010/11/investor-education-series-price-to-book.html

* * * END * * *

Saturday, January 16, 2010

INVESTOR EDUCATION = Selecting a Good Scrip for Investment

INVESTOR EDUCATION SERIES

SELECTING A GOOD SCRIP

FOR INVESTMENT

Selecting a Good scrip for investment is very important - to build your wealth. First time investors and investors with very little knowledge of the stock market usually depend on the advice of some experts, some news media or some broker and put their money in scrips recommended by them.

While there is no harm in seeking and receiving such advice, it is also necessary that the investor himself must make adequate efforts to analyze the reasons and data supporting such advice. There are many factors requiring analysis.But, the following factors may be analyzed more carefully and specially.

I would strongly suggest - please keep a book and record all the following factors under each scrip periodically.Preserve the book. Go on recording all significant facts coming up later under each scrip. It will help you and enable a much better assessment of the scrips. One day, you will be the expert on your portfolio of scrips.

1. For how long is the company in existence? Prefer those in existence for 5 years or more.

2. Do the promoters have a good track record in running their group companies and what is the performance of the group companies?

3. Is the company in a good industry sector, which is on growth track?

4. What is the track record of the company in last 3 years?

5. What is the profitability of the company in the last 4 Quarters? Has it been improving or coming down?

6. What is the current market price and Earnings per share. Latest 2 Qtrs EPS may be taken as guidance and annual EPS may be estimated.

7. What is the price earnings ratio of the company (Market price divided by annual EPS)? If it is less than the industry average, it leaves sufficient scope for appreciation.

8. Analyze at least 10 scrips and then, select the best among them, in terms of price earning capability, for your time horizon. Investors must have at least 1 year minimum time horizon.

Warren Buffet says, some scrips are forever.Long term investors in good growth scrips reap much better profits than investors who frequently shuffle their portfolios. Shuffling is needed only in certain circumstances, which will be dealt with in another Post.

Other Articles in CUSTOMER EDUCATION SERIES can be read at the following URLs :

1. 1. MONEY FASCINATES:

http://wiseinvestmentideas.blogspot.com/2010/01/money-fascinates.html

2. MARKET INVESTMENT : ESSENTIAL RULES FOR SUCCESS:

http://wiseinvestmentideas.blogspot.com/2010/01/stock-market-investment-essentail-rules.html

3. SELECTING A GOOD SCRIP FOR INVESTMENT 9CURRENT BLOG POST)

http://wiseinvestmentideas.blogspot.com/2010/01/selecting-good-scrip-for-investment.html

4. INVESTMENT STRATEGIES OF WARREN BUFFET: (5 ARTICLES)

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet_05.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet_04.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffer.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet.html

6. WORDS OF WISDOM FROM WARREN BUFFET:

http://wiseinvestmentideas.blogspot.com/2010/05/warren-buffet-wisest-stock-market-guru.html

7. DOLLAR (RUPEE) COST AVERAGING :

http://wiseinvestmentideas.blogspot.com/2010/05/win-with-dollar-rupee-cost-averaging.html

8. PRICE TO EARNINGS RATIO :

http://wiseinvestmentideas.blogspot.com/2010/05/price-earnings-ratio-investor-education.html

9. GROWTH STOCKS vs VALUE STOCKS :

http://wiseinvestmentideas.blogspot.com/2010/06/growth-stocks-value-stocks-two-great.html

10. CANSLIM TECHNIQUE :

http://wiseinvestmentideas.blogspot.com/2010/06/investor-education-canslim-technique.html

11. PRICE TO BOOK VALUE RATIO

http://wiseinvestmentideas.blogspot.com/2010/11/investor-education-series-price-to-book.html

* * * E N D * * *

Thursday, January 14, 2010

INVESTOR EDUCATION = Stock market Investment - Essentail Rules for Success

INVESTOR EDUCATION SERIES

STOCK MARKET INVESTMENT

ESSENTIAL RULES

FOR SUCCESS

“When I was young I thought that money was the most important thing in life; now that I am old I know that it is” says Oscar Wilde.

Most people today will readily agree with Oscar Wilde, with a small difference, that money is not the, but one of the most important things in life. Making your money grow larger and larger is the art and science of Investment. One of the most favorite avenues of investment is the stocks and shares of companies.

The stock market gives any of us the opportunity to grow our money at faster than other investment avenues open to most of us. Today, there are millions of stock market investors in India, USA and other countries. Some of them are very successful, but some are unsuccessful. Like in any other profession, stock market investment has its rules for success.

We are talking here of only medium to long term investment, as this is the safest for most investors and we are excluding trading activities in Futures and options in this blog post. We will see them later. Follow these time tested principles – and profit from them.

Review time : The year beginning – in fact, every quarter beginning – is review time for your Portfolio of stocks and shares. You must be brutally frank in reviewing the investments you made in the year gone by, before making fresh investments in the New Year. Were they the best possible investments? Or, could you have made better investments - with some more info, some more analysis, some more coolness, some more cautiousness or some more promptness? Or, some more resources? What went wrong and what went right? And, why? Learn from your past mistakes.
Learn from others' Mistakes : It is preferable and profitable to learn from others’ mistakes. You don’t have to commit the same mistakes in your life. Look at what others- including analysts, chartists, experts and friends. What they were saying and doing throughout last year. Where did they hit the dot and where did they miss? And, why? Will they go wrong in similar circumstances in current year? Many people missed the great opportunities of 2009 beginning. Did we not know that economy will again move up, industries will perform again? Was it not a herd mind set to miss the bus, then? Clear up your vision and your logic.
Determine Your Time Horizon : Fix your time horizon for investment. Is it 1, 3, 6 or 10 years? Perhaps, you want cash back in about 30 percent of the investment in the 2^nd year; another 20 percent in the 4^th year and balance can remain for 10 years. Your Investment strategy should be planned accordingly.
Plan the Strategy : Do not make any investment - without a clear strategy! Never make an ad-hoc purchase or sale. Look for growth sectors and leaders therein. Review all national, international, industry-wise and company level factors. Zero in on the top 3 companies in healthy, growth oriented, profitable sectors. As a general principle, go for high growth sectors, and their leaders with reasonable P/E ratios. Future appreciation will be higher in them. Do not Buy a company’s share with a P/E multiple, much higher than the Industry average. “Only buy something that you'd be perfectly happy to hold if the market shut down for ten years” says Warren Buffett.
Make Your Research : Do not go merely by what experts say. Take their opinion by all means. But, make your research. You be knowledgeable on your investments. But I repeat, listen to others’ opinions and constantly review your opinions – based on any facts they may have. Keep in mind what Warren Buffet says of some experts: “Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”
Do not put all Eggs in one Basket : Do not put all your money in a single company’s shares, or in a single Industry’s shares, how so ever good it may be. Spread your investment over 5 to 10 good companies, in different industries. For large investments, up to 20 companies also is good. But, if you find great investments in only 10 companies, limit it to 10. Watch your Portfolio continuously. Shuffle them, whenever necessary. If you feel a company has given very good profits, and future rate of growth is likely to be slower, shuffle it in favour of a higher growth company.
Look for Future Leaders : Some Companies may be either new or small today – but likely to become big in 2-3 years from now. Some of them may belong to excellent business groups with great track record, but may have 2-3 years gestation period. Zero in on such future leaders. These are for long term investment. These could be multi baggers in the long term. Buy such future leaders, when no one is looking at them. They could give you great appreciation in long term.
Short Term Gains : You don’t need to miss the short term gains on companies which performed lower in last Quarter, but are sure to perform much better in next one or two Quarters.
Buy Low : Buy on DIPs. BUY on corrections. BUY when market is going down under. Everybody talks of BUY LOW and SELL HIGH. But, very few actually do it. Prices fall LOW because all have deserted market simultaneously. Prices rise HIGH because everybody is simultaneously in the market for buying. Do the opposite of such mob mind set. In the long run, this is the best policy. Be cautious, if a single company’s shares are going down consistently, there may be factors behind such fall, which you need to know.
Penny Stocks : Penny stocks are cheap stocks, which are selling at face value or less than face value for a long time. There may be some good stocks in them. But, if you are a new investor, or, one with small amount to invest, do not touch PENNY STOCKS. Stay away. If you are a seasoned Investor, research them, convince yourself of its likely rise in future and put a small portion of money in them. No harm.
Markets Always Fluctuate : Markets are not static. They change every day. Look for the new opportunities. But, do not become elated or morose by stock price fluctuations. These are opportunities to sell or Buy. Not to get exited about or feel morose. As one master says, if you have trouble living with a 20 percent loss in stock prices, do not enter the market at all.
Market Information : Markets have millions of investors. There is information, misinformation, opinions and whims too in the market. Don’t equate opinions and whims with facts.
No Debts for Stock Investments : Very, very rarely only, going in for debts to make stock investments can be justified. As a general rule, avoid debts to make stock investments. Debt burden always goes up only. But, stocks can go UP or DOWN also during the term of debt. This rule can be broken for short periods in case of exceptionally good investments.
Look at Management's Credentials : Constantly keep the management’s integrity and credentials in view while investing. Some managements are absolutely inefficient or lacking in integrity in running their companies and rewarding their investors. Stay away from them, however good their current financials may look! Also, avoid small companies, with small floating stock. It is difficult to sell them. Their price fluctuations can also be heavy.
Never Bet Your last Shirt : Your TODAY is just as important as your TOMORROW. Keep reasonable part of your income for your normal needs and some for urgencies. Do not invest up to the last rupee on stocks and shares. Your emergencies are important.