If you are Young,Have time in your life you would want invest in some money to get returns that make your life better and comfortable.Off Course,Some of us have a much different definition of Comfort.For instance ,for some it may be moving around in Limousine,partying all night.Having personal Chef with a long long dinner table etc etc...
Value Investing
Values investing is a long term investment in which you seek to invest money so that you could reap its long term benefits.
4 thing to take a look at while Investing
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The most important qualities every good investment possesses
New investors are often interested in purchasing a company's stock but don't know what to look for. What constitutes a good investment? Here are the four most important things you should require out of each of your holdings.
1. What is the "entire" company selling for?
When doing research, it is important that you look at more than just the current share price - you need to find out what the entire business is selling for. The "cost" of acquiring the entire corporation is called market capitalization (or market cap for short) and is frequently referred to by financial professionals.
One of the best examples of how this can keep you from overpaying for a stock is the eBay vs. General Motors case. At one point during the Internet boom, eBay had the same market cap as the entire General Motors Corporation. To put that into perspective, in fiscal 2000, General Motors made $3.96 billion dollars in profit, while eBay made only $48.3 million. Yet were you to buy either one, you would have had to pay the same amount. It is almost unbelievable that any sane investor would pay the same price for both companies - but the general public was seduced by visions of quick profits and easy cash.
One tool that will help you discover how much you are really paying for a company is the Price to Earnings Ratio. It provides a valuable standard of comparison by which you can compare your possible investment options.
2. Is the company buying back shares?
One of the most important keys to investing is that "overall growth is not as important as growth-per-share." A company could have the same profit, sales, and revenue for five consecutive years, but create large returns for an investor if the amount of available shares is reduced.
To put it into simpler terms, think of your investment like a large pizza. Each slice represents one share of stock. Would you rather have part of a pizza that was cut into ten slices or one that was cut into eight slices? The pizza that was only cut into eight parts will have bigger slices with more cheese and toppings.
The same principle is true in business. A shareholder should desire a management that has an active policy of reducing the amount of shares, thus making each investor's stake in the company bigger. When the corporate "pie" is cut into smaller pieces, instead of cheese and toppings, each investor gets a bigger cut of the profits, assets, and revenues. This principle is the foundation for the belief that when a company's stock is selling on the market for less than it is worth, the best investment any corporation can make is in itself.
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3. What are your reasons for investing in the company?
Before you purchase your first share of a company, you need to ask yourself why you are interested in investing in that particular stock. It is dangerous to fall in love with a corporation and buy it solely because you have a nostalgia for it - after all, the best company in the world is a lousy investment if you pay too much for it.
Make sure the fundamentals of the company [current price, profits, good management, etc.] are the only reason you are investing. Anything else is based upon your emotions, which are detrimental in the financial world. You have to remove your feelings completely from the equation of selecting your investments, otherwise you will be unable to make rational decisions.
4. Would you be willing to own the stock for the next five years?
If you aren't willing to buy shares in a company and completely forget about them for the next five years, you really have no business owning those shares at all. The simple [but painful] truth of this is evident on Wall Street everyday. Professional Money Managers attempt to beat the Dow Jones Industrial Average, which is a collection of 30 largely unmanaged stocks. Year after year, they fail to do this. It seems impossible that a portfolio managed by the best minds in finance can't beat a portfolio managed by no minds at all.
The guaranteed way to success has historically been to pick a great company, pay as little as possible for it, and then leave it alone, reinvesting the dividends. Anything else requires a lot of time, energy, and risk tolerance that you may not have.
_(this was by joshua from About network)
The person who mastered the art of INvesting was Graham.Graham had his wonderful philosophies of investing.Influenced by his Mentor Warren joined under his guidance the Stock kingdom.But thats when Warren realize the problem with Graham.Graham often invested in business taking in term Intrinsic value of share,how ever as soon as the intrinsic valu was reached he sold them.thus Graham wasnt looking at long term investments.However Warren realized that companies which have excellent managment practices,will never Reach intrinsic valu and thus he always held on to his investments.
How to Think About Share Price(Taken from Joshuas Texts)
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Share Price and Investing Decisions
If you had $1,000 to invest, and were given the choice between buying 100 shares of company ABC at $10 per share, or 5 shares of company XYZ at $125, which would you choose? Many investors would go for the one hundred shares of ABC because the share price is lower. "The $10 stock looks cheap," they argue, "the $125 per share price for the other stock is too risky and rich for my taste."
If you agree with this reasoning, you're in for a shock. The truth is, you don't have enough information to determine which stock should be purchased based on share price alone. You may find, after careful analysis, the $125 stock is cheaper than the $10 stock! How? Let's take a closer look.
Share Price and Stock Splits - The Coca-Cola Example
Every share of stock in your portfolio represents a fractional ownership in a business. In 2001, Coca-Cola earned $3.696 billion in profit. The soft drink giant had approximately 2.5 billion shares outstanding. This means that each of those shares represents ownership of 1/2,500,000,000 of the business [or 0.0000000004%] and entitles you to $1.48 of the profits [$3.696 profit divided by 2.5 billion shares = $1.48 per share]. Let's say the company's share price is currently $50.
If Coca-Cola's board of directors thinks that $50 per share is close to the intrinsic value of the company's stock, but it's getting a little too pricey for average investors to be able to afford shares, they can announce a stock split. There are many kinds of stock splits, the most common being the 2 for 1. If Coke announced a 2-1 stock split, the company would double the amount of shares outstanding [in this case the number of shares would increase to 5 billion from 2.5 billion]. The company would issue one share for each share an investor already owned, cutting the share price in half [i.e., if you had 100 shares at $50 in your portfolio on Monday, after the split, you would have 200 shares at $25 a piece.] Each of the shares is now only worth 1/5,000,000,000 of the company, or 0.0000000002%. Due to the fact that each share now represents half of the ownership it did before the split, it is only entitled to half the profits, or $0.74.
This should prove it is pointless to wait for a stock split before buying the shares of a company. Which is better - paying $50 for the right to $1.48 in earnings, or paying $25 for the right to $0.74 in earnings? Neither! In the end, the investor comes out exactly the same. The effect is sort of like a man with a $100 bill asking for two $50's. Although it now looks like he has more money, his economic reality hasn't changed.
Share Price Relative to Value
This all serves to make one very important point: The share price by itself means nothing. It is the share price in relation to earnings and net assets that determines if a stock is over or undervalued.
Let's assume company ABC, at $10 per share, had EPS of $0.15. Company XYZ, on the other hand, earned $35 per share compared to its $125 price tag. In ABC's case, you are paying just under 67x earnings [$10 per share divided by $0.15 EPS = 66.67]. In XYZ's case, you are paying 3.57x earnings [$125 per share divided by $35 EPS = 3.57]. In other words, you are paying $66.67 for every $1 in earnings from company ABC, while company XYZ is offering you the same $1 in earnings for only $3.57. Assuming both company's earnings have been stable for many years, you would get much richer by investing in the $125 XYZ stock. Going one step further, unless ABC had a really high growth rate to justify the lofty p/e ratio of 66.67, it is dramatically overvalued and will probably fall sometime in the future.
Some companies have a policy of never splitting their shares, giving the share price the appearance of gross overvaluation to less-informed investors. The Washington Post, for example, has recently traded between $500 and $700 per share with EPS of over $22. Berkshire Hathaway has traded as high as $70,000 per share with EPS of over $2,000 per share. Hence, Berkshire Hathaway, if it fell to $45,000 per share, may be a far better buy than Wal-Mart at $70 per share. Share price is all relative.
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In the end this topic is quite difficult to grasp at once,But if researched and understood thoroughly it gives benefits.Couple of months ago we Invested in a group and My My we werent let down by it.
Disclaimer : Some of the material is written by me and some has been taken from ABout Netwrok and from Joshua Kennon's Text.I dont intend to use this article for commercial purpose.However I feel these texts should be passed on to the public in view of Economic interests.I would recommend My opinions as Base opinions nor would i gaurantee success as there is a lot to be understood before Actually investing powerfully to become OUtrageously rich.After all that is a dream isnt it? for all?
Thanks.
bye!
Value Investing
Values investing is a long term investment in which you seek to invest money so that you could reap its long term benefits.
4 thing to take a look at while Investing
_
The most important qualities every good investment possesses
New investors are often interested in purchasing a company's stock but don't know what to look for. What constitutes a good investment? Here are the four most important things you should require out of each of your holdings.
1. What is the "entire" company selling for?
When doing research, it is important that you look at more than just the current share price - you need to find out what the entire business is selling for. The "cost" of acquiring the entire corporation is called market capitalization (or market cap for short) and is frequently referred to by financial professionals.
One of the best examples of how this can keep you from overpaying for a stock is the eBay vs. General Motors case. At one point during the Internet boom, eBay had the same market cap as the entire General Motors Corporation. To put that into perspective, in fiscal 2000, General Motors made $3.96 billion dollars in profit, while eBay made only $48.3 million. Yet were you to buy either one, you would have had to pay the same amount. It is almost unbelievable that any sane investor would pay the same price for both companies - but the general public was seduced by visions of quick profits and easy cash.
One tool that will help you discover how much you are really paying for a company is the Price to Earnings Ratio. It provides a valuable standard of comparison by which you can compare your possible investment options.
2. Is the company buying back shares?
One of the most important keys to investing is that "overall growth is not as important as growth-per-share." A company could have the same profit, sales, and revenue for five consecutive years, but create large returns for an investor if the amount of available shares is reduced.
To put it into simpler terms, think of your investment like a large pizza. Each slice represents one share of stock. Would you rather have part of a pizza that was cut into ten slices or one that was cut into eight slices? The pizza that was only cut into eight parts will have bigger slices with more cheese and toppings.
The same principle is true in business. A shareholder should desire a management that has an active policy of reducing the amount of shares, thus making each investor's stake in the company bigger. When the corporate "pie" is cut into smaller pieces, instead of cheese and toppings, each investor gets a bigger cut of the profits, assets, and revenues. This principle is the foundation for the belief that when a company's stock is selling on the market for less than it is worth, the best investment any corporation can make is in itself.
_
3. What are your reasons for investing in the company?
Before you purchase your first share of a company, you need to ask yourself why you are interested in investing in that particular stock. It is dangerous to fall in love with a corporation and buy it solely because you have a nostalgia for it - after all, the best company in the world is a lousy investment if you pay too much for it.
Make sure the fundamentals of the company [current price, profits, good management, etc.] are the only reason you are investing. Anything else is based upon your emotions, which are detrimental in the financial world. You have to remove your feelings completely from the equation of selecting your investments, otherwise you will be unable to make rational decisions.
4. Would you be willing to own the stock for the next five years?
If you aren't willing to buy shares in a company and completely forget about them for the next five years, you really have no business owning those shares at all. The simple [but painful] truth of this is evident on Wall Street everyday. Professional Money Managers attempt to beat the Dow Jones Industrial Average, which is a collection of 30 largely unmanaged stocks. Year after year, they fail to do this. It seems impossible that a portfolio managed by the best minds in finance can't beat a portfolio managed by no minds at all.
The guaranteed way to success has historically been to pick a great company, pay as little as possible for it, and then leave it alone, reinvesting the dividends. Anything else requires a lot of time, energy, and risk tolerance that you may not have.
_(this was by joshua from About network)
The person who mastered the art of INvesting was Graham.Graham had his wonderful philosophies of investing.Influenced by his Mentor Warren joined under his guidance the Stock kingdom.But thats when Warren realize the problem with Graham.Graham often invested in business taking in term Intrinsic value of share,how ever as soon as the intrinsic valu was reached he sold them.thus Graham wasnt looking at long term investments.However Warren realized that companies which have excellent managment practices,will never Reach intrinsic valu and thus he always held on to his investments.
How to Think About Share Price(Taken from Joshuas Texts)
_
Share Price and Investing Decisions
If you had $1,000 to invest, and were given the choice between buying 100 shares of company ABC at $10 per share, or 5 shares of company XYZ at $125, which would you choose? Many investors would go for the one hundred shares of ABC because the share price is lower. "The $10 stock looks cheap," they argue, "the $125 per share price for the other stock is too risky and rich for my taste."
If you agree with this reasoning, you're in for a shock. The truth is, you don't have enough information to determine which stock should be purchased based on share price alone. You may find, after careful analysis, the $125 stock is cheaper than the $10 stock! How? Let's take a closer look.
Share Price and Stock Splits - The Coca-Cola Example
Every share of stock in your portfolio represents a fractional ownership in a business. In 2001, Coca-Cola earned $3.696 billion in profit. The soft drink giant had approximately 2.5 billion shares outstanding. This means that each of those shares represents ownership of 1/2,500,000,000 of the business [or 0.0000000004%] and entitles you to $1.48 of the profits [$3.696 profit divided by 2.5 billion shares = $1.48 per share]. Let's say the company's share price is currently $50.
If Coca-Cola's board of directors thinks that $50 per share is close to the intrinsic value of the company's stock, but it's getting a little too pricey for average investors to be able to afford shares, they can announce a stock split. There are many kinds of stock splits, the most common being the 2 for 1. If Coke announced a 2-1 stock split, the company would double the amount of shares outstanding [in this case the number of shares would increase to 5 billion from 2.5 billion]. The company would issue one share for each share an investor already owned, cutting the share price in half [i.e., if you had 100 shares at $50 in your portfolio on Monday, after the split, you would have 200 shares at $25 a piece.] Each of the shares is now only worth 1/5,000,000,000 of the company, or 0.0000000002%. Due to the fact that each share now represents half of the ownership it did before the split, it is only entitled to half the profits, or $0.74.
This should prove it is pointless to wait for a stock split before buying the shares of a company. Which is better - paying $50 for the right to $1.48 in earnings, or paying $25 for the right to $0.74 in earnings? Neither! In the end, the investor comes out exactly the same. The effect is sort of like a man with a $100 bill asking for two $50's. Although it now looks like he has more money, his economic reality hasn't changed.
Share Price Relative to Value
This all serves to make one very important point: The share price by itself means nothing. It is the share price in relation to earnings and net assets that determines if a stock is over or undervalued.
Let's assume company ABC, at $10 per share, had EPS of $0.15. Company XYZ, on the other hand, earned $35 per share compared to its $125 price tag. In ABC's case, you are paying just under 67x earnings [$10 per share divided by $0.15 EPS = 66.67]. In XYZ's case, you are paying 3.57x earnings [$125 per share divided by $35 EPS = 3.57]. In other words, you are paying $66.67 for every $1 in earnings from company ABC, while company XYZ is offering you the same $1 in earnings for only $3.57. Assuming both company's earnings have been stable for many years, you would get much richer by investing in the $125 XYZ stock. Going one step further, unless ABC had a really high growth rate to justify the lofty p/e ratio of 66.67, it is dramatically overvalued and will probably fall sometime in the future.
Some companies have a policy of never splitting their shares, giving the share price the appearance of gross overvaluation to less-informed investors. The Washington Post, for example, has recently traded between $500 and $700 per share with EPS of over $22. Berkshire Hathaway has traded as high as $70,000 per share with EPS of over $2,000 per share. Hence, Berkshire Hathaway, if it fell to $45,000 per share, may be a far better buy than Wal-Mart at $70 per share. Share price is all relative.
_
In the end this topic is quite difficult to grasp at once,But if researched and understood thoroughly it gives benefits.Couple of months ago we Invested in a group and My My we werent let down by it.
Disclaimer : Some of the material is written by me and some has been taken from ABout Netwrok and from Joshua Kennon's Text.I dont intend to use this article for commercial purpose.However I feel these texts should be passed on to the public in view of Economic interests.I would recommend My opinions as Base opinions nor would i gaurantee success as there is a lot to be understood before Actually investing powerfully to become OUtrageously rich.After all that is a dream isnt it? for all?
Thanks.
bye!
