It is impossible to predict the stock price of any given
company over the short term. Trying to day trade based on guesses on where
stock prices are heading is a sure way to the poor house.
Tuesday, March 31, 2015
Financial Thought of the Day March 31, 2015: Investing for the Short Term Is Bad
Monday, March 30, 2015
Financial Thought of the Day March 30, 2015: Future Value of a Single Amount—30 Years
The compounding of money is such a powerful thing. Over time
it can build up. Three elements go into the compounding of money—Amount,
compound rate and time. It can be denoted by the following formula:
Future Value of an amount = (1 +r)^n where
r = rate of return
n = number of periods
With that said:
A single $1,000 amount compounded @ 1% over a period of 30
years which is roughly the equivalent of an online bank account —(1.01)^30
gives you a multiplier of 1.3478 x $1,000 = $1,347.85
A single $1,000 amount compounded @ 10% over a period of 30
years which is the historical return of the stock market as a whole --- (1.10^30)
gives you a multiplier of 17.4494 x $1,000 = $17,449.40
A single $1,000 amount compounded @ 22% over a period of 30
years which is Warren Buffett level returns --- (1.22^30) gives you a
multiplier of 389.7579 x $1,000 =
$389,757.89
Friday, March 27, 2015
Financial Thought of the Day March 27, 2015: Future Value of a Single Amount—20 Years
The compounding of money is such a powerful thing. Over time
it can build up. Three elements go into the compounding of money—Amount,
compound rate and time. It can be denoted by the following formula:
Future Value of an amount = (1 +r)^n where
r = rate of return
n = number of periods
With that said:
A single $1,000 amount compounded @ 1% over a period of 20
years which is roughly the equivalent of an online bank account —(1.01)^20 gives
you a multiplier of 1.2202 x $1,000 = $1,220.19
A single $1,000 amount compounded @ 10% over a period of 20
years which is the historical return of the stock market as a whole --- (1.10^20)
gives you a multiplier of 6.7275 x $1,000 = $6,727.50
A single $1,000 amount compounded @ 22% over a period of 20
years which is Warren Buffett level returns --- (1.22^20) gives you a
multiplier of 53.3576 x $1,000 =
$53.357.64
Financial Thought of the Day March 26, 2015: Future Value of a Single Amount—10 Years
Sorry I skipped yesterday folks. Here’s a makeup post:
The compounding of money is such a powerful thing. Over time
it can build up. Three elements go into the compounding of money—Amount,
compound rate and time. It can be denoted by the following formula:
Future Value of an amount = (1 +r)^n where
r = rate of return
n = number of periods
With that said:
A single $1,000 amount compounded @ 1% over a period of 10
years which is roughly the equivalent of an online bank account —(1.01)^10 gives
you a multiplier of 1.1046 x $1,000 = $1,104.62
A single $1,000 amount compounded @ 10% over a period of 10
years which is the historical return of the stock market as a whole --- (1.10^10)
gives you a multiplier of 2.5937 x $1,000 = $2,593.70
A single $1,000 amount compounded @ 22% over a period of 10
years which is Warren Buffett level returns --- (1.22^10) gives you a
multiplier of 7.3046 x $1,000 = $7,304.60
Wednesday, March 25, 2015
Stockdissector (Theoretical) Portfolio Update--March 25, 2015--Beating The S&P 500
It appears that my theoretical portfolio is off to a good start. My one and only stock--Wabtec-- has outperformed the stock market since being added on January 30, 2015.
Stockdissector is NOT an investment advisor. This is for informational
purposes only. This should not be construed as an investment advice and you
should always consult your financial advisor for a second opinion.
Wabtec-(NYSE: WAB)--Added on January 30,
2015
Price when added $83.45
S&P 500 when added 1,994.99
Wabtec's Price on 03/25/15----$95.27
S&P 500 Price on 03/25/15-----2061.05
Wabtec's Price Return 14.2% vs. 3.3% for the S&P 500 since being added to the portfolio (not including dividends).
The stock is outperforming the S&P 500 since added to portfolio (as of 03/25/15)
Stockdissector owns shares in this company.
Original blogspot post with timestamp for verification.
Go to the Stockdissector (Theoretical Portfolio)
Price when added $83.45
S&P 500 when added 1,994.99
Wabtec's Price on 03/25/15----$95.27
S&P 500 Price on 03/25/15-----2061.05
Wabtec's Price Return 14.2% vs. 3.3% for the S&P 500 since being added to the portfolio (not including dividends).
The stock is outperforming the S&P 500 since added to portfolio (as of 03/25/15)
Stockdissector owns shares in this company.
Original blogspot post with timestamp for verification.
Go to the Stockdissector (Theoretical Portfolio)
Financial Thought of the Day March 25, 2015: Value Trap
Sometimes a stock price goes down for a reason. Be sure to
research the fundamentals of any business before investing.
Tuesday, March 24, 2015
Financial Thought of the Day March 24, 2015: Active Management Risk
The TIAA-CREF S&P 500 Index Fund Prospectus defines
Active Management Risk as “The risk that Advisors’ strategy, investment
selection or trading execution may cause the Fund to underperform relative to
the benchmark index or mutual funds with similar investment objectives.”
Trading execution can run up brokerage fees and taxes which
can eat into your returns. Owning shares in a mutual fund means you have a
partial interest in a professionally designed portfolio. Within a mutual fund
if an advisor trades a stock on your behalf it can incur fees and taxes in the
portfolio serving as a drag on return. Picking stocks that you can hold for a
long time can enhance your chances of better long-term gains. The same can be
said about an advisor managing your mutual funds.
Thursday, March 19, 2015
Wednesday, March 18, 2015
Financial Thought of the Day March 18, 2015: Quantitative Analysis Risk Defined
The TIAA-CREF S&P 500 Index Fund summary prospectus defines
Quantitative Analysis Risk as “The risk that stocks selected using quantitative
modeling and analysis could perform differently from the market as a whole.”
First of all that risk could pay off if the company performs better than the
stock market as a whole. Second, a business oriented stock market investor will
look at factors beyond the numbers such as high barriers to entry, selling a
wanted/needed product and market leadership.
Tuesday, March 17, 2015
Financial Thought of the Day March 17, 2015: Cash to Stockholder’s Equity
I always like publicly traded companies with lots of cash on
its balance sheet. I prefer companies with cash to stockholder’s equity of 20%
or more to get it through tough times, make prudent acquisitions and
self-finance operations. However, most of the financial community doesn’t want
to see a great deal of cash on a company’s balance sheet because they feel it’s
not being put to good use.
Monday, March 16, 2015
Financial Thought of the Day March 16, 2015: Diligence Pays
Never give up on the notion of saving. Always minimize
expenses and maximize revenue.
Friday, March 13, 2015
Financial Thought of the Day March 13, 2015: Who Cares About the Jones?
Keeping up with the Joneses? Keep in mind they may be
operating under a load of interest choking debt. Better to be debt free and not
paying the bank interest then keeping up with your neighbor with the fancy car.
Thursday, March 12, 2015
Financial Thought of the Day March 12, 2015: Have a Spending Blackout Period
Challenge yourself to have a “spending blackout period”. It
could be a few hours, a day or whatever. Continue to have these intermittent blackout
periods. Check and see if this has any impact on your finances over a period of
time. Not spending money over a period of time can strengthen financial
discipline.
Wednesday, March 11, 2015
Financial Thought of the Day March 11, 2015: Financial Freedom Defined
To me financial freedom means having enough of an asset base
that generates enough income to live on. That means not reporting to a boss to
earn a paycheck and doing what you want to in life.
Monday, March 9, 2015
Financial Thought of the Day March 9, 2015: Gambling Is Not a Way to Make a Living
Playing slots and video poker is NOT a way to make a living
and leaves you feeling empty in the end when you are broke.
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