Always carefully weigh factors before making an investing
decision.
Thursday, July 28, 2016
Monday, July 25, 2016
Navigating Rough Times
Holding on during rough times represents a true test for the
long-term investor. However, due diligence is always recommended. A company or
industry might not pull through. Ultimately it is your decision on whether or
not to keep shares in a company.
Friday, July 22, 2016
Look Past Entertainment
A number of financial articles can be geared for
entertainment, especially if they are about politicians. While entertainment is
nice, always focus and do your own research.
Wednesday, July 20, 2016
Don’t Use Just One Metric
Don’t
rely on one single metric such as the P/E ratio. Use a complete analysis to get
an overall picture of your investment.
Tuesday, July 19, 2016
Have you developed an investment philosophy?
Developing an investment philosophy that works enhances your
chances of successful investing over the long-term.
Monday, July 18, 2016
Think for Yourself During Earnings Season
Remember when looking at earnings headlines to dig deeper,
think for yourself and make your own decisions.
Friday, July 15, 2016
Buy and Hold is Best
Finding good quality publicly traded businesses to own over
the long-term allows you to sleep better than utilizing trading strategies that
could turn on you in a dime.
Thursday, July 14, 2016
Wednesday, July 13, 2016
Risking Assets Just to Get a Return at All
Once upon a time if you wanted to get a risk free return on
your investment, you put cash in a savings account. If you wanted a superior
return, you risked at least part of your cash in the stock, bond, and/or commodities
market for a shot at superior returns.
Now, in this low to negative interest rate environment, you
get almost no risk free return or even have to PAY to keep your savings safe.
You need to risk at least part of your cash just for the potential of a return
at all.
Tuesday, July 12, 2016
Beware of Bubbles
Record low interest rates translate into stock bubbles as
investors seek a decent return on their investment. This means that some
companies will trade at excessive valuations even though fundamentals may be
stagnant or eroding. Do your research before investing and make sure that
valuations aren’t too excessive. Also, it may pay to keep some cash on hand to
invest during any potential corrections.
Friday, July 8, 2016
Doing nothing….
Sometimes the best course of action for long-term investors
is to do nothing. Especially if stock prices are fueled by a bubble brought on
by low interest rates.
Thursday, July 7, 2016
Acquisitions Can Be Depressing for Long-Term Investors
Long-term investors should lament the acquisition of any of
their rock solid publicly traded business. That means they will no longer be
able to participate in any potential profits in that business. They essentially
sell that right for some cash that will need redeployed in some profitable manner.
Wednesday, July 6, 2016
Make Sure a Dividend is Solid
When a company’s stock pays an enticing dividend yield,
always make sure that it’s supported by free cash flow. Dividends not supported
by free cash flow would need to come from external financing such as a stock
sale or debt financing. This could prove detrimental to your publicly traded
businesses over the long-term. I prefer to see companies pay out less than 50%
of their free cash flow and retain the rest for other purposes.
Monday, June 27, 2016
Hunting Time for the Value Investor
Global volatility in the stock market means that long-term
business oriented investors should go looking for solid publicly traded
businesses selling on the cheap.
Friday, June 17, 2016
Take Care of What You Have
Nothing depletes your cash more than replacing a piece of household
equipment that wasn’t properly maintained.
Thursday, June 16, 2016
Rainy Day Fund Could Morph Into a Rainy Year Fund
You never know how tough things are going to get. It pays to
have an emergency fund that will pay bills for a year and a half.
Wednesday, June 15, 2016
Pay Your Credit Card Off On Time
Always make sure you pay your credit card bill in a timely
fashion. If you don’t, interest costs will accrue. The accrual of interest expense
represents reverse compounding of wealth.
Tuesday, June 14, 2016
Focus On What’s Important
On any given day the stock market will go up some and down
some. Long-term investors in publicly traded businesses should focus on things
such as growth in revenue, net income and free cash flow and whether or not
they sit behind high barriers to entry.
Monday, June 13, 2016
Risk of Permanent Loss in the Stock Market
Remember there is always a risk of permanent loss in the
stock market. The most widely known route to a permanent loss is bankruptcy.
Another way is that a company that you own shares in may go private at a price
less than what you paid for.
Friday, June 10, 2016
Long-Term Investors Love Corrections
Stock market corrections enable long-term investors to
purchase shares in excellent publicly traded companies on the cheap.
Thursday, June 9, 2016
Look to the Future
Looking at past oppressions and failures will not help you
move forward in your career if you only obsess on them. Try to learn something
useful from the experiences.
Wednesday, June 8, 2016
You Have to Make Your Own Security
In a day and age where employment is increasingly tenuous,
it pays to maintain the viewpoint of building your own security. People needs
to build their own retirement, healthcare and (increasingly) even their own
career by owning a business or pursuing some form of self-employment as
employers increasingly become unreliable. All of this takes money. Save all you
can while you can.
Friday, June 3, 2016
The Importance of Earmarking
It is important NOT to think of money as a generic
commodity. Every dollar has a purpose. Thinking along those lines goes a long
way in properly managing your finances.
Thursday, June 2, 2016
Wednesday, June 1, 2016
Thoughts on Stock Prices
Long-term investors should always look for lower stock prices.
Lower stock prices enhance the chance of superior returns over the long-term. However,
diligent investors should make sure that the correction isn’t justified.
Friday, May 27, 2016
Pursuing Career Passions Makes The Bumps Easier
When you are pursuing your career passions, it makes it easier to get past the inevitable bumps in the road.
Wednesday, May 25, 2016
Always Look for Bargains in the Stock Market
Long-term investors should always strive to find stocks of
publicly traded businesses with decent fundamentals
trading at low
valuations. The cheaper the stock the better the chances of achieving a
superior return.
Tuesday, May 24, 2016
Invest in Educating Yourself
Always invest in educating yourself. It doesn’t necessarily
mean go to college. It could mean learning a trade skill and reading books to
improve your knowledge in areas such as investing, technology or any other
fields that you may want to pursue.
Monday, May 23, 2016
Advantages of Dividend Stocks
Buying shares of companies that pay a dividend is like
purchasing an income stream. Investing in companies that regularly boost their
dividends is like getting a raise on a consistent basis. Of course, it comes
with risks. Those dividends need to be backed by expanding free cash flow and a
company shouldn’t pay too much of its free cash flow out in dividends.
Personally, I prefer that a company that pays out less than 50% of its annual
free cash flow out in dividends.
Tuesday, May 17, 2016
Save for a Rainy Year
Sometimes you need to save for a rainy year. You need an
emergency fund to cover at least a year or more of expenses.
Monday, May 16, 2016
Thoughts On Negative Interest Rates Part II
Part of the motive behind negative
interest rates is to get people to spend more money. When people spend
money it disempowers them. Perhaps this is what central banks and governments
want?
Friday, May 13, 2016
Three Ways to Save
There are three ways to save: 1) Spend less than you earn 2)
Make more than you spend 3) The combination of No. 1 and No. 2. Understandably,
it’s more difficult for some people to do this than others. However, if you
want to accumulate wealth you should strive to do these things.
Thursday, May 12, 2016
Are you prepared for the proverbial floods in life?
Always be prepared for unexpected life events such as a job
loss or cut in benefits. Always have enough cash on hand to pay for 1-2 years
of life expenses.
Wednesday, May 11, 2016
Tuesday, May 10, 2016
Monday, May 9, 2016
Don’t let greed get in the way of rational thinking
Greed can cause you to make bad investing decisions. Seeing
a popular stock go up in value may make you feel like you are missing out on
great riches when you may be buying at the top. Make sure you hit the pause
button and research a particular investment before taking the plunge.
Friday, May 6, 2016
Wednesday, May 4, 2016
Are stocks on sale?
Long-term investors should look at stock market corrections
in the same way that a shopper looks at discounted merchandise.
Tuesday, May 3, 2016
Do you live for your neighbors?
Chances are they don’t care about the newest vehicle or boat
that you bought.
Monday, May 2, 2016
Thoughts on Negative Rates
Some countries have negative interest rates, which means some savers and bond investors actually pay for the privilege of saving and
investing. This could potentially happen in the United States if global trends
hold up. What kind of perverse world punishes saving???
Friday, April 29, 2016
What is a forward P/E ratio?
Forward P/E Ratio = Stock Price/Estimated earnings per
share. This compares to the P/E
ratio which is based on known earnings per share.
Thursday, April 28, 2016
What is a dividend?
A dividend is the amount of cash that a shareholder receives
from a company. Dividends are typically paid in quarterly. Some companies like
to pay on a monthly, semi-annual and annual basis.
Wednesday, April 27, 2016
What is return on equity?
Return on equity (ROE) is defined by the following formula—(Net
Income/Stockholder’s equity) x 100. Sometimes investors use this formula—(Net
Income/Average Stockholder’s equity) x 100. I like to see companies with ROE of
12% or more.
Tuesday, April 26, 2016
What is long-term debt to equity?
Long-term debt is defined by the following formula:
(Long-term debt/Stockholder’s equity) x 100. I like to see companies with
long-term debt amounting to 50% or less of stockholder’s equity.
Monday, April 25, 2016
What is cash to stockholder’s equity?
I like to use a measure called cash to stockholder’s equity
defined as (Cash/Stockholder’s Equity) x 100. I like to see companies hold cash
amounting to 20% or more of stockholder’s equity to get them through tough
times, expand, pay dividends, etc.
Friday, April 22, 2016
What is profit margin?
Profit Margin = (Net Income/Revenue) x 100. Investors desire
this percentage to stay steady or increase over time.
Thursday, April 21, 2016
What is operating margin?
Operating Margin = (Operating income/Revenue) x 100. You
would want this percentage to stay steady or increase over time. Moreover, I
prefer that operating income exceeds
interest expense by five times.
Wednesday, April 20, 2016
What is gross margin?
Gross margin = (Gross profit/revenue) x 100. Investors want
to see this percentage stay steady or go up over the long term.
Tuesday, April 19, 2016
What is current ratio?
Current ratio = Current Assets/ Current Liabilities. I like
to see 2 or more on this measure.
Monday, April 18, 2016
What is times interest earned?
Times interest earned = operating income/ interest expense.
Five or greater is considered a good conservative ratio.
Friday, April 15, 2016
What are unrealized gains?
Unrealized gains represent the increase in the value of your
stock on paper. These gains don’t become cash unless you sell your holdings and
then it becomes realized gains.
Thursday, April 14, 2016
Wednesday, April 13, 2016
Tuesday, April 12, 2016
Monday, April 11, 2016
The Coin Jar
Pennies add up to dollars. Throwing change into a jar is
better than not saving anything at all. It can actually add up to a somewhat
decent amount over time.
Thursday, April 7, 2016
Cash is King in Investing
Remember to always keep enough cash (above and beyond your
emergency fund) to take advantage of any opportunity provided by stock market
corrections. Stock market corrections mean you can buy quality companies on the
cheap.
Wednesday, April 6, 2016
Have you done your research?
Before investing in anything you should do your research.
You may be investing in a proverbial lemon that could cost you your investment.
Tuesday, April 5, 2016
Stock Price Corrections are Good
Lower stock prices means long-term investors can pick up
shares of good companies on the cheap.
Monday, April 4, 2016
Have you thought about earmarking your money?
Not all dollars are the same. Some money gets allocated to
various outlays such as utilities, recreation and investing.
Friday, April 1, 2016
Have you thought about your stock’s valuation?
The chances of getting a good return on your investment
depend not only on the business viability of the company behind your stock but
paying a good price. One simple way to determine whether or not your stock is
cheap is looking at the company’s P/E
ratio. Buying shares in a company backed by solid fundamentals with a low
P/E ratio could improve your total return over the long-term.
Thursday, March 31, 2016
Wednesday, March 30, 2016
The Key to Success
Integrity, authenticity, and due diligence will increase the
chances of success.
Tuesday, March 29, 2016
Does your company consistently grow free cash flow?
It’s often rewarding for people to own shares in companies
that consistently expand their free cash flow.
Monday, March 28, 2016
Wednesday, March 23, 2016
Have you thought about where your dividends come from?
Dividends should come from free cash flow. You should look
for companies with dividends amounting to less than 50% of annual free cash
flow.
Tuesday, March 22, 2016
Friday, March 18, 2016
Thursday, March 17, 2016
Wednesday, March 16, 2016
Emergency Fund for Volatile Times
Volatile economic times call for a bigger emergency fund. It
would pay to have enough cash to pay for a year to 2 years’ worth of expenses.
Easier said than done for the vast majority of people, but if you are in a
position to do it by all means do so. On another note, you should have a decent
emergency fund before you invest in stocks.
Tuesday, March 15, 2016
Pursue Your Passions
It takes perseverance to succeed. It is much more difficult
to give up on things that we are passionate about when things get tough.
Monday, March 14, 2016
Financial Thought of the Day March 14, 2016: When The Stock Market Goes Down….
When long term investors see the stock market declining,
they should go shopping for excellent publicly traded companies on the cheap.
Friday, March 11, 2016
Financial Thought of the Day March 11, 2016: Think Before You Spend
Before you spend money on something, think to yourself, “Do
I really need this?” This best way to save is not spend at all if you can help
it.
Thursday, March 10, 2016
Financial Thought of the Day March 10, 2016: Personal Income Statement
One way to keep track of whether or not you live within your
means is to do a personal income statement. Take what you make each payday or
time period such as a month and subtract what you spend. If the number is
positive, then you are spending less than you earn. If that number is negative
you are either leaning on savings or credit to prop you up. If it is negative,
you need to figure out a way to earn more and/or spend less. It’s preferable to
make more and spend less.
Monday, March 7, 2016
Financial Thought of the Day March 7, 2016: Reading the Annual Letter to Shareholders
When researching a publicly traded company, it always pays
to read the annual letter to shareholders. It can tell you a great deal about
the qualitative characteristics of a company. Of course, this isn’t the only
thing you should do in your research, but it represents one important
component.
Friday, March 4, 2016
Financial Thought of the Day March 4, 2016: Always Dig Deeper
Just because
a company beats Wall Street estimates doesn’t necessarily mean that it expanded its
fundamentals for the quarter or that it makes a great investment over
the long term. Conversely, just because a company doesn't beat Wall Street estimates
doesn’t necessarily mean that a company is seeing degrading fundamentals or that investors
stand to lose everything over the long term. Always dig deeper.
Thursday, March 3, 2016
Wednesday, March 2, 2016
Financial Thought of the Day March 2, 2016: It Pays to Read to the Bottom….
It pays to read to the bottom of any article, document,
paper, etc. when researching stocks. Sometimes the best information occurs
somewhere in the middle of the discourse or sometimes near the bottom.
Tuesday, March 1, 2016
Financial Thought of the Day March 1, 2016: Think Long-term When Investing in Stocks
When investing in stocks it’s important to think about how
the business behind the stock will do 5-10 years down the road. Don’t think about what the stock price is
going to do over the next few days, weeks or even months.
Monday, February 29, 2016
Financial Thought of the Day February 29, 2016: Berkshire Hathaway’s Superstar Returns
On February 27, 2016, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) came out
with its 2015
annual report. In the report, the company illustrated that its stock gave shareholders
a 20.8% annualized return from 1965 – 2015. Over 50 years, a 20.8% annualized
return would turn a $100 investment into $1,268,664.29.
*Disclosure
William Bias (stockdissector) owns shares in Berkshire Hathaway’s Class B shares.
Friday, February 26, 2016
Financial Thought of the Day February 26, 2016: Building Wealth (Revisited)
The key to building wealth is spending less than you earn
and save/invest the rest. It is as simple as that.
Thursday, February 25, 2016
Financial Thought of the Day February 25, 2016: Something Doesn’t Come for Nothing
Something never comes for nothing. Don’t sit around waiting
for a family member, politician or some other party to do something. Maintain
the mindset of working for your money and spending less than you earn.
Wednesday, February 24, 2016
Financial Thought of the Day February 24, 2016: Saving a Percentage
It’s best to set aside 10% of your paycheck for a rainy day.
If you can’t do that then try 5%, 3% or even 1%.
Tuesday, February 23, 2016
Financial Thought of the Day February 23, 2016: Keep Emergency Fund in Cash
Your emergency fund should be kept as cash in a really
liquid bank account such as a passbook savings account or checking account. Don’t
put that money at risk. If you invest in risky assets such as stocks then you
may have to sell at a loss when you need it the most.
Monday, February 22, 2016
Financial Thought of the Day February 22, 2016: Invest in Yourself
Learn skills and/or concepts that will enable you to earn
enough income to exceed your expenses.
Friday, February 19, 2016
Financial Thought of the Day February 19, 2016: Stock Market Risk
Investing in the stock market doesn’t come without risk.
There is always a chance of loss.
Thursday, February 18, 2016
Financial Thought of the Day February 18, 2016: Saving a Little is Better Than Nothing
It pays to save something even if it’s a few dollars a week
in a cookie jar.
Wednesday, February 17, 2016
Financial Thought of the Day February 17, 2016: It’s About the Fundamentals
When you buy shares of a stock you effectively become a
business owner. A good business will have growing demand for its products, keep
costs to a minimum and generates cash for its owners. Any publicly traded
business in your portfolio that doesn’t do these things should be re-evaluated.
Tuesday, February 16, 2016
Financial Thought of the Day February 16, 2016: Investing Versus Speculation
Investors buy/sell financial instruments based on the
underlying financials with the intention of holding for the long-term.
Speculators are looking for a quick profit and see the financial markets as
nothing more than a gambling casino.
Monday, February 15, 2016
Financial Thought of the Day February 15, 2016: Save for a Snowy Day
Always set aside some money for the proverbial “snowy days”
in life such as a job loss, medical bills not covered by insurance, etc. It
pays to have the equivalent of 6-12 months of personal expenses set aside in a
savings account.
Friday, February 12, 2016
Financial Thought of the Day February 12, 2016: Beware of Frothy Markets
Extreme bullish markets produce stocks with high valuations,
which can correct in a major way when market sentiments turn sour.
Thursday, February 11, 2016
Financial Thought of the Day February 11, 2016: Stock Market Volatility Creates Opportunity
The year 2016 proved a volatile year for the stock market.
Long-term minded investors should seize this opportunity to buy good quality
publicly traded companies on the cheap.
Wednesday, February 10, 2016
Financial Thought of the Day February 10, 2016: Money Provides Options Other Than The Opportunity to Buy Luxury
Remember money can provide options other than the
opportunity to buy luxury items. It can purchase the peace of mind of not
having worry about being broke right before payday.
Tuesday, February 9, 2016
Financial Thought of the Day February 9, 2016: Be Prepared for Storms of Life
Having an emergency fund will help prepare you for the
storms of life. It pays to have one year’s of expenses.
Monday, February 8, 2016
Friday, February 5, 2016
Financial Thought of the Day February 5, 2016: The Formula for Future Value of a Single Amount
This week I talked about what compound interest can do for a
single amount over a period of time. The formula for the future value of a
single amount is FV = (1 + i)^N where i is interest and n is the number of
compounding periods. In my illustration involved annual compounding.
A table for the various rates of returns for a $1,000 can be
found below:
Thursday, February 4, 2016
Financial Thought of the Day February 4, 2016: Berkshire Hathaway: The Ultimate Example of Compound Growth
Building wealth is a function of amount invested, the rate
of return and time. Warren Buffett has ran Berkshire Hathaway (NYSE: BRK-A)
(NYSE: BRK-B) for over fifty years. From 1964–2014 the
company’s class A stock returned 21.6% compounded annually. Here’s what $1,000
would have done with that rate of growth over time in the table below. It takes
investment genius to achieve this and this rate is definitely not guaranteed
and few people could probably achieve this.
$1,000 Amount
|
||
Time
|
Rate
|
Amount After Compounding
|
10 Years
|
21.6%
|
$7,068.64
|
20 Years
|
21.6%
|
$49,965.65
|
30 Years
|
21.6%
|
$353,189.06
|
40 Years
|
21.6%
|
$2,496,565.69
|
50 Years
|
21.6%
|
$17,647,319.43
|
A similar table to the one found above for different
compound growth rates can be found here:
Wednesday, February 3, 2016
Financial Thought of the Day February 3, 2016: Here’s What 15% Can Get You Over Time
Building wealth is a function of amount invested, the rate
of return and time. Yesterday, I illustrated
how much 10%, which represented the potential return of an index mutual fund,
can get you over time given a $1,000 investment. Today, I will illustrate what
15% can do for a single $1,000 over time. It takes a little investing skill by
investing in solid publicly traded companies, risk taking and luck to get these
returns and is definitely not guaranteed (table below).
|
$1,000 Amount
|
||
|
Time
|
Rate
|
Amount After Compounding
|
|
10 Years
|
15%
|
$4,045.56
|
|
20 Years
|
15%
|
$16,366.54
|
|
30 Years
|
15%
|
$66,211.77
|
|
40 Years
|
15%
|
$267,863.55
|
|
50 Years
|
15%
|
$1,083,657.44
|
Tuesday, February 2, 2016
Financial Thought of the Day February 2, 2016: Here’s What 10% Can Get You
Building wealth is a function of amount invested, the rate
of return and time. Yesterday, I illustrated
how much 2%, which represents a risk free rate of return, can get you over time
given a $1,000 investment. Today, I will illustrate what 10% will get you. You
have to take a little more risk to get this rate of return by investing in a
mutual fund and there is no guarantee you will get it (see table below).
|
$1,000 Amount
|
||
|
Time
|
Rate
|
Amount After Compounding
|
|
10 Years
|
10%
|
$2,593.74
|
|
20 Years
|
10%
|
$6,727.50
|
|
30 Years
|
10%
|
$17,449.40
|
|
40 Years
|
10%
|
$45,259.26
|
|
50 Years
|
10%
|
$117,390.85
|
Monday, February 1, 2016
Financial Thought of the Day February 01, 2016: Here’s What 2% Can Do For Your Money Over Time
Building wealth is a function of amount invested, the rate
of return and time. Here’s what 2%
(the rate for a 10 year Treasury Note) can do for you over time:
|
$1,000 Amount
|
||
|
Time
|
Rate
|
Amount After Compounding
|
|
10 Years
|
2%
|
$1,218.99
|
|
20 Years
|
2%
|
$1,485.95
|
|
30 Years
|
2%
|
$1,811.36
|
|
40 Years
|
2%
|
$2,208.04
|
|
50 Years
|
2%
|
$2,691.59
|
Note: William Bias
(stockdissector) does not own any Treasury Notes.
Friday, January 29, 2016
Financial Thought of the Day January 29, 2016: Debt = Interest Expense
Adding to your credit card balance unnecessarily creates an interest
expense burden that people shouldn’t need to shoulder. In fact, debt should be
avoided altogether if possible.
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