Friday, 28 November 2014

On Becoming Rich

My search on becoming rich has led me down a few alleys and byways. What I have found, is that, there are no ways around doing the work to be rich. Even if a short cut is available, you still have to do the work to find it.

Doing the work certainly don't mean working hard, especially working hard on, at, and for the wrong things, but what it means is finding what matters and doing that work. Most of the richest people in the world have worked hard, but they did the work that mattered most.

They have been working on themselves for the most part, learning to earn and keep their gold and goals while all else around them kept moving. They prepared themselves for lady opportunity and when she appeared they took action.

I cannot imagine a dreamer who succeeds without taking action, and no master falls in love with a lazy man or woman for that fact. Lady opportunity regardless of how she dresses, she loves a man of action. So it is important that you take action and do the work even if you want to become rich in spirit, you have to take action.

That genie lamp above requires a little rubbing and a command, and that is all the action that is needed. If you light a fire or put a blaze out, it is the work that matters. Rub that genie and start a fire on becoming rich. Clone the rich and do the work.

Take action and do the work that matters and see what happens.

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Saturday, 22 November 2014

The concepts of money and time...

The concepts of money and time =
Money and time are the only things you spend
You make money, but you can't make time
Rich people invest in time and poor people invest in money
You store money and use it later
You keep time, but you cant store it, its never the same later
Money is fungible, but time is not, something make it different the next time around...
Money can wait, but time never waits
Money runs out, but time runs off and never runs out (you run out of time because time runs off)
Money comes in, but time is always there
Money fools you, time schools you
Strap for money and strap for time
Time is money
Money on the mind, but it takes time to think. (In the head is where the two meet)

Tuesday, 18 November 2014

Buying a good stock is buying a good company?

A good stock to buy does not always equate into a good company to buy into as a shareholder. Some stocks are worth trading as long as they trade at the lowest price and later provide you with an opportunity to sell it at a profit after cost. It is always a good idea to go for the lowest price you can get a stock for. Buy it at that price with a view of selling it when the market for the stock improves. Of course the business should at least be good enough to stay in business while you hold the stocks.

Some business are like cigar butts with not much value, but even that can be hard to find at times. It may not be a good business, it is a good stock only because with some certainty that it has just that little value left in it. It could be like real a cigar butt with one last smoke, only that it is wet and soggy. Sun it dry just a little, and you may get the few last puff left before you hits the cork.

The stock market is distinctly different from the enterprise/industry market of a business. There may be pricing misalignment between the two valuations i.e. the equity valuation of the business may be different from the asset valuation of the business and this is where you have to search for the misprice in valuations.

The lowest price is where the best investment starts and the highest valuation is where profit starts.

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Saturday, 15 November 2014

Five things to evaluate your Financial Adviser on...

You come into a sudden stash of cash on your hands and you decide to invest some for retirement or some future acquisition such as buying a house or car etc etc...

So you call up an investment adviser with the expectation that you will be given the best advice in allocating your capital. So you call up the one most advertised. You get some advise, but your work is  not done yet, because not all investment advisers are measured equally and you are right, some are more equal than some.

These five things can help you when evaluating a financial adviser:

  1. Fee Structure: Is the financial adviser giving you advice on fee basis linked to the product offering at the time you approach them or is the adviser giving you advice as a service offering with no connection to any particular investment product. By that I mean, do they recommend a product based on the fee they receive from selling that particular product to you regardless of what your investment objective may be or do they sell you a service at a flat fee while at the same time considering your best option with your investment objective in mind.
  2. Trust: Do you trust the person or the firm giving you the advice. I know this can be a difficult one to measure, but it is not hard. Start a relationship with the individual or institution and look at how they conduct business with you. Are you keeping more of your money or are they getting more of your money than you are? A key measure is how do they execute their fiduciary duties to you and other clients. Don't stress test the exchange to the point of destroying the relationship, but ask the hard question about the investment and be objective and rational. You may need some time alone to decide before you eventually invest your money so as many questions as you can. Take that time you need to evaluate the investment proposal and don't be pressured into any deal without independent consultation.
  3. Independence: Only you can decide what you believe to be in your best interest. The adviser can only recommend or suggest alternatives from which to choose from, but you have to decide. There is nothing wrong with researching and seeking the opinion of a second person before you decide. Prepare a checklist to make the decision process systematic. The greatest of all investors have a system that they work through like a checklist before they decide. Compare investment products apples to apples and choose base on your own comfort level. Work through your biases and be as rational as you possibly can.
  4. Rationale: Why you decide on buying a particular investment product must be known by you. You must know what the reasons are before buying an investment product. Whether the investment be for long term or short term goals, interest rate returns, inflation rate protection or living income while you hold the investment must be considered. You must know why your capital is sitting in that investment product and your reasoning should be without bias for lack of rationale.
  5. Accessibility: You want to have access to your adviser and you want to have access to your money with reasonable notice. It is a real challenge when you have made up your mind and can't find either adviser or money to execute your decision. The last thing you want to do is lose money and can't find the adviser. I would much rather lose the adviser and can find my money.

I hope that these five things can help you in finding the right investment adviser. The checklist provided here is not complete, but it is enough to get you started. So pick carefully and be mindful of the difference between the butcher and a dietitian 

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Saturday, 1 November 2014

Buying a company's asset vs company's earnings

Recently a book by Lawrence Cunningham, titled "Berkshire beyond Buffett" hit the shelves, I have not read it as yet, but I watched a book review  presented by Cunningham and hosted by Google a couple of days ago. I will not give an opinion on the book itself, but I like theme. The writer basically chronicled the buying pattern of Warren Buffett and how sustainable Berkshire Hathaway would be even after he is no longer with us.

Buffet prefers to buy assets as oppose to earnings and you should too when considering to acquire an investment opportunity. His focus is on the asset moreso because he is looking for that margin of safety should the price of the stock gets beaten down and he can acquire the entire business in order that his investment wont suffer permanent loss capital.He wants to be able to recover investment by selling the asset of company as he did with Berkshire Hathaway. 

A company's assets are really the supporting feature of the company's earnings. The assets can come in the form of cash on balance sheet, land and machinery, talent pool of staff or any other business system that generates revenue year on year (e.g. a franchise business). There is almost always some tangible or intangible asset form from which to rely for future income and as it is with all income, fluctuation is normal and should be expected. Corporate earnings are no different from fluctuating income, because it too fluctuates. 

Measuring these asset forms against the earnings will determine what price is paid to enter into an investment opportunity. The price of a stock will fluctuate at the uproar of the market beit an earnings call, an investors briefing or some other market event. The asset price of the company does not fluctuate in the same fashion and is more stable in nature. Earnings on the other side are unstable and are subject to greater market base volatility then assets. Stock exchange investors rarely ever look at the asset base of a company unless they are sophisticated or seek to inform themselves beyond the ordinary.

Don't get me wrong, earnings is very important and without earnings a company can’t make a profit let alone pay a dividend, but it should not be the sole basis for spending your money on a company stock. Take a look at the company's asset base firstly. Remember that you want to buy those at a discount.

Pick your investment opportunity subject to the company's asset base above the earnings when considering buying a company stock.

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