Financial Investing
Here are the secrets of successful investing. Your money golden investing rules to know in order for you to succeed. In investing your money it is important that you should know the proper way of it or else your money will be vanish like a wind. So know the tips on a wise investing.
A.) INVEST IN WHAT YOU UNDERSTAND
I believe that you cannot make an intelligent investment decision about a company and its future unless you have some sense of how the company makes its money. That is why many investors don’t have their own shares in some promising sectors, such as high technology or pharmaceuticals.
Example: Bill Gates, Microsoft’s founder and chairmen, is the smartest man he has ever met. He also says Microsoft is a very dynamic company. But many investors don’t own shares of Microsoft because they don’t understand the software business or how the company will make money over time.
B.) LOOK FOR CONSISTENT OPERATION HISTORIES
Many investors prefer to invest their money in companies that have stood the test of time, surviving and flourishing through different economic cycles and competitive environments. These surviving companies include Coca-Cola, The Washington Post Company and Wells Fargo but not in General Motors or IBM.
Many investors also not interested in new companies because they do not have proven track records and the risk of new companies failing is so high. They believe it’s a mistake to waste time trying to find struggling companies that are hoping to turn around their fortunes.
Strategy: Identify successfully companies that have been producing great products or services for a decade or longer. Look for those companies that have generated steadily-increasing earnings.
C.) INVEST IN THE BEST
Companies that make strong brand-name products dominate their categories. These products have great value because they are so well-known that consumers are not likely to accept substitutes. Many of these companies are also appealing investments because their product prices aren’t regulated.
Example: Coca-Cola has a strong position in the U.S or even in the world market because its brand name and level of quality are so high. Customers will always be willing to pay more for that. Coca-Cola is also strong overseas, where it has much less competition. Pepsi-Cola, on the other hand, I number two in the soft-drink category worldwide and its presence overseas is not as strong as that of Coca-Cola.
Important: Avoid companies that make commodity like products. There are products that consumers view as having plenty of substitutes, such as computers. Other commodity businesses include the automobile and airline industries.
Problem: Companies that make commodity products have to charge increasingly lower prices or else customers will buy from their competitors. As a result, the only way to succeed in a commodity business is to have low cost, and keep prices low. This rarely does much for a stock’s earnings in price.
D.) INVEST IN COMPANIES WITH RATIONAL MANGERS
A rational CEO invests surplus cash in projects that generate high rates of return, or turns the money back to shareholders by increasing the company’s dividend or buying back shares on the stock market.
Example: When The Washing Post Co., one of many investors largest holding, had excess cash in 2000, the company increased its dividend rather than using the money to increase the size of its business in ways that might not be economical.
Strategy: If you have invested in a company that generates extra cash, keep a close eye on how the mangers spend that money.
E.) LOOK BEYOND REPORTED EARNINGS
Most analysts look at a company’s earnings per share to judge how well it is performing. Many investors point out that since companies typical reinvest a large percentage of earnings in their firms, it should not be a surprise when a company’s profits continue to grow. What is more important is the company’s return on its resources, the return on the money that share holders and other have invested. That is measured by dividing a company’s operating earnings by its shareholders’ equity.
You can find a company’s historical return in the Value Line Investing Survey. Look under “Percent Earned Net Worth”, which is a slightly more conservative figure than the correct return. Compare it with the figures for other companies in the same industry. If it’s higher than the average of those companies listed in Value Line, that Is a good sign.
F.) FIND COMPANIES WITH HIGH PROFIT MARGINS
Find a company’s profit margin by dividing its earning by its revenues. A high profit margin usually means that a company is keeping its costs down, a sign of an excellent investment.
Many companies don’t start working to reduce costs until after their profits to slip. Investor likes companies that keep costs down before things turn bad.
Example: Many investors constantly invests in Well Fargo because it doesn’t waste money on projects or expenses that don’t add to the company’s value.
Strategy: Check a company’s net profit margin in Value Line, where it is listed along with earnings and sales. Then compare it with profit margins for other companies in the same industry. If it is higher than the average, that is another good sign.
G.) LOOK FOR A MARGIN OF SAFETY
Many investors role model was the famous investment theorist Benjamin Graham, who, nearly 80 years ago, preached the importance of buying a company’s stock for considerably less than its real value, and thus building a margin of safety into your investment.
Investor uses sophisticated financial formulas to determine when a stock is undervalued, based on projections about its future growth rate. If you identify good businesses and then avoid paying outrageous prices for their stocks, you will at least steer clear of most disasters. That generally means buying a stock when its price is down, rather than when it is at an all-time or 52-week high.
Investor is greedier when people are scared and more scared when people are greedy.
I believe that you cannot make an intelligent investment decision about a company and its future unless you have some sense of how the company makes its money. That is why many investors don’t have their own shares in some promising sectors, such as high technology or pharmaceuticals.
Example: Bill Gates, Microsoft’s founder and chairmen, is the smartest man he has ever met. He also says Microsoft is a very dynamic company. But many investors don’t own shares of Microsoft because they don’t understand the software business or how the company will make money over time.
B.) LOOK FOR CONSISTENT OPERATION HISTORIES
Many investors prefer to invest their money in companies that have stood the test of time, surviving and flourishing through different economic cycles and competitive environments. These surviving companies include Coca-Cola, The Washington Post Company and Wells Fargo but not in General Motors or IBM.
Many investors also not interested in new companies because they do not have proven track records and the risk of new companies failing is so high. They believe it’s a mistake to waste time trying to find struggling companies that are hoping to turn around their fortunes.
Strategy: Identify successfully companies that have been producing great products or services for a decade or longer. Look for those companies that have generated steadily-increasing earnings.
C.) INVEST IN THE BEST
Companies that make strong brand-name products dominate their categories. These products have great value because they are so well-known that consumers are not likely to accept substitutes. Many of these companies are also appealing investments because their product prices aren’t regulated.
Example: Coca-Cola has a strong position in the U.S or even in the world market because its brand name and level of quality are so high. Customers will always be willing to pay more for that. Coca-Cola is also strong overseas, where it has much less competition. Pepsi-Cola, on the other hand, I number two in the soft-drink category worldwide and its presence overseas is not as strong as that of Coca-Cola.
Important: Avoid companies that make commodity like products. There are products that consumers view as having plenty of substitutes, such as computers. Other commodity businesses include the automobile and airline industries.
Problem: Companies that make commodity products have to charge increasingly lower prices or else customers will buy from their competitors. As a result, the only way to succeed in a commodity business is to have low cost, and keep prices low. This rarely does much for a stock’s earnings in price.
D.) INVEST IN COMPANIES WITH RATIONAL MANGERS
A rational CEO invests surplus cash in projects that generate high rates of return, or turns the money back to shareholders by increasing the company’s dividend or buying back shares on the stock market.
Example: When The Washing Post Co., one of many investors largest holding, had excess cash in 2000, the company increased its dividend rather than using the money to increase the size of its business in ways that might not be economical.
Strategy: If you have invested in a company that generates extra cash, keep a close eye on how the mangers spend that money.
E.) LOOK BEYOND REPORTED EARNINGS
Most analysts look at a company’s earnings per share to judge how well it is performing. Many investors point out that since companies typical reinvest a large percentage of earnings in their firms, it should not be a surprise when a company’s profits continue to grow. What is more important is the company’s return on its resources, the return on the money that share holders and other have invested. That is measured by dividing a company’s operating earnings by its shareholders’ equity.
You can find a company’s historical return in the Value Line Investing Survey. Look under “Percent Earned Net Worth”, which is a slightly more conservative figure than the correct return. Compare it with the figures for other companies in the same industry. If it’s higher than the average of those companies listed in Value Line, that Is a good sign.
F.) FIND COMPANIES WITH HIGH PROFIT MARGINS
Find a company’s profit margin by dividing its earning by its revenues. A high profit margin usually means that a company is keeping its costs down, a sign of an excellent investment.
Many companies don’t start working to reduce costs until after their profits to slip. Investor likes companies that keep costs down before things turn bad.
Example: Many investors constantly invests in Well Fargo because it doesn’t waste money on projects or expenses that don’t add to the company’s value.
Strategy: Check a company’s net profit margin in Value Line, where it is listed along with earnings and sales. Then compare it with profit margins for other companies in the same industry. If it is higher than the average, that is another good sign.
G.) LOOK FOR A MARGIN OF SAFETY
Many investors role model was the famous investment theorist Benjamin Graham, who, nearly 80 years ago, preached the importance of buying a company’s stock for considerably less than its real value, and thus building a margin of safety into your investment.
Investor uses sophisticated financial formulas to determine when a stock is undervalued, based on projections about its future growth rate. If you identify good businesses and then avoid paying outrageous prices for their stocks, you will at least steer clear of most disasters. That generally means buying a stock when its price is down, rather than when it is at an all-time or 52-week high.
Investor is greedier when people are scared and more scared when people are greedy.
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