Many investors believe the value of seeing an Investment Advisor or Financial Planner is in the investment advice, such as choosing which funds to use or shares to buy.
Whilst this advice can make a difference and is an important part of the process, the greatest value is in planning to achieve core lifestyle goals and objectives.
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Working out a company’s value can mean pouring over its financial statements, analysing the quality of its business operations, assessing competitive position, returns on equity, earnings growth, and the list goes on.
However, one thing missing from this list is the importance of the quality of management in a business.
Management may make decisions that are, while in their best interests, not in the interests of the company. This is called agency risk.
Just one public relations mishap can cause a retailer to lose an extraordinary amount of business. A small decline in sales can result in the share price dropping dramatically. Some investors shy away from the sector for that reason.Continue reading
Summer will soon be upon us, which means sunny picnic and beach days as well as rainy days in.
Last year I wrote an article on my favourite investment reads and received a great response and welcome feedback from you all. Here are five other great reads you may enjoy.
The date Lehmann Brothers filed for bankruptcy- September 15, 2008 – marked the worst of the GFC.
10 years is a long time. A decade in the markets is even longer.
New advisors and bankers who are at the beginning of their careers will have only experienced the low interest rates and liquidity that Governments around the world undertook to combat the effects of the GFC.Continue reading
A value investor seeks to buy a stock for less than its intrinsic value (for example, buying for 50 cents a stock worth a dollar).
How does a value investor establish that the intrinsic value of a stock?Continue reading
I was recently asked to give an impromptu speech to share the words of wisdom I would give my 16-year old self.
My short speech was to explain the power of compounding.
It is an understanding I am trying to impart to my children of how compounding interest or returns work in your favour over time.
Of course, my children politely listen to me explain the power of compounding, roll their eyes and say, “Yes Daddy I understand.” I ask questions like, “Do you want me to buy that lego set now or a car when you turn 50?” I am not sure those questions help, turning 18 is an eternity when you are young.
Warren Buffet, the world’s third richest man, certainly understands the effect of compounding. As a child he gained an understanding of what compounding could do and it has shaped his whole life.
It is one thing to understand compound interest but applying it is where the magic happens. The sooner you start the greater the result. Continue reading
Warren Buffett, founder of investment company Berkshire Hathaway and the world’s fourth richest man, sends an annual letter to shareholders that is also eagerly awaited by his followers.
I have been reading and collecting his letters for many years as they give an insight into Buffett’s value investing philosophy and his investment mind that has presided over Berkshire Hathaway’s compounded annual gain of 19.1% p.a. since 1965. Continue reading
People love to dream, they dream of the big pay-off, winning the lottery, a forgotten uncle leaving them a fortune in their will, finding gold or making a fortune on a speculative share.
Why else do we spend so much on lottery tickets when the odds are against us? Only around 60% of lottery ticket sales are redistributed in winnings and this is before you even count the odds of having the winning ticket. This is not the basis for a sound decision.Continue reading
Why is it that many investors get caught up in the hype of making a quick fortune and instead experience poor or mediocre results?
The financial world is littered with examples of speculative bubbles. This is often when common sense goes out the window and people get caught in the lure of making easy money. And it doesn’t seem to matter that these bubbles and the disasters that can follow are well documented.