Introduction To Value Investing

A Short Introduction To Value Investing

  • Value investor can be defined as putting money to work to start or expand a project, purchase an asset or interest. Here is where all those funds are then put to work, with the goal to income and increased value over time. The term "investment" can refer to any mechanism that generate future income. In the financial sense, this includes the purchase of bonds, stocks or real estate property among several others. Here we will talk about the investment in detail and knowing more about stocks, return, real estate and bonds. In the courses we will take more in detailed.

    Summary:

    • Investing in stocks yields the highest possible returns

    • Stocks are parts of a business and not things that fluctuate in price

    • Value investing is about buying great companies at discount prices

    • Value investing is a low-risk, high reward strategy

    • Value investing is a long term strategy

    • Benjamin Graham is the father of Value Investing and Buffett’s mentor

    • Stock prices can divert significantly from underlying business values

    • Compounded interest is the key to exponential returns

Why You Are Probably Better Off Without An Advisor

  • It is normal for beginners to seek an advisor however the advisor have it's own thinking you maybe cannot tolerate or not be able to do your own way. The advisor may help you but in the end it is still you who made the decision.  In this lesson I will tell you why you are probably better off investing your own money instead of having an advisor do it for you, since what is good for your advisor may not necessarily be good for you.

    Summary:

    • There is a structural conflict of interest between advisors and their clients (you)

    • Advisors are primarily seeking to maximize commissions and fees

    • Advisors focus on frequent rather than on profitable trading

    • You should probably avoid even honest advisors, because they tend to earn you only mediocre returns

    • The cause of this is a short term, relative performance orientation

    • Value investors regularly under perform in the short run, but come out as the clear winners in the long run

    • You don’t need an advisor, because you can quite easily do it yourself

    • You can practice investing with zero risk involved by opening a virtual portfolio

Why Most People Lose Money On The Stock Market

  • In this third lesson we cover some of the most common reasons why people lose money on the stock market, and how you can avoid these traps to achieve the investment success you are aiming for.

    Summary:

    • Just like advisors and professional money managers, individual investors suffer from a short term, relative performance bias

    • Fear and greed are the primary drivers behind short term price movements

    • Growing your wealth takes time, there is no shortcut

    • Many investors buy on hype and sell on pessimism, which absolutely destroys their returns

    • Ignoring most of the financial news is a great way to stay out of trouble

    • Be indifferent to the stocks you want to own, let the numbers and facts determine your decisions instead

    • Think for yourself and try not to get caught up in herd behavior

    • A stock price should only be considered low relative to the value of the underlying company, not relative to the price on a previous point in time

    • Frequent trading leads to high transaction costs, which has a huge impact on your total returns. So make infrequent, big investments rather than frequent, small investments

Defining Your Investment Goals

  • In today’s lesson I’ll guide you through the process of defining realistic investment goals. We’ll talk about time frame, expected returns, and the amount of money you should invest.

    Summary:

    • It is crucial to have a clear understanding of what your investment goals are to be able to stick to your strategy

    • Not many people earn a living through investing alone

    • Avoiding losses is the most important prerequisite to investment success

    • A loss interrupts the compounding process and is very hard to earn back

    • Focus on minimizing downside risk, rather than on returns

    • Over time the returns will come

    • Clearly define why you want to invest and how much money you need to earn to reach those goals

    • Don’t invest with borrowed money or money that you might need soon

    • Invest 10% of your monthly income

    • Check if your goals are realistic based on historical stock market returns, the money you plan to invest, your time frame, and the money you need to earn to reach your goals

    • With value investing, risk and reward are inversely correlated

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