Before you flood me with all the questions and tips about how I do it, I need to clarify the following,
1. I am no investment guru. I am blessed and still learning;
2. If you are looking for “instant and fast profit”, this is not for you;
3. I do not practise diversification, it is for people who know nuts about investment. In fact, my portfolio consist of 2 stocks only, growing from low 5 figure to a 6 figure sum within 3.5 years. They are local stocks and I generated more ROI than so call financial planners/ fund managers;
4. I am an investor not a trader. In fact, I never sell my stocks once I bought them (provided the essential fundamental intact) so my cost of margin is extremely low. I am every stock broker worst nightmare.
5. It requires discipline, detachment and a child like mindset
6. You need a simple understanding of the following terms: P.E, EPS, ROE, Cashflow, Balance Sheet and lastly walk the ground.
Ready? I practise “Value Investing”. Maybe you hear of it, maybe not. The second richest man on planet earth, Warren Buffet is a master in “Value Investing”. The concept is developed by Benjamin Graham and David Dodd whom they published a book called, “Security Analysis” in 1934. Yup, you hear me right, Value Investing has been around for 72 years! The concept is pretty straight forward which states a smart investor should purchase a stock at 60 cents when it is worth a dollar!
2 important fundamentals in Value Investing:
1. Undervalued stock (I will talk more on a seperate blog as this deal with financial terms)
2. Margin of Safety
3 important questions to ask when selecting a stock,
1. Does the company have a monopoly or some cost advantage in the market they operate in?
2. Who is the management team? Are they competent in constantly generating good return for shareholders? Are they honest and people with integrity? Are they drama lover? Yes, some worst crook wear white collars and have fanciful MBA/corporate title!
3. Do you know the business well? Is the business model or accounting very complex to understand?
Lastly, just in case I forget to mention the stock that generate a good return for me: Singapore Stock Exchange. Bought at S$1.63, Market Closing as of 10 Nov 06: S$5.25.
Check out this book “The Little Book of Value Investing” by Christopher H. Browne on the right nag. bar of this site.
Give me your comment. Thanks!
