Tuesday, February 28, 2017

Be a Pessimist When Investing

Graphic depicts a euphoric girl and a pessimistic mouse
Graphic depicts a euphoric girl and a pessimistic mouse

"When investing, pessimism is your friend, euphoria the enemy."

Warren Buffett





Monday, February 27, 2017

Buy Stocks to Hold for Very Long

Graphic portrays the Stock Exchange Closed for 10 years
Graphic portrays the Stock Exchange Closed for 10 years

"Only buy something you'd be perfectly happy to hold if the market is shut down for 10 years."
Warren Buffett



Sunday, February 26, 2017

Happy when Prices of Burgers Down But Not Stocks Slide

Slide shows people celebrating when prices of burgers are down but weeping when prices stocks are down
Slide shows people celebrating when prices of burgers are down but weeping when prices stocks are down

People Are Happy when Prices of Burgers Down But Not Stocks

Picture shows people celebrating when burger prices are down but sad about stocks
Picture shows people celebrating when burger prices are down but sad about stocks

"This is one thing I can never understand. To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing "Hallelujah Chorus" in the Buffett household. When hamburgers go up, we weep. For most people it's the same way with everything in life they will be buying - except stocks. When stocks go down and you can get more for your money, people don't like them anymore."

Warren Buffett



Warren Buffett Interview 1 2017




Wait for Your Pitch

Graphic Depicts Base Ball Player Swinging to Strike at the Pitch
Graphic Depicts Base Ball Player Swinging to Strike at the Pitch

The stock market is a non-called strike game. You don't have to swing at everything - you can wait for your pitch. The problem when you're a money manager is that your fans keep yelling, "Swing you bum!"



Saturday, February 25, 2017

Investing Profits Games

Picture Depicts Playing Games and Profits
Picture Depicts Playing Games and Profits

It is time to test our learning in a fun way. You are advised to read the profits related definitions like EBDITA, provided in the page 'Accounting and Financial Terms' before attempting to play this game.

This interactive investing and financial knowledge game is built over a protected MS Excel file. Please enter your answer (only numbers) in the green coloured boxes. Only these boxes are intended to input your answers. In case you attempt to alter any other cell you will receive an error message,

Refresh the page to clear the contents of the green coloured boxes.

Now, please have fun!


Price to Book Value Ratio Calculator

Happy Investor Frog Explains Price to Book Value Calculation
Happy Investor Frog Explains Price to Book Value Calculation


Meaning/ Definition:

‘Price to Book Value (P2BV)’ is a measure of the number of times the book value of a share is trading at in the stock market. The ratio or proportion is obtained by dividing the ‘Current Market Price (CMP)’ of the share by its book value.


Significance:

Price to Book Value is the second most important metric in determining the fair price of a share, the first being ‘Price to Earnings (PE) Ratio. If the price is less than the book value it is a good bargain. Maximum recommended is 1.5 times, beyond which the price is not fair or reasonable.

Calculator:



Further Reading:

Friday, February 24, 2017

Book Value Per Share Calculator


Picture Shows Happy Frog Dreaming About Book Value Per Share
Picture Shows Happy Frog Dreaming About Book Value Per Share





Add to Existing Before Looking at New Investments

Picture Shows Investor Looking at New Investments
Picture Shows Investor Looking at New Investments

"Before looking at new investments, we consider adding to the old ones. If a business is attractive enough to buy once, it may well pay to repeat the process."

Warren Buffett

Tuesday, February 21, 2017

Is there a Legal Cap on Bond Rates?

Picture portrays bond and wonders about rate cap
Picture portrays bond and wonders about rate cap 

Actual Question:

What is the maximum interest rate and minimum interest rate for issue of debentures?

Answer:

Dear Friend!
There are no laws or regulations that fix the minimum and maximum interest rates for debentures or bonds; it is the market that determines them.
The debenture is a debt contract and the interest rate is one of the contract terms. In a contract it is the mutual consent and acceptance that matters.
In reality the interest rates of debentures are governed based on following factors:
  • Is it a government debt?
  • If private debt is there a sovereign guarantee?
  • Is it a secured or unsecured?
  • What is the tenure or repayment period - short or medium or long?
  • Credit Rating assigned by independent rating agency
  • What are the prevailing market interest rates for similar instruments?
  • What is brand value of the issuer - example TATA Steel
  • There are many other factors that go into finalising the interest rate of the debenture. Finally whether the rate will be attractive to the investors and affordable to the investor are the key.

Thank you,
With Best Regards

Anand

Related:



Monday, February 20, 2017

Distinction Between Trading and Investing

Actual Question:

What’s the difference between stock trading, investing and real estate?

Answer:

The dictionary meaning of the word ‘Investing’ is putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit. Further drilling down reveals a few other aspects like period of holding, safety of principal, regularity, and so on.

Picture depicts investor walking to the stock broker to purchase shares
Picture depicts investor walking to the stock broker to purchase shares

Stock Trading’ is buying shares or sticks with an intention of profiting from the price fluctuations on the stock market. Stock trading is a speculative activity and does not fit into the definition of investing.

Picture shows a trader sitting before the computer trading in stocks
Picture shows a trader sitting before the computer trading in stocks

Real estate investment qualifies as investment though it has some fundamental drawbacks.

Following table brings out the differences among the three:

Sl. No.
Aspect
Share Trading
Investing (Shares)
Real Estate
1
Recurring income from the same investment
2
Capital Appreciation
3
Liquidity
4
Can invest small sums?
5
Intended Period of holding
Short
Long
Long
6
Safety of Principal





Related: