Ideas | Stock Market Books

Value investing made simple: Here I write about great ideas from Warren Buffett, and share some ideas about making money on the stock market. Let me share some great investment ideas and concepts of value investment from the famous Buffett with you:

1. Many people buy stocks and see them as pieces of paper that give dividends or capital appreciation. Yes, that is actually what stocks are, but Warren Buffett suggests a different approach. Why not see stocks as parts of businesses? Every stock certificate is linked to a company. Stocks are indeed linked to businesses, and the prices of the paper stem from the businesses. This key insight means that the stocks yield money when the businesses are healthy. You can therefore make investment decisions by asking the following questions:

Is there a market for the product? Is the particular company doing well now and does it seem likely to do well in the future? Is the company under good management, or are the people in control known for not being trustworthy?

Simply put: see the stocks as linked to businesses, and apply fundamental analysis to make money on the stock market. Warren Buffett reads a lot of annual reports and therefore he makes a lot of money when the decisions turn out right.

2. Use market fluctuations to your own personal advantage to make money in the stock market. This is a great idea. Warren Buffett and Ben Graham often talk about Mr Market. This is an allegory. It goes like this: A man called Mr Market turns up every day and quotes prices. He is basically a price quoter and does nothing but quote prices, and you must decide whether to buy or to sell. Market fluctuations therefore help you if you can sell to Mr Market when he quotes high and buy from him when he quotes low. Mr Market is occasionally optimistic and then again sometimes pessimistic, but as long as you buy and sell at the right prices, there is no need to worry because you will make money. Why? … because you are able to profit from folly and profit from market fluctuations.

3. Another metaphor here : Warren Buffett once mentioned a bridge and suggested that you do not drive heavy trucks over a bridge meant for heavy loads, but rather, you drive light trucks over a bridge that can bear more load. This is the idea of margin of safety. This is also a key concept: the margin of safety in investment.

Another way of looking at it would be: it’s better to buy a dollar for 40 cents than it is to buy a dollar for 70 cents. This enables you to make money. The key learning point is this: We learn the value approach. Just as we do not want to fall over a precipice by driving a heavy truck over a bridge, and just as we want to make money by buying dollars cheap, we should do the same for stock investments. We should have a margin of safety.

4. Last but not least, use common sense. This is a great idea but may prove harder than the more technical aspects of value investing, like margin of safety and fundamental analysis, and other elements of Buffett’s system. The reason is that this needs to come via experience. Diversification may not be a good idea if you know what you are doing, but if you don’t then diversification might save you. That kind of common sense is sometimes counterintuitive and may take some time to acquire.

What have we learnt here in this short article on value investing?

Don’t see stocks as paper!

Profit from folly; don’t join in!

Always have a margin of safety.

Use your investment common sense.

Hope you glean several insights from this article. Thanks for reading and cheers!

My site has more on <a rel=”nofollow” onclick=”javascript:_gaq.push(['_trackPageview', '/outgoing/article_exit_link']);” href=http://ideasonhowtobecomerich.blogspot.com/>ideas on how to become rich</a>, so do drop by and visit me for more investment education and financial education.

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Shawn Seah -
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Shawn Seah writes on diverse topics, mainly investment and education. He has a site on ideas on how to become rich as well as How to Learn German Fast,, Get Your Uni Degree Online and more.

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Capital Ideas and Market Realities: Option Replication, Investor Behavior, and Stock Market Crashes

Monday, June 14th, 2010

Product Description
The summer and fall of 1998 witnessed some of the most turbulent financial markets the world has ever seen. The implosion of the Russian financial markets and investors’ ensuing flight to quality propelled the giant hedge fund, Long-Term Capital Management, to the brink of collapse and left the investment portfolios of many of Wall Street’s major banks and brokerage houses teetering on the brink. The US equity market dropped precipitously at the end of August … More >>

Capital Ideas and Market Realities: Option Replication, Investor Behavior, and Stock Market Crashes

Tags: Behavior, Capital, Crashes, Ideas, Investor, Market, Option, Realities, Replication, Stock
Posted in Stock Market Books | 4 Comments »

The Best Stock Market Trading Strategies – Investment Ideas For Beginners

Sunday, May 2nd, 2010

What are the best stock market trading strategies? Is the old fashioned ‘buy and hold’ strategy dead? The economy is failing, companies are collapsing and the increased volatility of the stock market seems to have made all of the best stock trading strategies redundant. Or has it? The media would have you believe that stock trading is becoming more and more risky by the minute. In actual fact professional traders love volatility, why? Because unlike the average investor they are privy to the all of the best stock market trading strategies that are available.

The media will tell you ‘putting all of your financial eggs in one basket is a dangerous’ and the ‘stock options trading is too risky’ and ‘forex trading is not for individuals’. All of these statements are wrong and are simply there to keep the uniformed scared and poor.

Lets have a look at some of the Best Stock Market Trading Strategies that most people don’t even know exist!

- Renting Shares
- Naked Puts
- CFD Hedging
- Forex Trading
- Options Trading (short term and long term)

Just to name a few. Let’s have a look in some more depth at why these really are the best stock market trading strategies that are available and why your brokers haven’t told you about them.

Everybody always says that diversification is a must, all so called experts tend to highly recommend it yet have you stopped to think about it. If you buy dozens of different stocks your investment portfolio is basically representative of an index. That’s fine but wouldn’t it just be easier to buy an ETF that tracks the price of the index? Of course it would but your broker would never agree to this because they would lose out on valuable commissions. Instead they will probably recommend that you buy multiple managed funds that all pay them handsome commissions.

Although they rarely agree on anything else, brokers and financial advisors seem to always invest in a wide range of stocks. This basically assures you of mediocre results as even if you bought the well performing stocks you are more than likely to have got some bad ones too.

So what can you do to increase you knowledge of the stock market basics and in turn develop your stock trading strategies? Read everything that you can. Learn a day trading strategy even if you have no intent of using it, start reading about ex dividend dates and how you can take advantage of them, buy some stock investing software, do everything think that you can to create your own personal stock market trading strategies. It is only when you truly understand it yourself that you will be able to come up with the best stock market strategy in the world.

I believe the natural progresson towards becoming a successful investor goes like this. Education equals Knowledge – Knowledge equals Action’s – Actions equal Success. Without the proper education you will never have enough courage to take the appropriate action and deal with the hard decisions.

http://www.SharesPropertyMoney.com are giving away a Free DVD “Investment Ideas For Beginners” Become a serious investor today! For the original version of this article go to the below link The Best Stock Market Trading Strategies

Tags: Beginners, Best, Ideas, Investment, Market, Stock, Strategies, Trading
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How to Find Good Stock Investment Ideas

Friday, April 30th, 2010

We all know that opportunity does not come knocking every day. The phrase ‘lightning never strike twice on the same place’ illustrates the point. Investors are successful because they can identify opportunity as well as the courage to act on it. This article is written to identify what constitutes a good turnaround stock investment. Here are several steps necessary in finding your next stock investment.

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Scour the 52 week-low list – This is a useful preliminary screening where you identify stocks that has fallen. While stocks that fall have their own specific problems, it is generally better to buy low rather than high.

Calculate Its Net Cash. The next step would be to gauge the strength of the company’s balance sheet. This is done by calculating the company’s net cash. Net cash is calculated by adding cash equivalents, short term investments and long-term investments in the asset column and subtract it with long-term debt. If possible, you need to find stocks that has a positive net cash valued at 10% of its market capitalization or more. All the companies in our stock portfolio has positive net cash.

Calculate Earning Per Share Going Forward. This step is critical in determining the fair value of the common stock. It is also the hardest part to master in stock investing. Generally, you predict earning per share by constructing your own pro-forma income statements where all its components are based on your prediction of the company. At the bottom of the income statement is the profit/loss figure in which you can convert to earning per share.

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Calculate Fair Value. When you obtain your earning per share figure, you can then calculate the fair value of the common stock. Fair Value differs for various investors depending on their investment objective. With current interest rate environment, I set the fair value when the company can give me a return on investment (ROI) of roughly 7.5% year after year. To give you an idea, an ROI of 1 % means that for every $ 100 you invest, you will get $ 1 back annually. For common stocks, this means that for every $ 13.4 of investment, common stock holders will get $ 1 in profit. As you may know, this translates into a fair Price Earning Ratio of 13.4.

Determine Your Entry Point. You have found the fair value of your stock. It is now the time to decide where and what price you want to buy your investment. Investors’ job is to make money. Therefore, we should not buy a stock at its fair value. We should sell at fair value or if heaven permits, at overvalued level. But, we should buy at below fair value. This depends again on your investment philosophy. If taking 10% return is fine with you, then you can buy a stock that is trading at 10% below fair value. I personally think that investors should buy a stock that is at least 30% below its fair value. This is because of the uncertainty in the earning per share figure of a common stock. As you may remember, we need to predict this earning per share at step # 3. We compensate our inability to forecast earning per share by buying our stocks 30% below fair value.

Other investors might have different ways of picking for their stock investment. But the basic idea is still the same. They want to buy lower than their expected sale price. In our case, our selling price is when a stock reaches its fair value. A lot of investors mistook fair value as the buying point. Hopefully, reading this will change your perception about that.

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More Stock Market Trading System Tips:

Trading Pro System is a complete video training course and teaches the traders to trade with confidence. The comprehensive 24 hours video training provides a bunch of strategies and tactics and a lot of content about trading in the stocks and options market. The system uses simple language and is created by businessmen which imply that the secrets of winning are at your fingertips.

Stock Market Index Secret is by Karl Dittman, a 30 year veteran of stock market trading. Karl maps out a really simple ?secret? formula that can point you at a method of targeting a stock or an index on any day and make a profit. If you follow his patterns, you can can see opportunities to take good profits.

The Secrets of Sucessful Traders Guide was preferred amongst our team of researchers. It offers the most practical stock trading advice for beginners looking to find success in the stock market without losing their house. It is a step by step instructional guide which clearly explains everything you need to know about the industry and is patiently explained in detail to ensure that you are fully aware of how the stock market works before making your first investment.

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Some Great Investment Ideas From the Master of Investment, Warren Buffett

Capital Ideas and Market Realities: Option Replication, Investor Behavior, and Stock Market Crashes

The Best Stock Market Trading Strategies – Investment Ideas For Beginners

How to Find Good Stock Investment Ideas

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