Investment Pointers To Myself 2

 

Will try to do more of these pointers in the future. Its the lessons I have learnt from investing over the years. Some are influenced by books and some by real life investing experience.

1) Focus on the intrinsic value of a company: To estimate the intrinsic value of a company, consider factors such as earnings, assets, and growth potential. Market speculation and the stock price are not good indicator of a company's true value, instead focus on the fundamentals.

2) Don't follow the crowd: Graham was a contrarian investor who believed in buying when others were selling. He encouraged investors to make their own decisions and not follow the crowd, as this could lead to making emotional and impulsive decisions. The recent AI hype is a good example, it is possible that buying the potential winners or losers could both be a bad idea.

3) Diversify: Diversification is a key element of reducing risk in investing. Spread investments across a range of stocks, bonds, and other assets, rather than putting all their eggs in one basket.

4) Look for a margin of safety: When buying a stock, it is important to look for a price that is significantly lower than the intrinsic value of the company. This provides a margin of safety in case the company's value does not meet expectations. Sometimes using earnings as a metric is not a good anchor but rather some kind of sum of parts anchoring couple with reasonable long term earnings/fcf relative to its market cap. 

5) Be patient: Hold onto your investments for the long-term. Good investments will eventually show value over time, and that attempting to time the market or make quick decisions often leads to poor outcomes.

6) Consider both the financial health and management quality of a company: Before making an investment, we should assess both the current financial situation of a company and the quality of its management team. A company with a strong financial position and a competent management team is more likely to succeed in the long-term.

7) Stay disciplined: Have a disciplined approach to investing and stick to their investment plan. This helps to avoid impulsive and emotional decisions, and increases the chances of achieving long-term success.

8) Look for undervalued stocks: Seeking out stocks that is undervalued, or trading at a discount to their intrinsic value. Consider both the current price of the stock and its potential for growth.

9) Avoid debt: Invest in companies with low levels of debt, as it reduces the risk of bankruptcy. Companies with high levels of debt are more susceptible to financial distress, and may be less likely to provide good returns to investors. Another red flag is cash burning companies during low interest rate environment. If companies cant make money during low rates environment, it will be much harder for them to make money when rates go up.

10) Keep a long-term perspective: Have a long-term perspective and not let short-term market fluctuations discourage you. Good investments will show value over time, and that focusing on the long-term potential of investments is more likely to lead to success than trying to time the market.