Showing posts with label Lifetime investing opportunity. Show all posts
Showing posts with label Lifetime investing opportunity. Show all posts

Saturday 14 April 2012

What is the Present Value of Your Lifetime Income?

Utility of money depends on your whole lifetime wealth.

Do this interesting exercise - Estimate the Present Value of your Lifetime Income.

What is gaining, losing or giving $10,000 or $100,000 today to you when compared to the Present Value of your lifetime income?

Are you rational or irrational in your handling and managing of your finances, work and leisure time today?


[In economics, utility is a measure of satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service but also referring to satisfaction received by its contingent production relations. Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain economic behavior in terms of attempts to increase one's utility. Utility is often modeled to be affected by consumption of various goods and services, possession of wealth and spending of leisure time.]
http://en.wikipedia.org/wiki/Utility

Thursday 8 December 2011

'A great opportunity to buy equities will emerge'

'A great opportunity to buy equities will emerge'
Shares will stage "a very strong and sustained rally" if a solution is found to the debt crisis, according to a senior investment strategist.


ECB HQ - 'A great opportunity to buy equities will emerge'
Mr Scott said he doubted that the eurozone would survive in its current form Photo: Bloomberg News
Even a break-up of the eurozone would provide a good opportunity to buy equities, said Ted Scott, the director of global strategy at F&C Investments.
"With each emergency summit proving to be more disappointing than the last, investors have lost faith in the eurozone policy-makers to provide a solution that will work," he wrote in a research note under the heading "A great opportunity to buy equities will emerge".
"This has contributed to a collapse in investor sentiment with fear the overriding emotion in today's markets."
But he added: "If a satisfactory solution for the debt crisis were to be found, the reversal in investor sentiment could contribute to a very strong and sustained rally."
Mr Scott said he doubted that the eurozone would survive in its current form, but that even a break-up of the bloc would be a positive "end-game" for investors.
"I believe the end game is moving towards some form of break up in the Eurozone and this will be the catalyst that provides an attractive entry point for equity investors," he said. This was despite his assessment that "the risk of a second global recession and financial crisis, at least as bad as 2008, cannot be discounted".
He said the valuation for equities was "low from a historical perspective". "The dividend yield on most markets is high, especially against government bonds for AAA-rated countries. When dividends yield more than bonds it is traditionally a strong buy signal that has rewarded investors handsomely."


http://www.telegraph.co.uk/finance/personalfinance/investing/8938388/A-great-opportunity-to-buy-equities-will-emerge.html

Sunday 15 November 2009

Investment Opportunities in Times of Financial Crisis

Investment Opportunities in Times of Financial Crisis

It looks like the stock market is not the favorite place for anyone these days. Every day brings another disturbing news or commentary. Another stock tanked. Another bank failed. And so on.

The financial marketplace is now marked with extreme volatility and investments resemble quite a lot lottery tickets - unpredictable and surprising rallies in the value of stocks and bonds are followed by sudden significant drops. No wonder that so many investors sell up and run away from the stock market, which only worsens the situation and further pushes the stock market down.

So why should you be the one to go against the current? Is it wise to invest in stocks right now?

Actually, it is. Now that everyone else is selling it is one of the best times to invest in stocks.

"Be Greedy When Others Are Fearful"
Remember that famous Warren Buffet's quote?

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

Right now fear has seized the stock market and to many investors it seems like it is the end of the world now. However, it is not. The economy and the market will recover even if it takes longer than expected. Thus, what you can do in times of crisis like the current one is take advantage of the attractive prices and fearful environment.

Of course, this does not mean that you should invest in companies with bad outlook. Before you make a major, long-term investment, do your homework and find companies with strong and experienced management teams, good track records of profitability and growth, and innovative R&D.

You may not find extraordinary bargains but there are certainly some nice bargains for patient investors committed to gains over the long term. There are many companies that the general market has dragged down to very low prices despite their great product lines.

Invest Based on Your Objectives and Age
Do not forget that both your age and objectives should play role when you are choosing your investments.

If you are young, far from your retirement years, you can afford a little bit bigger risk. Surely, it is painful to watch your investments drop significantly. And it is very easy to give in to the fear when a stock in your portfolio drops 50%. But fear is not a good guide to decision making. While sudden financial losses may be indeed indicators that even worse drops in value lie ahead, they can just as easily be followed by an upswing.

Selling now and moving to safer investments (such as US treasuries) that will provide only 2 or 3% rate of return will not get you to your goals and will certainly take you too much time to even get back to where you were before the market went down.

On the other hand, if you are near your retirement you should choose more stable and safer investments. First, you might never be able to recover from a significant drop since you have much shorter timeframe to work with. Second, since you are going to need your money sooner, you may be forced to sell your assets at their lows.

Conclusion:

Surely the current financial/credit/housing crisis caused tremendous losses and sent many investors "racing" for the exits. Yet, remember, when the real estate and the stock market are going down, this is still equal to both crisis and opportunity.

http://www.stock-market-investors.com/stock-market-advices-and-tips/investment-opportunities-in-times-of-financial-crisis.html

Friday 20 March 2009

Opportunities still abound in tougher financial times

Opportunities still abound in tougher financial times

Last Updated: 4:01PM GMT 19 Mar 2009

Managing client money in a downturn is proving to be the ultimate stress test. In an economic downturn, capital preservation becomes a greater consideration as investment risk increases.

Stockmarkets can experience sharp declines, volatility rises and traditional sources of income can be eroded. Such periods of economic difficulty also provide attractive opportunities. Being positioned with flexibility means it is possible to take advantage of these as they emerge.

To manage client money successfully in a downturn we have to try to identify the environment in which we are operating. This has been made more difficult by the rapid change in the economic and financial landscape in recent months. But certain factors are apparent:

A number of leading banks have wiped out their capital. Governments have, however, made it clear that they will do everything possible to protect savers and keep the banking system functioning. This is good news, but investors need to be wary of any loss of nerve by the authorities as they face up to multiple bank recapitalisations.

We have entered a recession that will be deep and last for several years. There will be a sharp fall in the rate of inflation and we may even see a negative number this year. Interest rates will continue to fall.

Given the level of uncertainty, the value of capital and the extensive range of attractive opportunities available it makes no sense to lock up capital even if apparent returns are attractive. For example, investors in five-year structured notes backed by a bank whose credit rating is deteriorating, will attest to how uncomfortable they feel at present and how much poorer they are in the short term.

Equally, borrowing to invest even though interest rates are falling is unnecessary and potentially dangerous.

Backward-looking asset-allocation models have also failed to protect investors. Decade-long average returns and past correlations have been of little use over the past year and they will continue to provide poor guidance for a number of years to come.

Governments are fully occupied in an exercise that may best be described as battlefield triage of the financial system, while at the same time trying to work out how to sustain the rest of the economy and the confidence of consumers. They have now moved on to search for explanations as to what went wrong and who to blame.

On the other hand, investors should have a different agenda.

Liquidity in all asset classes is critical so that when the forced selling stops and the markets stabilise, investors will be able to use valuable capital to maximum effect. There are attractive opportunities in all asset classes.

Interest rates are low and probably heading lower. Returns on cash are correspondingly low, but having a good cushion of liquidity provides the flexibility to redeploy this quickly as opportunities open up. Gilt yields have tumbled, reflecting the decline in interest rates and the expectation that inflation will remain low for some time.

However, while this may hold true for now, the combination of substantial fiscal and monetary stimulus packages is likely to rekindle inflation in two years. This makes inflation-linked gilts look more attractive at present.

Corporate bonds have delivered a poor return over the past year as the default risk priced into them rises in step with the deterioration in the economic environment. However, there are a number of high-quality investment-grade bonds offering attractive yields well in excess of government stock.

Equity markets have slumped, but there are many good-quality businesses with strong balance sheets that are generating sufficient cash flow to support progressive dividend policies. Equities are an unloved asset class at present, but many quality companies in sectors such as oil and pharmaceuticals are sitting at attractive valuations. Commodities also have a role to play within a diversified portfolio.

Our focus at present is on gold and silver, rather than economically sensitive industrial metals. We regard the former as a hedge against the longer term inflationary implications of the action being taken to stimulate the economy, specifically low interest rates and the expansion of the monetary base.

We believe that successful investment is about managing risk, sensible diversification and taking advantage of opportunities as they occur.

Michael Kerr-Dineen is chief executive of Cheviot Asset Management

http://www.telegraph.co.uk/finance/personalfinance/investing/5016903/Opportunities-still-abound-in-tougher-financial-times.html

Thursday 4 December 2008

Your Once-in-a-Lifetime Investing Opportunity

Your Once-in-a-Lifetime Investing Opportunity
By Chuck Saletta

December 3, 2008


"Panic" might be too weak a word for what's going on out there. It's not just that the stock market has been affected -- the far larger lending market has seized up as well. Banks don't want to lend to each other, much less those of us out here in the real world, and the bond markets remain off-limits to all but the strongest of borrowers.


And all of that is leaving everyone terrified. The long-term future simply doesn't matter all that much to a company that risks oblivion in the next week if it can't roll over its maturing debt or cover tomorrow's margin call.


The companies hit hardest by this mess have been the ones that were built on the presumption of easy, cheap, and unlimited credit. Homebuilders like Centex (NYSE: CTX) are in a world of hurt, and even the strongest automobile titans like Toyota (NYSE: TM) are feeling the impact of the credit crunch. But it was investment banks and financial institutions -- the largest and fiercest players on Wall Street -- that were literally ground zero for this implosion.


The list of companies brought down by the implosion -- Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac -- includes some of the most notable names on Wall Street. The list of companies struggling to survive the economic downturn grows longer by the day. And that's creating a once-in-a-lifetime investing opportunity -- for you.


It's your turn There are unbelievable bargains available now, the likes of which we haven't seen since the days of Benjamin Graham. Under less unusual circumstances, Wall Street's financial wizards would be leveraging themselves to the hilt to take advantage of the market's current conditions. But with their funds cut off, redeemed, or diverted into mere survival, they're forced to sit on the sidelines, rendered completely unable to act.
That's where you come in. As long as you have the patience to wait out the volatility, you can buy those very same bargains (without the leverage) and be richly rewarded when things return to normal.


The country, the stock market, and the strongest companies of the era survived the Great Depression. We'll get through this mess, too. Much the way Benjamin Graham and his protege Warren Buffett did after past catastrophes, the superinvestors of this generation will make their fortunes buying on the heels of this one.


Where to play



Even if you don't aspire to be the next Graham or Buffett (and don't have $5 billion sitting around with which to invest in a struggling company), there are plenty of bargains available to you right now.


But be careful out there -- not every company that has fallen is legitimately cheap. We're in the throes of a global economic rout, after all, and many companies deserve their slashed share prices.


Those whose prices have dropped as a result of forced selling or general market malaise, on the other hand, are the most likely to reward their shareholders for holding on through this mess.



They typically have



  • Strong balance sheets,

  • Reasonable or cheap valuations, and

  • Moats protecting their core businesses.

Companies like these, for instance:
Company/Moat/Value proposition
Wal-Mart
(NYSE: WMT)
Unparalleled supply chain.Scale to leverage best prices.
Trailing P/E below 16;$5.9 billion in cash on hand.
Microsoft
(Nasdaq: MSFT)
So dominant, it's routinely classified as a monopoly.Nobody likes Vista, but they're buying it anyway.
Trailing P/E below 11;$19.7 billion in cash on hand.
Altria
(NYSE: MO)
In spite of knowing better, people still smoke.Government-enforced market-share protection thanks to master settlement agreement.
Forward P/E around 9;more cash on hand than total debt.
Oracle
(Nasdaq: ORCL)
Dominant position in database market gives it leverage in related business software categories.
Trailing P/E below 15;more cash on hand than total debt.
Verizon
(NYSE: VZ)
Captive markets for line-based phone services.Already built-out cellular network.
Trailing P/E below 15;total debt less than 1/2 of revenue.


Although these companies are likely to be affected by the U.S.'s newly declared year-old recession and the general tightening of consumer credit, their basic businesses are solid. Solid businesses, clean balance sheets, and cheap prices compared to intrinsic value mean these are the types of opportunities you should be taking advantage of right now -- while you still can.


This won't last forever


In ordinary times, companies this strong would not be available at such attractive prices. These deals are available only because the global financial meltdown has knocked out so very many of the institutional investors who would ordinarily bid these companies up much higher.


If you want to pay bargain-basement prices for some of the strongest businesses around, this is when you should pounce. It's not easy to buy when everyone is panicking, but it's precisely how generations of successful value investors have made their fortunes.


At Motley Fool Inside Value, we're taking advantage of the brief window we've been given -- and we're excited to buy companies like these at such reasonable prices. You can get a free, 30-day trial, with all of our recommendations but no obligation to subscribe, just by clicking here.
At the time of publication, Fool contributor and Inside Value team member Chuck Saletta owned shares of Microsoft. Wal-Mart and Microsoft are Motley Fool Inside Value selections. The Fool's disclosure policy knows the corporate American Express number but isn't telling.




http://www.fool.com/investing/value/2008/12/03/your-once-in-a-lifetime-investing-opportunity.aspx



Also read:

http://financialfellow.com/2008/11/24/yet-another-reason-to-start-saving-for-retirement-early/