Good Portfolio Management and Trading are of maximum value when used with an Appropriate Investment Philosophy

Here are a number of issues that investors should consider in managing their portfolios.

While individual personalities and goals can influence one's trading and portfolio management techniques to some degree, sound buying and selling strategies, appropriate diversification, and prudent hedging are of importance to all investors.

Of course, good portfolio management and trading are of no use when pursuing an inappropriate investment philosophy; they are of maximum value when employed in conjunction with a value investment approach.

How can you achieve consistent, high-level returns?

How can you achieve consistent, high-level returns?

Students of investing look for a formula.  Many students read both technical works and the retrospective testimonies of high-performing investors.

1.  The technical approaches:  A few good books have been written.  But reported technical investment approaches rarely, if ever, lead to consistent, high-level returns.

2.  The investment memoirs:  They tend to be long on philosophy and short on advice for how to buy particular securities.


Thus, in both areas, the students are largely disappointed.





Investment memoirs of successful investment practitioners

However, as the works of successful investment practitioners, the memoirs do have much to recommend them.  They describe non-specifically, investment approaches that worked in practice.  They capture an important aspect of investment success:  that it depends more on character than on mathematical or technical ability. This is the consistent message of investment memoirs of a group of successful investment practitioners.

The problem is that each memoir presents a unique perspective on the character traits necessary for investment success.  Different authors emphasize different characteristics:

- patience,
- coolness in a crisis,
- wide-ranging curiosity,
- diligence in pursuit of information,
- independent thought, broad qualitative as opposed to detailed quantitative understanding,
- humility,
- a proper appreciation of risk and uncertainty,
- a long time horizon, 
- intellectual rigour and balance in analysis,
- a willingness to live outside the herd, and 
- the ability to maintain a consistently critical perspective.


Unfortunately, an investor with all these qualities is a rare bird indeed.

Understanding Investments - How to Stop Worrying and Start Investing

The Great Courses Plus
Published on 2 Nov 2016

The Great Courses Plus here: https://www.TheGreatCoursesPlus.com/u...

Investing, and the skills to succeed at it, play critical roles in building and maintaining your financial resources. And investment opportunities are available to everyone. No matter where on your financial timeline you may be—whether you're just starting out, approaching retirement, or somewhere in between—there is no question that improving and enhancing your investment skills can have a positive impact on your financial life and in turn, your life goals.

Understanding Investments helps you do just that. In 24 lectures, it introduces the fundamentals of investing to those new to the subject while broadening and deepening the knowledge of more experienced investors. Taught by Professor Connel Fullenkamp, an award-winning educator from Duke University who regularly consults in the world of international finance, these lectures clearly explain the various kinds of financial markets, the different kinds of investments available to you, and the pros and cons of each. Even more important: The course shows you how to evaluate each of these in terms of your own financial situation.

The FIVE KEY DECISIONS every investor needs to make

The 5 key decisions every investor needs to make:

1. The Do-It-Yourself Decision
Do-It-Yourself
Retail Brokers
Independent, Fee-Only Advisors
How to Select an Independent, Fee-Only Advisor
Investment Philosophy
Personal Connection and Trust


2. The Asset Allocation Decision
The Impact of Volatility on Returns
Risk and Return are Related
The Asset Allocation Decision
Cash, Bonds and Stocks
Small vs. Large Companies
Value vs. Growth Companies
Your Emotional Tolerance to Risk
Your Age


3. The Diversification Decision
Positively correlated, uncorrelated or negatively correlated.
Domestic or International Stocks
Domestic or International Bonds
Portfolio Risk and Return


4. The Active versus Passive Decision
Active Investing
Passive Investing
Cash Drag, Consistency, Costs Matter


5. The Rebalancing Decision
Rebalancing = Buy Low and Sell High, minus your emotions
Rebalancing Methods
The Benefits of Rebalancing
Rebalanced Annually
Never Rebalanced


Everyone who takes the time to address these five investment decisions can have a successful investment experience.

The elegant truth of economics is that the return on capital is exactly equal to the cost of capital.

Wealth is created when natural resources, labour, intellectual capital and financial capital combine to produce economic growth.

As an investor, you are entitled to a share of that economic growth when your financial assets are invested in and used by the global economy.


So, how can you best capture your share?

The most effective way is to deploy your capital throughout the public fixed income and equity markets ### in a broadly diversified manner designed to capture a global capital market rate of return.

With the proper time horizon and discipline you can reach your financial goals and outperform most investors with less risk.

Remember, do not focus on what you cannot control. You cannot predict the occurrence of an event like the mortgage crisis, the sovereign debt crisis or an oil spill in the Gulf of Mexico.

You can control your costs, diversify properly, establish the right asset allocation, and maintain the discipline to stay the course.

Going forward, when you see the investment predictions on the cover of the latest financial periodical, watch the talking heads make their forecasts on TV, and listen to your friends and neighbours boast about their latest great investment scheme, you will understand that they are speculating instead of investing.

You know a better way and you have the answer.




Appendix:

###
Fixed Income Asset Classes
Cash Equivalents
Short-Term U.S. Government Bonds
Short-Term Municipal Bonds
High-Quality, Short-Term Corporate Bonds
High-Quality, Short-Term Global Bonds

Equity Asset Classes
U.S. Large Stocks
U.S. Large Value Stocks
U.S. Small Stocks
U.S. Small Value Stocks
International Large Stocks
International Large Value Stocks
International Small Stocks
International Small Value Stocks
Emerging Markets Stocks (Large, Small and Value)
Real Estate Stocks (Domestic and International)



The 5 key decisions every investor needs to make:

1. The Do-It-Yourself Decision
[Should you try to invest on your own or seek help from an investment professional? And if so, which type of advisor is best?]

2. The Asset Allocation Decision
[How should you allocate your investments among stocks (equities), bonds (fixed income), and cash (money market funds)?]

3. The Diversification Decision
[Which specific asset within these broad categories should you include in your portfolio, and in what proportions?]

4. The Active versus Passive Decision
[Should you favour an actively managed approach to investing that seeks to outsmart the market, or a more passive approach that delivers market-like returns?]

5. The Rebalancing Decision
[When should you sell certain assets in your portfolio and when should you buy more?]


Each of these decisions has a significant impact on your overall investment experience.

Whether you know it or not, every day you are making these decisions.

Even if you decide to just stay the course and do nothing with your investment portfolio, you are inherently answering all of these five questions.

By learning how to make five informed investment decisions that capture the essence of investing you will never again be afraid of financial markets or uncertain about what to do with your money.

You will no longer be a speculator .. you will be an investor.



Reference:
The Investment Answer
Daniel C. Goldie & Gordon S. Murray

The Investment Policy Statement

The Investment Policy Statement (IPS)

An investment policy statement is an invaluable planning tool that adds discipline to the investment process.

Before developing an IPS, an investment manager must conduct a fact finding discussion with the client to learn about the client's risk tolerance and other specific circumstances.

The IPS can be thought of as a roadmap which serves the following purposes:

• It helps the investor decide on realistic investment goals after learning about financial markets and associated risks.
• It creates a standard according to which the portfolio manager's performance can be judged.
• It guides the actions of portfolio managers, who should refer to it from time to time to assess the suitability of particular investments for their clients.

Major components of an IPS

• An introduction that describes the client.
• A statement of purpose.
• A statement of duties and responsibilities, which describes the duties and responsibilities of the client, the custodian of the client's assets, and the investment manger.
• Procedures that outline the steps required to keep the IPS updated and steps required to respond to various contingencies.
• The client's investment objectives.
• The client's investment constraints.
• Investment guidelines regarding how the policy should be executed (e.g., whether use of leverage and derivatives is permitted) and specific types of assets that must be excluded.
• Evaluation and review guidelines on obtaining feedback on investment results.
• Appendices that describe the strategic asset allocation and the rebalancing policy.

KEY PRINCIPLES TO INVESTING IN A STOCK

In this article we look at the four keys that we believe every stock investment should have. These are not new things but rather the core principles that successful investors have been following for decades.

1.  Invest in sectors and industries that you understand –

Becoming an expert in certain areas of the market will give you an upper hand when it comes to selecting stocks to buy. This is like a foundation for all other steps that follows. Pick a given sector or industry and try to get information on it as much as possible. This will enable you to make informed decision when it comes to buying stock.

2.  Find companies with a Long-Term Competitive Advantages –

Companies with long-term competitive advantage have an ”economic moat” i.e. Economic protection. These companies have the following advantages:

• A recognized brand.
• The ability to produce products cheaper than anyone else.
• The ability to sell their products cheaper than anyone else.
• Barriers to entry that make it difficult for competitors or new companies to compete.
• The opportunity to grow at a cheaper cost than anyone else.
• A duopoly situation where two companies dominate the industry like Airbus or Boeing.
• Networking effect where the users of the product or service makes the business more valuable like Google.

3. Look for companies with Excellent Management –

This can be done by reading annual and quarterly reports and studying the history of the company’s current management in an attempt to understand what the management is currently doing and what they may do in the future. You can look at the following:

• The management’s history of decision-making. Do they have a track record of someone who we would actually hire if given a choice?
• Understanding how management is compensated. Is their compensation based upon the success of the firm?
• Ensuring that management is shareholder friendly. Do they do things that have the best interest of shareholders in mind?
• These questions will help you to answer the question as to whether or not we trust the management enough to purchase the stock.

4. Buy When the stock is at a Good Price. Discounted to Intrinsic Value —

Find stocks that are currently trading below the market price. If you can be able to find stocks that are trading below their intrinsic value and have the other three core principles then we would have the formula for a sound stock investment. If you find a stock with the first 3 principles but is not trading below the market price, then it is better you wait. Any investor should know that the price at which he/she pays at, is a critical piece of investing. If you get it wrong then the investment will have a hard time making money.



Bottom Line

When all the four principles align then the possibilities of making money increase, though this does not guarantee that you will make money but rather increases the probability of making money.


http://www.businessandlifetips.com/2017/04/10/key-principles-to-investing-in-a-stock/

The great investors tend to focus on the process more than the actual outcome.

Over time, the great investors tend to focus on the process more than the actual outcome.

If you have a simple, proven, repeatable system with the relevant mental models, the results will ultimately take care of themselves.

Having a sound philosophy and method will allow you to focus on the components that matter most to an investor's success.

By following this long enough, you will develop everlasting habits and positive feedback loops as you compound on your knowledge of investing and the businesses around you.

The more you invest now and get to know the underlying businesses and the stock market, the better you will be at investing long term.

How to consistently profit in the Stock Market

3 Keys to a Winning Method to Consistently Profit in the Stock Market

Written by Adam Khoo

If you were to randomly buy stocks just because you got a “hot tip” or a “gut feel”, your chances of being profitable will be 50% at best. Since a stock either goes up or down, you only have a 50/50 chance of being right.

Of course, with some luck, you could still make money. However, money that is made from a lucky streak never ever lasts. Eventually, luck will run out and you will end up losing everything and much more. This is why people who gamble at casinos or try their luck at the stock market will end up losing everything.

But when you have a method that gives you an edge over the market, you can confidently be right 70% – 80% of the time. (You can never be right 100% of the time because many factors in the world of investing that are out of our control – e.g. a sudden economic crisis can cause stock prices to fall temporarily.)

A winning method of investing should consist of 3 key components:

Knowing…

1. What to buy
2. When to buy
3. When to sell

Let us go through all three in detail.

#1 What to Buy

When you buy a share of stock, you are actually buying a share of a public listed company. You become a part owner (albeit a very small one) of a business.

We only want to invest in shares of very good businesses. Using fundamental analysis, we need to learn how to study the financial reports of companies to determine which are the most profitable and valuable ones.

There are many factors that make a company’s stock a good investment. Let me highlight two important ones:

• Consistently increasing sales revenue and net income
• Positive long-term growth rate

I only invest in companies that have a track record of consistently increasing sales revenue and net income, together with positive future growth potential. When a company has these fundamental qualities, its share price will have a greater potential to rise over time.

Similarly, I avoid buying stocks of companies with inconsistent or declining sales revenue and net income. Stocks of companies that have weak revenue and net income growth usually have flat of declining stock prices.

Of course, there are many more financial data and ratios we can look at to determine that it is a great company. I also look at stuff like:

• Insider activity
• Return on equity
• Statement of cash flows
• Debt-equity ratio
• Current ratio
• Gross and net margins
• Working capital versus revenue growth
• Cash conversion cycle

It is essential to do enough research on the right company’s stock to buy. They have to meet all the critical fundamental criteria!

#2 When to Buy

It is not good enough to know which companies’ stocks to buy. You need to also know exactly WHEN to make your investment. I know many people who invest in great stocks.

Unfortunately, they buy it at the wrong time and see their investments go down in value for a long time before it starts recovering. Knowing WHEN to buy is even more important than knowing just WHAT to buy. I emphasise this concept a lot when I am going through them during my workshops.

Buy When Stock Price Is below its Intrinsic Value

So, WHEN is it a good time to invest? Well, you should only buy a stock when its price is below its intrinsic value. This means that the stock is selling at a price below what it is actually worth.

I use an intrinsic value calculator to determine the true value of a stock, based on the company’s cash flow from operations, growth rate, total debt and cash holdings. The intrinsic value of a stock will also give you an indication of where the share price can potentially reach in the short term.

For example, I made an investment in Google (GOOG) on Jan 2012, a stock that has delivered consistent growth in revenue and net income. Although it seemed pricey at $575, it was actually way below its intrinsic value of $1,065. The intrinsic value of GOOG gave me the confidence that I could potentially double my investment when GOOG reaches its true value.

Wealth Academy Intrinsic Calculator

Sure enough, a year later (2013), Google (GOOG) reached $1,100 per share, giving me a nice 91.3% gain! I am covering more of these case studies during my workshops in Malaysia as well.

Chart: Think or Swim – Prophet Charts®

Buy When the Stock is on an Uptrend

Besides analyzing a stock’s intrinsic value, it is also very important to only buy a stock when its price is on an uptrend. Never buy a stock when the price is on a downtrend, no matter how good the stock is or how cheap the price may seem. When a stock’s price is on a downtrend, you never know how low it can go before it starts to recover. A cheap stock may become even cheaper in the short term.

An uptrend is characterized by a series of stock prices making higher high points and higherlow points. On an uptrend, stock prices still go up and down. However, every time prices go down, they move up even higher subsequently.

Chart: Think or Swim – Prophet Charts®

When a stock is on an uptrend, it means that investors are getting more optimistic about it. This causes upward price momentum that drives the stock higher and higher. This will keep happening until a major news development changes the trend. It definitely makes sense to only buy a stock when it is on an uptrend because the probability is that it will keep going higher. This is why there is an old Wall Street saying, “the trend is your friend”.

#3 When to Sell

Knowing when to sell your investment is the most important part of your strategy. Many investors lose money or fail to maximize their profits despite knowing WHAT to buy and WHEN to BUY. This is because they failed to know WHEN to SELL.

No matter how great a stock is, it will not go up forever. Nothing great lasts forever. If you fall too much in love with a stock and fail to sell it when it reverses to a downtrend, all your profits could be wiped out!

Winning investors strictly follow their sell rules without compromise. They understand that if they do not sell at the right time, mistakes can turn into huge losses and potential winning investments can turn into losing ones.

Two investors who buy the same stock at the same time can get very different results depending on WHEN they sell.

You should hit the sell button when…

The stock price reverses to a downtrend

This is to protect the profits we have made.  A downtrend is characterized by a series of stock prices making lower high points and lower low points. On a downtrend, stock prices still go up and down. However, every time prices go up, they move down even lower subsequently.

Chart: ChartNexus

When a stock is on a downtrend, it means that investors are getting more and more pessimistic. This causes downward price momentum that drives the stock lower and lower.

The stock price falls 5% – 8% below your purchase price

This is known as your stop loss price. It is an important strategy to limit your losses when you are wrong. I always use an automated stop loss order for this. Remember that no matter how great your strategy is, you can never be right 100% of the time. A stop-loss ensures that losses are limited in those instances when the stock price does not move up as expected.

If you consistently follow these three keys, WHAT to buy, WHEN to buy and WHEN to sell, you will be able to achieve a high probability of success in the stock market.

I have learned mainly by reading myself.

Buffett: "I have learned mainly by reading myself. So I don’t think I have any original ideas. Certainly, I talk about reading Graham. I’ve read Phil Fisher. So I’ve gotten a lot of my ideas from reading. You can learn a lot from other people. In fact, I think if you learn basically from other people, you don’t have to get too many new ideas on your own. You can just apply the best of what you see.”

"ORIGINALITY is overrated. I believe in the discipline of mastering the best that other people have figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart." Charlie Munger

"What’s really astounding, is how resistant some people are to learning anything … even when it’s in their self-interest to learn. There is just an incredible resistance to thinking or changing. Bertrand Russell once said: ‘Most men would rather die than think. Many have.’ And in a financial sense, that’s very true." Warren Buffett.

Charlie Munger Fan Club

Investment management process: 5 step procedure

Investment management process is the process of managing money or funds.

The investment management process describes how an investor should go about making decisions.

Investment management process can be disclosed by five-step procedure, which includes following stages:

1. Setting of investment policy. 

2. Analysis and evaluation of investment vehicles. 

3. Formation of diversified investment portfolio. 

4. Portfolio revision 

5. Measurement and evaluation of portfolio performance.


Ref:  http://www.bcci.bg/projects/latvia/pdf/8_IAPM_final.pdf

Saved $1 million and living my dream retirement

Roy Nash long dreamed of retiring at the age of 55.

A self-taught investor, he diligently stashed all the savings he could in stocks and mutual funds. So by 2009, when he did turn 55, he says he had more than $800,000 saved -- enough to step away from his nearly three decade long career at a natural gas distributor in St. Louis.  

Now Nash is 61 and his smart investment choices have helped him grow his retirement savings to more than $1 million.

This sizable nest egg allows him to live the lifestyle he wants. He takes four trips a year to places like Chile and Jamaica and, during the rest of the time, he's volunteering around town, driving the elderly to doctor's appointments or helping poor families file their income taxes.  Now Nash is 61 and his smart investment choices have helped him grow his retirement savings to more than $1 million.

How did he do it?

Nash said he learned about the importance of saving from his mother, who raised him in Marianna, Ark.

"My mom told me when I was real small I should learn how to save some money, because my father was a spendthrift," said Nash. "I took it to heart and went beyond saving. I became an investor."

At the age of 22, he moved to St. Louis and eventually went to work as a controller for the largest natural gas distributor there.

During his free time, he taught himself to invest by reading Money and SmartMoney magazines. That's how he learned to love dividend stocks, high-yield, closed-end funds and mutual funds. He also invests in open-end funds and index funds.

Every year, he socked away between 10% and 15% of his income into his 401(k) plan. Additionally, he also saved another $300 a month in investing accounts with Fidelity.

"I wouldn't consider my savings a sacrifice. I had a good paying job and a budget," Nash said. "I disciplined myself."

And he was mindful about looking after his money and reinvesting gains back into funds and stocks.

"I always reinvested my capital gains," Nash said.

In the beginning, he worked with a brokerage to invest his money. But now he manages his own portfolio.

Nash said he's in an informal retirement club, mostly other retired friends from the office, who he loves teasing about their money managers.

Roy Nash on vacation with his family

"They're paying these guys 1.2% to 2% in fees!" Nash said.

Nash said he collects a healthy sum each year in dividend payouts from his investments in high-yield closed-end mutual funds and preferred stocks.

But still he keeps things simple, living on around $50,000 a year.

Too young for Medicare, Nash gets health insurance through Obamacare, "which has been fantastic," he said.

His retirement income is also enough to satisfy his lust for travel. He takes several trips each year. Often it's just visiting family and friends in Arkansas. But this year, he went to Mardi Gras in New Orleans. He's going to Jamaica in the spring and Santiago, Chile later in the year.

Most days, Nash fills his time by offering his services to the community. During the tax season, he helps the poor prepare their tax forms. And he volunteers for the county, driving housebound elderly residents on much-needed medical errands to doctor's appointments and the pharmacy.

He also plays golf and likes to go fishing, hunting and boating. And he works out at least five days a week, either on a treadmill or a bicycle for between 20 and 30 minutes a day.

"The most important thing I do, is live an active lifestyle," Nash said. "That keeps my doctor bills down."

He has two kids and six grandchildren, ages 3 to 15. Lately, he's become his family's go-to, back-up childcare for sick grandkids.

"If the kids are sick, I go and pick them up, so it doesn't disrupt their parents' work," he said.

And he takes pride in telling his story throughout the community, to help young people learn the importance of saving regularly and early.

"If your income is equal to your expenses, you're not going to save anything," Nash said. "I think anyone making $40,000 a year should be able to save money in St. Louis." 

http://money.cnn.com/2015/03/09/retirement/dream-retirement-million-dollar-saving/index.html?iid=SF_PF_River

Amongst the millions of questions regarding financial matters, the most popular one is undoubtedly “How do I save my money?”. Here are 3 common ways that could help you save a sizable amount for when it’s time to retire.

1) Contribute to EPF, do NOT withdraw

For Malaysians, EPF is undoubtedly the easiest way to save your money. Your personal contribution of 11% aside, your employer’s mandatory contribution of 13% (for employees earning less than RM5,000 monthly salaries) makes it a total of 24% of your monthly wages saved under your name each and every month.

To top it off, EPF’s average return of 5% per year is significantly higher than any fixed deposit interests in the market right now.

Tips: Firstly, get employed at a company that contributes to EPF. Try to keep your money in your EPF account for as long as possible because there simply aren’t any other bank deposits with higher interest rates in the market. If you can help it, DO NOT use any of your EPF sub accounts to pay for your home or buy a computer, so you can take full advantage of EPF’s high interest rate to maximize your returns.

2) Put your money aside the good old fashion way

Saving your money requires determination and discipline. If you aren’t already doing so, try putting aside a small percentage of your salary every month-end and save it in a separate bank account, preferably one without any easy withdrawal facilities (eg. ATM).

When you have a moderate amount, transfer the money to a high-interest fixed deposit account so it can generate greater interests whilst stopping you from accessing the funds every time you feel like getting a new handphone or a new pair of shoes.

To find the best fixed deposits in the market right now, check out our fixed deposit comparison table.

Tips: Like many other things in life, saving is an endeavour that many find hard to adopt especially in the beginning. To ease yourself into your money-saving journey, you may wish to start off with a moderate amount (say 5-10% of your wages) so that it does not affect your cash flow to the extend of making you give up altogether. Over time, you can try to increase the amount as the act of saving becomes a habit. Also, when it comes to saving, it helps to start as young as possible so you can reap the benefits of compound interest over the long run.

3) Use your money to invest in something

If you have moderate tolerance to risk, are not close to retirement age and have a sizable amount in your savings or fixed deposit account, you’ll probably want to consider using some of the monies you have for investment purposes.

Be it in shares, gold or real estate; investment is a great way to save even MORE money because the potential returns are usually much greater than, say, putting your money into a bank. The downside, however, is that investment involves RISKS – the risk of non-performance from your investments, or in certain cases, the risk of total evaporation of value for your investments caused by adverse market conditions.

Tips: Not all categories of investments are born equal, so you are advised to do your homework well before you engage with any kind of investment. For example: properties are considered medium-risk investments; they generally enjoy consistent growth but they also have low liquidity (i.e. not easily turned to cash). Shares, on the other hand, are considered high-risk investments; they are prone to fluctuations in value caused by volatile market, which basically means you could potentially GAIN a lot or LOSE a lot. Whichever form of investment you choose, it is best to make a genuine effort to learn about it before you commit.

Love this article? You might also wish to read about the importance of diversification in investment.

How To Save Money: 3 Common Methods

By Ching . 3 April 2013 . Money Management

My investing philosophy revisited

Happy New Year 2015.

I thought it would be nice to recall how my investing philosophy comes about.

Being a non-financial chap,  it was difficult to understand investing in my early years.   Tried as I did, I found the acquisition of this knowledge to be challenging.  I started with various books and often find them useful but still lacking.  Many were written for financial planning, understanding businesses, economics and accounts.

My early years in investing were much guided by my friend.  A kind chap indeed who is obviously very knowledgeable was willing to share his recommendations and I bought his recommendations.  That was in 1993 and the shares that he recommended remain in my portfolio till today and have done extremely well, despite the volatility and turmoil associated with the Asian Financial Crisis, the Sars crisis and the 2008/2009 US subprime global financial crisis.  Yes, buy and hold for the long term works beautifully for selected stocks.

Of course, my pursuit of financial and investing knowledge continues till today.  Post 2000, value investing became fashionable again.  Books on value investing started to appear in our local bookshops.  The internet was a great help.  One could read numerous articles on value investing, on the gurus the like of Benjamin Graham, Warren Buffett, Philip Fisher, Peter Lynch, John Templeton  and many others.  Synopsis and articles on the classical books were readily available in the internet allowing one to continue to build up this financial and investing knowledge.   The classic must read books would include Intelligent Investor and Security Analysis by Benjamin Graham, Common Stocks and Uncommon Profits by Philip Fisher, One Up on Wall Street by Peter Lynch, Five Rules for Successful Investing by Pat Dorsey and many others.   All these readings, carefully and critically sorted, allow one to formulate a philosophy to suit your own investing objectives, your own investing risk tolerance, investing time horizon and  your investing financial capacity.

Guided by a sound philosophy, how can I put this into practice?  How can I approach investing without taking too much effort or time, and yet be productive in my investing?  Here lies the next challenge.  Again, being not so good in computing, I had to learn simple computing and microsoft excel to aid my analysis of stocks.  I searched for various programs that are available online and adopted these to my own self designed program.  Over time, through a bit of effort, some semblance of a simple program to guide and help my investing is realised.  This helps to cut a lot of laborious analysis of past historical data and allow one to see the big picture of the company that you wish to analyse for your investing.

Yes, essentially, you should choose your own investing philosophy.  I have recently met up with my good friend.  He has invested into index funds in his country.  That is intelligent investing too, as I realised he did not have the time nor the initiative to analyse stocks on his own.  He wished to be relatively free from doing all these for his investing; more importantly he wouldn't know how.  Yet, he was wise enough to invest in an index linked fund, knowing over the long term, his investment will be safe and with promise of a reasonable return after taking into consideration the low cost.  That is intelligent investing of the defensive type according to Benjamin Graham.

For those who are more enterprising, well, investing can be fun and exciting.  Embarking on my journey in investing has shown this to be true.  It is easy to get market return, but trying to better the market return can be more challenging than it seems.  But sometimes you are "lucky".   But luck should really not be a big element in your investing should you choose to invest on your own in an enterprising manner.  Learning from Benjamin Graham's Intelligent Investor will put you on the right track,  allowing you to formulate a sound investing policy for the long term.

Best wishes and may your investing be productive always.


http://myinvestingnotes.blogspot.com/2008/08/strategies-for-buying-and-selling-kiss.html
http://myinvestingnotes.blogspot.com/p/philosophy.html

It pays to be eclectic

Markets change and conditions change.
One style of manager or one kind of fund will not succeed in all seasons.
You just never know where the next great performances will be, so it pays to be eclectic.


Some problems to look out for:
1.  Stuck in a situation where the managers have lost their touch.
2.  The stocks in the fund have gone out of favour:

• A value fund can be a wonderful performer for 3 years and awful for the next 6 years.
• Growth funds lost their advantage in certain years and then led the markets in certain years.

Definition

eclectic

adj

1. (Fine Arts & Visual Arts / Art Terms) (in art, philosophy, etc.) selecting what seems best from various styles, doctrines, ideas, methods, etc.

2. composed of elements drawn from a variety of sources, styles, etc.

Some basic approach to finding stocks:

1.  Capital appreciation stocks:  Buy any and all kinds of stocks that can give capital appreciation.

2.  Value stocks:  Invest in companies whose assets, not their current earnings, are the main attraction.  

3.  Quality growth stocks:  Invest in medium-sized and large companies that are well established, expanding at a respectable and steady rate, and increasing their earnings 15% a year or better.  [This cuts out the cyclicals, the slower-growing blue chips, and the utilities.]

4.   Emerging growth stocks:  Invest mostly in small companies.  

5.  Special situation stocks:  Invest in stocks of companies that have nothing in particular in common except that something unique has occurred to change their prospects.

Are you too scared to invest? You might have missed out on huge gains and put your financial futures in jeopardy.

5 Reasons Most Investors Fail

By Sean Williams 
September 8, 2013 |

I've been actively investing money into the market now for the past 15 years. Over that time I've morphed through a number of investing styles -- day-trading, trading based on technical analysis, long-term investing, and in the late 1990s even throwing darts. If I've learned anything over these years, it's that investing in businesses and ideas, not a stock ticker, is where the big gains are to be had.

Source: Ryan Lawler, Wikimedia Commons.

So you can imagine how quickly my jaw dropped to the floor when I revisited a study conducted by Prudential Financial in June 2011 that surveyed 1,000 people and asked them two simple questions: Do you still believe in investing, or have you lost faith in the stock market; and when are you likely to put more money into the stock market (within a year, over a year from now, or never). The answers to these questions are an absolute head-banger! 

What is your current perception of the stock market?

There are still benefits to investing	42%
I've lost faith in the market	58%

Source: Prudential Financial.

When are you likely to put more money into the stock market?

Within a year	25%
Over a year from now	31%
Never	44%

Source: Prudential Financial.

Now keep in mind that when these respondents were surveyed, the stock market had already rebounded a full 100% from its lows! Based on these figures, a full 44% of respondents would have missed out on an additional 26% rally in the broad-based S&P 500 (SNPINDEX: ^GSPC  ) which is higher than the historical annual average return of the stock market. Based on the exact date of June 1, 2011, to June 1, 2012, the 31% who chose to wait a year and try to time the market would have come out slightly ahead -- but if you moved that date forward or backward by just a few days they, too, would have lost out.

Here are five reasons I've learned throughout my years of investing why most investors fail:

• They're trying to buy stocks, not businesses.
• They don't understand the concept of compounding gains.
• They don't feel they have enough money to begin investing.
• They're too scared to lose their money.
• They don't know how to get started.

And here are some of the ways you can overcome these flaws.

Buy businesses, not stocksAt The Motley Fool you'll hear us trumpet Warren Buffett, the CEO of Berkshire Hathaway(NYSE: BRK-A  ) (NYSE: BRK-B  ) a lot -- but with good reason. Warren Buffett invests with the mentality that he's buying into a company that he thinks would succeed if the stock market shut down for the next 10 years. He believes in the management team of every company he buys and focuses on buying businesses with brand and pricing power. You might refer to them as boring investments, but Buffett just sees these businesses as steady sources of cash flow that will increase shareholder value in almost any economic environment.

Therefore, it shouldn't come as a surprise that his holding company, Berkshire Hathaway, which just recently announced the purchase of its 58th subsidiary in NV Energy in May, has outpaced the S&P 500 in 39 of the past 48 years. That's not luck -- that's what happens when you invest in businesses instead of trading stocks.

Invest for the long term and let compounding gains work in your favorThe most abundant mistake often made is when investors attempt to become traders and time the market. While timing the market may work for a short period, it's been shown time and again that long-term compounding gains achieved through share price appreciation and dividends will outpace the nominal gains achieved through day-trading and short-term holds. According to ABC News, and as I noted last month, of the nominal gains achieved by the S&P 500 between 1910 to 2010, dividend yield and dividend growth comprised 90% of all gains.

The Fool's Brian Stoffel put this story in an even easier-to-understand context in February 2012, when, in his fictitious short story he undertook explaining how short-minded investors would have missed out on big gains in Coca-Cola (NYSE: KO  ) versus long-term investors. Had a short-term investor sold holdings after 10 years in Brian's story, he or she may have netted a 2,500% gain, but were the same investor to hold from 1920 through the present day, that person would be up well over 1,000,000%, inclusive of dividends and share price appreciation!

There is no such thing as a wrong amount to invest withOne of the more superfluous rumors that's been floating around for decades is that it's not worth investing in the stock market if you don't have enough money to get started. This is blatantly wrong! If you have $200,000 or $200, it's always in your best interests to put that money to work for you.

Last week, the Fool's macroeconomic guru, Morgan Housel, demonstrated this point to a "T" when he examined the effect of wealth building over time. According to his calculations, a person in his or her 20s could see each dollar saved and invested turn into $10-$18 in future value. Even if that only means $20 per week, that's possibly $200-$360 in future value based on the standard historical returns of the market! 

Source: Rafael Matsunaga, Flickr.

You have to invest to beat inflationPutting your money under the mattress might preserve your nominal money, but it won't help you over the long run as prices continue to rise and make what money you currently have less valuable. Anyone who hopes to stay ahead of the game needs to invest.

Keep in mind that there are multiple ways of beating inflation and retiring well without risking your entire nest egg. It's perfectly fine to be risk-averse, which is what investment-grade and government-issued bonds are for. However, other ways of investing safely do exist, including buying into basket ETFs that spread your assets, along with the assets of others, among a number of companies. One great idea here would the iShares MSCI USA Minimum Volatility ETF (NYSEMKT: USMV  ) . Composed of 134 large-cap, low-volatility names such as PepsiCo., Johnson & Johnson, and TJ Maxx parent TJX, the iShares Minimum Volatility ETF bears just a 0.15% annual expense, yields slightly better than 2% annually, and is only 78% as volatile as the S&P 500.

Getting started is easier than everOne of the often forgotten reasons investors fail is that many are simply too overwhelmed or worried about their lack of knowledge to even get started. Luckily for you, the Internet has made the ability to learn about the market and individual companies easier than it's ever been.

The Motley Fool's co-founders (and brothers), David and Tom Gardner, developed the 13 Steps to Investing Foolishly specifically with that skittish investor in mind who's always been curious about investing in the stock market but has been terrified of his or her lack of knowledge or been wary of how to get a foot in the door. My suggestion is, if you're one of the 44% who exclaimed they'd never invest in the market again, one of the 58% who's lost faith in the market, or one of the many on the outside looking in, read over and implement these 13 steps.

Obviously you aren't going to be right with every investment, but all it takes is a few big winners and a lot of time for you to be sitting pretty in an early retirement.

Put plainly, if you don't take the time to invest, you could wind up like the millions of Americans that have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest, that have missed out on huge gains and put their financial futures in jeopardy. 

http://www.fool.com/investing/general/2013/09/08/5-reasons-most-investors-fail.aspx