Guinness Anchor Berhad (Malaysia) (28.8.2012)

Date announced 28-Aug-2012
Quarter 30/06/2012
Qtr 4
FYE 30/06/2012
STOCK GUINNESS
C0DE  3255 

Price $ 15.64
Curr. PE (ttm-Eps) 22.78
Curr. DY 7.99%

Dividends		% chg
Curr. FY0	125.00	131.5%
Prev FY1	54.00	20.0%
Prev FY2	45.00
Curr. DY	7.99%
Risk vs Returns
Upside	-0.02	-2%
Downside	1.00	102%
Returns
One Yr Apprec Pot.		0%
Avg Yield		6%
Avg Tot. Ann Return		6%
(for next 5 years)
INPUT VARIABLES
Today's Share Pr $		15.64
EPS GR %		10%
Avg H. PE		14.0
Avg. L. PE		11.0
Rec. Severe Low Pr		8.00
Current PE		22.78
Signature PE		12.50
RV		182%
Rational Price		8.58
Dividends
Present Dividend		125.00
Avg % DPO		90%
Present Div Yield		7.99%
Present High Yield		15.63%
EPS G. RATE		10%
Present Market Pr.		15.64

Date	Qtr No	ttm-eps	High Pr	Low Pr		High PE	Low PE
28-Aug-12	4	68.66	15.98	15.82		23.27	23.04
23-May-12	3	66.76	10.74	10.64		16.09	15.94
23-Feb-12	2	65.91	9.55	9.49		14.49	14.40
2-Nov-12	1	65.52	8.84	8.00		13.49	12.21
8-Apr-11	4	60.05	8.16	7.69		13.59	12.81
5-May-11	3	62.23	7.22	6.83		11.60	10.98
28-Jan-11	2	61.40	7.00	6.68		11.40	10.88
3-Nov-10	1	54.50	7.15	6.74		13.12	12.37
4-Aug-10	4	50.54	6.25	6.05		12.37	11.97
5-May-10	3	47.80	5.75	5.50		12.03	11.51
9-Feb-10	2	43.21	5.20	5.10		12.03	11.80
26-Nov-09	1	40.19	5.35	4.46		13.31	11.10
29-Aug-09	4	47.00	5.35	5.10		11.38	10.85
15-May-09	3	44.38	5.75	5.45		12.96	12.28
27-Feb-09	2	45.64	5.90	5.30		12.93	11.61
26-Nov-08	1	43.06	6.10	5.75		14.17	13.35
29-Aug-08	4	41.67	6.45	5.85		15.48	14.04
23-May-08	3	40.90	6.60	6.00		16.14	14.67
22-Feb-08	2	40.08	6.60	6.00		16.47	14.97
29-Nov-07	1	39.26	6.30	5.75		16.05	14.65
28-Aug-07	4	37.26	5.55	5.35		14.90	14.36
4-May-07	3	45.16	5.85	5.40		12.95	11.96
26-Feb-07	2	40.86	5.80	5.35		14.19	13.09
7-Nov-06	1	42.68	5.95	5.50		13.94	12.89
22-Aug-06	4	42.44	5.95	5.55		14.02	13.08
26-May-06	3	38.23	5.75	5.20		15.04	13.60
21-Feb-06	2	38.49	5.90	5.35		15.33	13.90

LPI Capital Berhad (9.10.2012)

Date announced 9-Oct-2012
Quarter 30/9/2012
Qtr 3
FYE 31/12/2012
STOCK LPI
C0DE  8621 

Price $ 13.52
Curr. PE (ttm-Eps) 18.75
Curr. DY 5.55%

Dividends		% chg
Curr. FY0	75.00	7.1%
Prev FY1	70.00	118.5%
Prev FY2	32.03
Curr. DY	5.55%
Risk vs Returns
Upside	2.27	69%
Downside	1.00	31%
Returns
One Yr Apprec Pot.		6%
Avg Yield		9%
Avg Tot. Ann Return		15%
(for next 5 years)
INPUT VARIABLES
Today's Share Pr $		13.52
EPS GR %		10%
Avg H. PE		15.0
Avg. L. PE		12.0
Rec. Severe Low Pr		11.80
Current PE		18.75
Signature PE		13.50
RV		139%
Rational Price		9.73
Dividends
Present Dividend		75.00
Avg % DPO		107%
Present Div Yield		5.55%
Present High Yield		6.36%
EPS G. RATE		10%
Present Market Pr.		13.52

You are not compelled to sell just because of short-term appreciation. Fisher taught either the investment you hold is a better investment than cash or it is not.

Sometimes the market will quickly confirm Buffett's judgement that a company is a good investment.  When that happens, he is not compelled to sell just because of short-term appreciation.  

He considers the Wall Street maxim "you never go broke taking a profit" to be foolish advice.

Fisher taught him that either the investment you hold is a better investment than cash or it is not.  

Buffett says that he is "quite content to hold any security indefinitely, so long as 

• the prospective return on equity capital (ROE) of the underlying business is satisfactory, 
• management is competent and honest, and 
• the market does not overvalue the business. 

If the stock market does significantly overvalue a business, he will sell.

In addition, Buffett will sell a fairly valued or undervalued security if he needs the proceeds to purchase something else - either

• a business that is even more undervalued or 
• one of equal value that he understands better.  

Beyond this investment strategy, however, Buffett confessed in 1987 that there are three common-stock positions that he will not sell, regardless of how seriously the stock market may overvalue their shares:  The Washing Post Company, GEICO Corporation, and Capital Cities/ABC.  In 1990, he added The Coca-Cola Company to this list of permanent common-stock holdings.

This 'till-death-do-us-part attitude places these four investments on the same commitment level as Berkshire's controlled businesses.  Permanent status is not something Buffett hands out indiscriminately.  And it should be noted that a company is not automatically "permanent" on the day Buffett buys it.  Berkshire Hathaway has owned shares of The Washington Post Company for 20 years and GEICO for 18 years.  Buffett first purchased Capital Cities in 1977.  Even Coca-Cola, first purchased in 1988, was not elevated to permanent status until 1990.

As long as businesses are increasing shareholder value at a satisfactory rate, a long term investor would prefer that the stock market delay its recognition.

It is Warren Buffett's practice to let companies inform him by their operating results, not by their short-term stock quotes, whether Berkshire's investments are successful.

He is convinced that although the stock market, in the short run, may ignore a business's financial results, it will, over time, confirm a company's success or failure at providing increased shareholder value.

Buffett remembers Ben Graham telling him that "in the short run, the market is a voting machine but inn the long run it is a weighting machine."

He is willing to be patient.  In fact, as long as Berkshire's businesses are increasing shareholder value at a satisfactory rate, he would prefer that the stock market delay its recognition, thereby allowing him the opportunity to purchase more shares at bargain prices.  

Petronas Gas (15.8.2012)

Date announced 15-Aug-12
FYE  31/12/2012
Qtr Others
Quarter 30/6/2012
STOCK  PETGAS 
C0DE  6033 

Price $ 19.24
Curr. PE (ttm-Eps) 25.61
Curr. DY 2.60%

Dividends		% chg
Curr. FY0	50.00	0.0%
Prev FY1	50.00	0.0%
Prev FY2	50.00
Curr. DY	2.60%
Risk vs Returns
Upside	0.23	19%
Downside	1.00	81%
Returns
One Yr Apprec Pot.		2%
Avg Yield		4%
Avg Tot. Ann Return		6%
(for next 5 years)
INPUT VARIABLES
Today's Share Pr $		19.24
EPS GR %		7%
Avg H. PE		20.0
Avg. L. PE		15.0
Rec. Severe Low Pr		11.24
Current PE		25.61
Signature PE		17.50
RV		146%
Rational Price		13.15
Dividends
Present Dividend		50.00
Avg % DPO		69%
Present Div Yield		2.60%
Present High Yield		4.45%
EPS G. RATE		7%
Present Market Pr.		19.24

Petronas Dagangan (16.08.2012)

Date announced 16-Aug-12
FYE 31/12/2012
Qtr 2
Quarter 30/6/2012
STOCK PETDAG
C0DE  5681

Price $ 22.8
Curr. PE (ttm-Eps) 26.21
Curr. DY 3.51%

Dividends   % chg Curr. FY0 80.00 -11.1% Prev FY1 90.00 5.9% Prev FY2 85.00   Curr. DY  3.51%               Risk vs Returns   Upside 0.18 16% Downside 1.00 84%       Returns     One Yr Apprec Pot.  1% Avg Yield    5% Avg Tot. Ann Return 6% (for next 5 years)         INPUT VARIABLES   Today's Share Pr $ 22.80 EPS GR %   9% Avg H. PE   18.0 Avg. L. PE   15.0 Rec. Severe Low Pr 15.80       Current PE   26.21 Signature PE 16.50 RV   159% Rational Price   14.36             Dividends     Present Dividend 80.00 Avg % DPO   90%       Present Div Yield 3.51% Present High Yield 5.06%       EPS G. RATE   9% Present Market Pr. 22.80

Topglove (11.10.2012)

Dividends		% chg
Curr. FY0	16.00	45.5%
Prev FY1	11.00	-31.3%
Prev FY2	16.00
Curr. DY	3.05%
Risk vs Returns
Upside	1.64	62%
Downside	1.00	38%
Returns
One Yr Apprec Pot.		7%
Avg Yield		4%
Avg Tot. Ann Return		12%
(for next 5 years)
INPUT VARIABLES
Today's Share Pr $		5.25
EPS GR %		8%
Avg H. PE		15.0
Avg. L. PE		12.0
Rec. Severe Low Pr		4.06
Current PE		16.06
Signature PE		13.50
RV		119%
Rational Price		4.41
Dividends
Present Dividend		16.00
Avg % DPO		49%
Present Div Yield		3.05%
Present High Yield		3.94%
EPS G. RATE		8%
Present Market Pr.		5.25

ZONING
Present Market Price of		5.25	is in the	Middle 1/3	Range
Mid-Price	=	5.63
Upper 1/3	=	6.16	to	7.20	(Sell)
Middle 1/3	=	5.11	to	6.16	(Maybe)
Lower 1/3	=	4.06	to	5.11	(Buy)

Rec. qRev	607229	q-q % chg	1%	y-y% chq	12%
Rec qPbt	67121	q-q % chg	5%	y-y% chq	92%
Rec. qEps	10.27	q-q % chg	18%	y-y% chq	143%
ttm-Eps	32.69	q-q % chg	23%	y-y% chq	79%

Disclaimer:  These data are for my own use.  It is not a recommendation. Please do your own due diligence.

"Mr. Buffett, what types of companies will you purchase in the future?"

Buffett is often asked what types of companies he will purchase in the future.

First, he says, he will avoid commodity businesses and managers in which he has little confidence.

What he will purchase is the type of company that he understands, one that possesses good economics and is run by trustworthy managers. 

"A good business is not always a good purchase,"  Buffett says, "although it is a good place to look for one."

For Buffett, the activities of a common-stock holder and a businessperson are intimately connected.  Both should look at ownership of a business in the same way.  "I am a better investor because I am a businessman," confesses Buffett, "and a better businessman because I am an investor."

The NINE most important words ever written about investing.

"Investing is most intelligent when it is most businesslike."

The most distinguishing trait of Buffett's investment philosophy is the clear understanding that, by owning shares of stock, he owns businesses, not pieces of paper.  

The idea of buying stock without understanding the company's operating functions - including a company's products and services, labour relations, raw material expenses, plant and equipment, capital reinvestment requirements, inventories, receivables, and working capital needs - is unconscionable, says Buffett.

A person who holds stocks has the choice to become the owner of a business or the bearer of tradable securities.  Owners of common stocks who perceive that they merely own a piece of paper are far removed from the company's financial statements.  These owners behave as if the market's ever-changing price is a more accurate reflection of their stock's value than the businesses' balance sheet and income statement.  They draw or discard stocks like playing cards.

Buffett: BUY OUTSTANDING BUSINESS at a significant discount to its intrinsic value.

If we make mistakes, Buffett confesses, it is either because of

(1)  the price we paid,
(2)  the management we joined, or,
(3)  the future economics of the business.

Miscalculations in the third instance are, Buffett notes, the most common.

It is Buffett's intention not only to identify businesses that earn above-average returns, but to purchase these businesses at prices far below their indicated value.  The margin of safety also provides opportunities for extraordinary stock returns.

If Buffett correctly identifies a company possessing above-average economic returns, the value of the shares of stock over the long term will steadily march upwards as the share price mimics the returns of the business.  

If a company consistently earns 15% on equity, its share appreciation will advance more each year than the share price of a company that earns 10% on equity.  

Additionally, if Buffett, by using the margin of safety, is able to buy this outstanding business at a significant discount to its intrinsic value, Berkshire will earn an extra bonus when the market corrects the price of the business.

"The market, like the Lord, helps those who help themselves."  Buffett says, "But unlike the Lord, the market does not forgive those who know not what they do."

Are you truly operating on the principle of obtaining value for your investments? Carry out the discounted-flows-of-cash calculation.

All the shorthand methods - high or low price-earnings ratios, price-to-book ratios, and dividend yields, in any number of combination, Buffett says, in determining whether "an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value for his investments...............Irrespective of whether a business grows or doesn't, displays volatility or smoothness in earnings, or carries a high price or low in relation to its current earnings and book value, the investment shown by the discounted-flows-of-cash calculation to be the cheapest is the one that the investor should purchase."  

Growth is simply a calculation used to determine value.

Value is the discounted present value of an investment's future cash flow; growth is simply a calculation used to determine value.

People who consistently purchase companies that exhibit low price-to-earnings, low price-to-book, and high dividend yields are customarily called "value investors."  People who claim to have identified value by selecting companies with above-average growth in earnings are called "growth investors."  Typically, growth companies possess high price-to-earnings ratios and low dividend yields.  These financial traits are exact opposite of what value investors look for in a company.

Investors who seek to purchase value often must choose between the "value" and "growth" approach to selecting stocks.

Buffett admits that years ago he participated inn this intellectual tug-of-war*.  Today he thinks the debate between these two schools of thought is nonsense.

"Growth and value investing are joined at the hip", says Buffett.



*Comment:  It is interesting to know that Buffett too had been through these intellectual debates and then formed his own conclusions.

Growth can either ADD or DETRACT from an investment's value/

Growth in sales, earnings, and assets can either add or detract from an investment's value.

Growth can add to the value when the return on invested capital is above average, thereby assuring that when a dollar is being invested in the company, at least a dollar of market value is being created.

However, growth for a business earning low returns on capital can be detrimental to shareholders.  For example, the airline business has been a story of incredible growth, but its inability to earn decent returns on capital have left most owners of these companies in a poor position.

Property/Casualty Insurance Accounting

Property/Casualty Insurance Accounting

Income Statement of Property/Casualty Insurance Company

Premium revenue is also known as earned premium.  This premium revenue is used to fund:

1. Claim payments (loss expense).
2. Sales commissions for insurance agents (commission expenses)
3. Operating expenses (OPEX)

Claim expenses, for example, typically consume 75% of an insurer’s net revenues.

(1)    + (2) + (3) / Premium revenue = Combined ratio

Combined ratio is an insurance company’s key underwriting profit measure.

A combined ratio under 100 indicates an underwriting profit. 

For example:  A combined ratio of 95 means that the insurer paid out 95% of its premium revenue for losses.  The 5% remaining is the underwriting profit.

A combined ratio exceeding 100 indicates an underwriting loss. 

For example:  An insurer with a combined ratio of 105 paid out 105% of its premium revenue to cover losses,  meaning that it had an underwriting loss equal to 5% of revenues.

Companies with combined ratios exceeding 105 for more than a short time have a difficult time recouping their losses via investment earnings, and this type of poor underwriting track record suggests that an insurer’s competitive position is unusually weak.  Insurers unable to earn even the occasional underwriting profit will produce the industry’s poorest returns and may be tempted to accept large investment risks to boost profitability.

Investment income of Insurance companies

Insurers also make money from investment income.  They are often reported as a ratio of premium.

Adding the investment ratio to the combined ratio yields the operating profit ratio.  In many instances, investment income is a key profit determinant because it offsets underwriting losses.

Combined ratio  + Investment ratio  = Operating Profit ratio

Balance Sheet of Property/Casualty Insurance Company 

In addition to float, most insurers invest a large portion of their own retained earnings as well.  The investment account reveals the size of an insurer’s investments relative to its asset base and details the asset allocation employed.

Investment account = Float deployed + Retained Earnings deployed.

Look at the asset allocation of this investment account.  Look for insurers with no more than 30% invested in equities (unless the company is run by Warren Buffett).

Unearned Premiums of Property/Casualty Insurance Company

Unearned premiums represent premiums received but not yet considered revenue.

This oddity reflects an accounting convention.  When an insurer receives a premium, it is deemed to earn it gradually across the year.  After all, if a customer cancels a policy, the insurer must refund that portion of the coverage not consumed.  After six months, an annual auto policy would be 50% earned, and half the premium would be considered revenue.  Before this occurs, the premiums are held in the unearned premium account, and the insurer is free to invest them.

The best property/casualty insurer is one that is able to consistently earn underwriting profits on a large, growing customer base.  In effect, this insurer would be getting paid to profit from investing other people’s money and could retain this float indefinitely (as long as it grows).  Unfortunately, for investors, these situations rarely occur.



Insurance Companies of Malaysia
Click here: https://docs.google.com/open?id=0B-RRzs61sKqRWmp5ZEFEREw4VWM

The One-Dollar Premise of Warren Buffett

There is a quick test that can be used to judge not only the economic attractiveness of a business but how well management has accomplished its goal of creating shareholder value:  If Buffett has selected a company with favourable long-term economic prospects, run by able and shareholder-oriented managers, the proof will be reflected in the increased market value of the company.

• In Buffett's quick test, the increase should, at the very least, match the amount of retained earnings, dollar for dollar.  
• If the value goes up greater than the retained earnings, so much the better.  

All in all, Buffett explains, "Within this gigantic auction arena, it is our job to select a business with economic characteristics allowing each dollar of retained earnings to be translated eventually into at least a dollar of market value.  

The Sultan of Brunei's Supercar Collection: $300,000,000 and Counting

 




Click here:
http://www.carbuzz.com/news/2012/5/19/The-Sultan-of-Brunei-s-Supercar-Collection-300-000-000-and-Counting-7708867/

Cognitive Biases That Cause Bad Investment Decisions

Henry Stimpson

Published: Tuesday, November 29th 2011

---

When it comes to investing, you might think your emotions don’t play a role, but they do without you even realizing it. Everyone has emotional and cognitive biases that shape their choices, and only by spotting them can you overcome them so they don’t cause bad investment decisions, according to Ben Sullivan, a certified financial planner at Palisades Hudson Financial Group.
Sullivan recalls a number of clients who have made mistakes in the past. A middle-aged banker had more than half of his $500,000 portfolio in a few bank stocks. Another prospective client sold his business to a big consumer-goods company had almost all his money — many millions — in that company’s stock. An employee believed his 401(k) plan was diversified because he owned four funds — all large-cap stock funds.
“Investor mistakes have predictable patterns,” says Sullivan. “Our pervasive emotional and cognitive biases often lead to poor decisions.”

Overconfidence
It’s easy to overestimate your own abilities in picking stocks while underestimating risks. Even professional money managers struggle to beat index funds. The casual investor has little chance, Sullivan says.
“It’s almost impossible to have a day job and moonlight as manager of your individual-stocks portfolio,” he says. “Overconfidence frequently leaves investors with their eggs in far too few baskets, with those baskets dangerously close to one another.”

Self-attribution
This is a cognitive error leading to overconfidence. Someone who bought both Pets.com and Apple in 1999 might dismiss his Pets.com loss (it went bankrupt) because the market tanked but believe he’s an investment whiz because he bought Apple.

Familiarity
Investing in what you “know best” can be a siren song leading investors astray from a prudently diversified portfolio. That was the case with all three investors mentioned above. They were familiar with banks, consumer goods and large-cap U.S. stocks respectively, Sullivan says, and unwisely put all their eggs in that familiar basket.

Anchoring and loss aversion

Investors may become “anchored” to the original purchase price. Someone who paid $1 million for his home in 2007 may insist that what he paid is the home’s true value, even though it’s really worth $700,000 now. The same holds for securities.
“Only the future potential risk and return of an investment matter,” Sullivan says.
Inability to sell a bad investment and take a loss causes investors to lose more money as the hoped-for recovery never happens.
“You’ll also miss the opportunity to capture tax benefits by selling and taking a capital loss,” he adds.


Herd fever
When the market is hot and high, the media and everyone else say buy. When prices are low — remember March 2009 — everyone says sell. Following the herd leads investors to come late to the party so that they’re buying at the top and selling at the bottom. Following the herd is a powerful emotion.
Today, Sullivan says, the herd is buying gold and U.S. Treasuries.

Recency
According to a study by DALBAR Inc., the average investor’s returns lagged those of the S&P 500 index by 6.5% per year for the 20 years prior to 2008 largely because of recency bias. People invested in last year’s hot funds, which often turn sour next year, instead of taking a steady course, he says.
(Ed: Read about how the recency effect has been influencing the housing market.)

Counteracting your biases

Having a written plan is the key, Sullivan says.
“Create a plan and stick to it,” he says.
Hewing to a written long-term investment policy prevents you from making haphazard decisions about your portfolios during times of economic stress or euphoria. Selecting the appropriate asset allocation will help you weather turbulent markets.
All investors should invest assets they will need to withdraw from their portfolios within five years in short-term liquid investments. Combining an appropriate asset with a short-term reserve gives investors more confidence to stick to their long-term plans, he says.
If you can’t control your emotions — or don’t have the time or skill to manage your investments — consider hiring a fee-only financial adviser, Sullivan says. An adviser can provide moral support and coaching, which will boost your confidence in your long-term plan and also prevent you from making a bad, emotionally driven decision.
“We all bring our natural biases into the investment process,” Sullivan says. “Though we cannot eliminate these biases, we can recognize them and respond in ways that help us avoid destructive and self-defeating behavior.”

http://www.physiciansmoneydigest.com/personal-finance/Cognitive-Biases-That-Cause-Bad-Investment-Decisions

Is Your Financial Situation Sustainable And Renewable?

Two words that have attracted a lot of attention are "sustainable" and "renewable." These words are generally used in an environmental sense when discussing energy and natural resources, but they should also be applied to your personal financial situation. Using sustainable and renewable sources of energy, for example, can create a secure supply of energy upon which people can rely. Similarly, ensuring that your lifestyle, savings rate and income can be sustained and/or renewed will help you achieve long-term financial security.

Your Lifestyle

Let's start by examining the spending portion of your financial equation. Do you know how much money you spend each month? If you don't, there's no time like the present to take inventory.

Even if you don't know how much you spend, you should certainly know how much you earn. Starting there, do you know what you would do if your next paycheck did not arrive? How long could you continue to support your current lifestyle? Even if you can't bring yourself to create a budget, at the very least you need to stash away some cash in case you find yourself unemployed.

Your Savings Rate

Now let's look at the savings portion of your financial equation. How much do you save each month? Include all sources, from money set aside in your checking or savings account to your 401(k) plan or other employer-sponsored plan. Don't overlook the cash you stash in the cookie jar.

Now figure out how difficult it would be to save that same amount if you were unemployed or were forced to accept a lower-paying job than the one you have today. When you are saving for long-term goals, such as retirement or the cost of a child's education, the amount you end up with is significantly impacted by the amount you put away early on because of the effects of compound interest. Any interruption of the steady stream of savings could significantly reduce the likelihood of achieving your goal.
When you put your savings plan under the microscope, be sure to view it in the context of your income. Are there places where you could cut your spending if times get tough? Is there a way to cut other expenses before you reduce the amount allocated to savings?

Your Income

Now, let's examine your primary income source. If you are counting on a paycheck from your job to finance your expenses, you should put some thought into where your job ranks in terms of sustainability. Are your skills likely to be in demand five years from now? 10? 15? Is your present employer stable? If not, are your skills easily transferable to another employer? Could you earn an equal or greater paycheck if you changed jobs?

If not, are you taking action? Remember, today is the best time to start preparing for tomorrow.

Hope for the Best, Plan for the Worst

Although the future is unknown, taking inventory of your life will certainly let you know where you stand today and take the stress off your tomorrow. If your current level of income would not be easy to replace, spend some time contemplating the merits of living with less.
Simplifying your lifestyle without reducing your income is a great way to free up some cash to build up your emergency fund or give your investment plan a major boost. With a little forethought, you can be prepared for any eventuality. 


The Bottom Line

Of course, if your cash inflows are steady, your savings plan is on track and your source of income is secure, there's nothing wrong with living the good life. Just do so responsibly. Don't buy more than you can afford, keep your debt-to-income ratio low and have a backup plan in the event that life rains on your parade.

Read more: http://www.investopedia.com/articles/pf/08/personal-finance-sustainable-renewable.asp#ixzz28Je6NVlP

Evaluating Your Personal Financial Statement

Month after month, many individuals look at their bank and credit statements and are surprised that they spent more than they thought they did. To avoid this problem, one simple method of accounting for income and expenditures is to have personal financial statements. Just like the ones used by corporations, financial statements provide you with an indication of your financial condition and can help with budget planning. There are two types of personal financial statements:

• The personal cash flow statement
• The personal balance sheet

Let's explore these in more detail.

Personal Cash Flow Statement

A personal cash flow statement measures your cash inflows and outflows in order to show you your net cash flow for a specific period of time. Cash inflows generally include the following:

• Salaries
• Interest from savings accounts
• Dividends from investments
• Capital gains from the sale of financial securities like stocks and bonds

Cash inflow can also include money received from the sale of assets like houses or cars. Essentially, your cash inflow consists of anything that brings in money.

Cash outflow represents all expenses, regardless of size. Cash outflows include the following types of costs:

• Rent or mortgage payments
• Utility bills
• Groceries
• Gas
• Entertainment (books, movie tickets, restaurant meals, etc.)

The purpose of determining your cash inflows and outflows is to find your net cash flow. Your net cash flow is simply the result of subtracting your outflow from your inflow. A positive net cash flow means that you earned more than you spent and that you have some money leftover from that period. On the other hand, a negative net cash flow shows that you spent more money than you brought in.

Personal Balance Sheet

A balance sheet is the second type of personal financial statement. A personal balance sheet provides an overall snapshot of your wealth at a specific period in time. It is a summary of your assets (what you own), your liabilities (what you owe) and your net worth (assets minus liabilities).

Assets

Assets can be classified into three distinct categories:

• Liquid Assets: Liquid assets are those things you own that can easily be sold or turned into cash without losing value. These include checking accounts, money market accounts, savings accounts and cash. Some people include certificates of deposit (CDs) in this category, but the problem with CDs is that most of them charge an early withdrawal fee, causing your investment to lose a little value.
• Large Assets: Large assets include things like houses, cars, boats, artwork and furniture. When creating a personal balance sheet, make sure to use the market value of these items. If it's difficult to find a market value, use recent sales prices of similar items.
• Investments: Investments include bonds, stocks, CDs, mutual funds and real estate. You should record investments at their current market values as well.

Liabilities 

Liabilities are merely what you owe. Liabilities include current bills, payments still owed on some assets like cars and houses, credit card balances and other loans.

Net Worth

Your net worth is the difference between what you own and what you owe. This figure is your measure of wealth because it represents what you own after everything you owe has been paid off. If you have a negative net worth, this means that you owe more than you own.

Two ways to increase your net worth are to increase your assets or decrease your liabilities. You can increase assets by increasing your cash or increasing the value of any asset you own. One note of caution: make sure you don't increase your liabilities along with your assets. For example, your assets will increase if you buy a house, but if you take out a mortgage on that house your liabilities will also increase. Increasing your net worth through an asset increase will only work if the increase in assets is greater than the increase in liabilities. The same goes for trying to decrease liabilities. A decrease in what you owe has to be greater than a reduction in assets.

Bringing Them TogetherPersonal financial statements give you the tools to monitor your spending and increase your net worth. The thing about personal financial statements is that they are not just two separate pieces of information, but they actually work together. Your net cash flow from the cash flow statement can actually help you in your quest to increase net worth. If you have a positive net cash flow in a given period, you can apply that money to acquiring assets or paying off liabilities. Applying your net cash flow toward your net worth is a great way to increase assets without increasing liabilities or decrease liabilities without increasing assets. 

The Bottom Line

If you currently have a negative cash flow or you want to increase positive net cash flow, the only way to do it is to assess your spending habits and adjust them as necessary. By using personal financial statements to become more aware of your spending habits and net worth, you'll be well on your way to greater financial security.

Read more: http://www.investopedia.com/articles/pf/08/evaluate-personal-financial-statement.asp#ixzz28JcbWX2o

How To Land A Finance Job With A Bachelor's Degree

Finance is an extremely competitive profession, especially at the entry level. The desks of investment professionals' are piled high with the resumes of students who have dreams of big money, nice cars and getting on the path to being Masters of the Universe by the time they are 30. Finance is also a cyclical job market: when the stock market is booming, finance jobs boom as well, but when returns dwindle, so do the job listings. And even when the market is flush with jobs, finding a good job is key. Follow these five tips to dramatically increase your chance of landing a finance job even before hitting graduation.

Tip No.1 - Land An Internship

For entry-level positions, interviewers do not expect candidates to know much. Many companies have orientation and training programs that teach new recruits the specifics of what they need to know, but having background knowledge is still expected. An internship can help to fill in for the lack of full-time experience and is not as difficult to get as a real job. Internships do not generally require much, if any, prior knowledge. They will likely be based around grunt work, performing tasks that anyone can do, such as making copies. But they provide learning experiences, references, networking opportunities and something tangible to talk about in an interview. Doing several internships also provides a great display of work ethic, which is a sought-after quality in the finance industry. 

Tip No.2 - Start Early

If you start in the summer before your first year in college, you can have a total of four summer internships before senior year. Is it necessary to do that many? No, but why not? Many finance internships are paid, so there are no excuses. If you are going to get a summer job anyway, it is better to do something that will further your career instead of just flipping burgers. The same holds true when attending college in a metropolitan area. Instead of working part-time at the local clothing store during the school year, file papers for a local investment advisor.

Tip No.3 - Diversify Your Experiences

Don't do five internships for equity traders unless you're 100% sure you want to trade for a living. Try to switch it up a little and land internships around the industry. This will help you gain a better perspective in different areas and help you figure out what you really want to do. If you want to research bonds, an interviewer is likely to ask why. If you had an internship in fixed income and another in equities, you can give a more eloquent answer than, "I just like bonds." Also, the different branches of finance are generally interconnected somehow. Portfolio management makes use of trading and research, for example. Knowing a little about how the different sectors of finance work can give you an edge in the job market.

Finally, work hard at any internship you land. The references can be valuable no matter what, but more importantly, impressing your bosses during an internship can be a great way to open doors for a future full-time job with that company. Many of the summer analyst/internship programs at big banks are created to look for entry-level hires for the next year.

Tip No.4 - Learn to Talk the Talk

To get a job in finance, you should ideally pick a business-oriented major like finance or economics. Many companies say that this does not matter, and it is very common to hear, "We hire all majors - we even have art history majors working at XYZ Company." All is not lost for the art history majors, but it is still certainly better to apply for finance jobs with a finance degree.

Another great way to learn is to make reading the financial news part of your regular routine. Pick up a subscription to The Wall Street Journal and/or the Financial Times and read it every day. As a student, you can normally get discounted subscriptions for these publications. Picking up a weekly magazine like The Economist orBarron’s will help expand your knowledge as well.

Immersing yourself in financial reading will help you get used to the terms and jargon of Wall Street, which is one of the biggest hurdles to cross. Do you know what MBS, CDS, BPS, EBITDA and federal discount rate mean? Regularly reading the financial news throughout college will help you pick up all the basics in due time. Even if you are studying this vocabulary in your courses, reading more about finance will help you to solidify that knowledge and feel more comfortable discussing it. Other ways of picking up financial knowledge are reading investing books, from basic to advanced topics, and reading tutorials and guides from financial websites (looks like you're already on the right track there). Treat learning the financial language the same as learning a foreign language. Instead of ignoring words that you don't understand, look those terms up to help broaden your knowledge.

Tip No.5 - Start Your CFA

As stated earlier, the job market in finance is always very competitive. Many applicants will have high GPAs and degrees from good schools and will have done the things listed above. It is always good to go above and beyond to differentiate yourself from the pack. One way of doing this is to take the Chartered Financial Analyst (CFA)Level 1 exam. The CFA designation is well respected in the financial industry. You'll need to pass three exams and have four years of eligible work experience to obtain the designation, but the first exam can be taken in the final year of a bachelor's program, either in December or June.

Financial professionals know the amount of time and dedication that the program entails (a minimum of 250 hours of study is recommended per exam), so coming out of an undergraduate program having passed the first exam will certainly make you stand out among other job candidates. The commitment to the program will display your work ethic and dedication to finance.

The Bottom Line

In both good and bad times, it is difficult for undergraduates to land a good entry-level position. Your resume is going to get lumped in with hundreds of others from candidates with strong credentials. The competitive nature of the finance job market means that focusing early, gaining experience with internships and gaining knowledge from following the news and reading will help you stay at the front of the pack. Finally, doing something to break off from the pack, like entering the CFA program in your final year of college, can better your chances of landing a good job. Work hard and good luck!

Read more: http://www.investopedia.com/articles/financialcareers/08/five-undergrad-tips.asp#ixzz28JbtpWhc