Benjamin Graham's advice to guide investors in a falling market

If You Think Worst Is Over, Take Benjamin Graham's Advice
By JASON ZWEIG

May 26, 2009

It is sometimes said that to be an intelligent investor, you must be unemotional. That isn't true; instead, you should be inversely emotional.

Even after recent turbulence, the Dow Jones Industrial Average is up roughly 30% since its low in March. It is natural for you to feel happy or relieved about that. But Benjamin Graham believed, instead, that you should train yourself to feel worried about such events.

At this moment, consulting Mr. Graham's wisdom is especially fitting. Sixty years ago, on May 25, 1949, the founder of financial analysis published his book, "The Intelligent Investor," in whose honor this column is named. And today the market seems to be in just the kind of mood that would have worried Mr. Graham: a jittery optimism, an insecure and almost desperate need to believe that the worst is over.

You can't turn off your feelings, of course. But you can, and should, turn them inside out.

Stocks have suddenly become more expensive to accumulate. Since March, according to data from Robert Shiller of Yale, the price/earnings ratio of the S&P 500 index has jumped from 13.1 to 15.5. That's the sharpest, fastest rise in almost a quarter-century. (As Graham suggested, Prof. Shiller uses a 10-year average P/E ratio, adjusted for inflation.)

Over the course of 10 weeks, stocks have moved from the edge of the bargain bin to the full-price rack. So, unless you are retired and living off your investments, you shouldn't be celebrating, you should be worrying.

Mr. Graham worked diligently to resist being swept up in the mood swings of "Mr. Market" -- his metaphor for the collective mind of investors, euphoric when stocks go up and miserable when they go down.

In an autobiographical sketch, Mr. Graham wrote that he "embraced stoicism as a gospel sent to him from heaven." Among the main components of his "internal equipment," he also said, were a "certain aloofness" and "unruffled serenity."

Mr. Graham's last wife described him as "humane, but not human." I asked his son, Benjamin Graham Jr., what that meant. "His mind was elsewhere, and he did have a little difficulty in relating to others," "Buz" Graham said of his father. "He was always internally multitasking. Maybe people who go into investing are especially well-suited for it if they have that distance or detachment."

Mr. Graham's immersion in literature, mathematics and philosophy, he once remarked, helped him view the markets "from the standpoint of eternity, rather than day-to-day."

Perhaps as a result, he almost invariably read the enthusiasm of others as a yellow caution light, and he took their misery as a sign of hope.

His knack for inverting emotions helped him see when markets had run to extremes. In late 1945, as the market was rising 36%, he warned investors to cut back on stocks; the next year, the market fell 8%. As stocks took off in 1958-59, Mr. Graham was again pessimistic; years of jagged returns followed. In late 1971, he counseled caution, just before the worst bear market in decades hit.

In the depths of that crash, near the end of 1974, Mr. Graham gave a speech in which he correctly forecast a period of "many years" in which "stock prices may languish."

Then he startled his listeners by pointing out this was good news, not bad: "The true investor would be pleased, rather than discouraged, at the prospect of investing his new savings on very satisfactory terms." Mr. Graham added a more startling note: Investors would be "enviably fortunate" to benefit from the "advantages" of a long bear market.

Today, it has become trendy to declare that "buy and hold is dead." Some critics regard dollar-cost averaging, or automatically investing a fixed amount every month, as foolish.

Asked if dollar-cost averaging could ensure long-term success, Mr. Graham wrote in 1962: "Such a policy will pay off ultimately, regardless of when it is begun, provided that it is adhered to conscientiously and courageously under all intervening conditions."

For that to be true, however, the dollar-cost averaging investor must "be a different sort of person from the rest of us ... not subject to the alternations of exhilaration and deep gloom that have accompanied the gyrations of the stock market for generations past."

"This," Mr. Graham concluded, "I greatly doubt."

He didn't mean that no one can resist being swept up in the gyrating emotions of the crowd. He meant that few people can. To be an intelligent investor, you must cultivate what Mr. Graham called "firmness of character" -- the ability to keep your own emotional counsel.

Above all, that means resisting the contagion of Mr. Market's enthusiasm when stocks are suddenly no longer cheap.



http://online.wsj.com/news/articles/SB124302634866648217?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB124302634866648217.html

Buy & Hold Investing? Give It Time

Uploaded on 18 Feb 2009
The Wall Street Journal's Jason Zweig shares his unique perspective on buy and hold investing, concluding that one should look at it differently.


Is buy and hold dead?
I don't think it is right.
That is exactly what people say right before buy and hold comes back to life.  
Nobody says that when the Dow was over 14,000 when buy and holding was a dangerous idea.
They only started saying this when the Dow was nearer 8,000.
But it is cheap now and it is inconceivable that buy and hold is a bad idea at Dow 8,000 than at Dow 14,000.

What about the idea of the market being in a long term bear market that could go on for years, like from 1966 to 1982?
Anytime you buy, it is going to take you years to get back to where you were and people should invest more actively.
We may enter at a protracted period when the returns from the market are below average, that doesn't mean that more active trading in and out of stocks are going to increase your returns.
Though the trading costs are lower now than before, the costs are still real.
If you can buy and hold through a protracted period of low returns, the flip side to this is, you are buying at lower market valuation than before.
People who bought and held from 1966 to 1982, or from 1929 to 1940s and 1950s, did quite well.
It was the people who only held who suffered.
If you are going to retire, you had a big problem.
But if you are younger, buying and holding is a spectacular idea.

But when people said to buy and hold, they do not mean, buy once and then do not put another dime in, and wait for it to go up.
They mean buying steadily, not trying to decide  where you think the bottom has bottomed, but keep buying at lower prices regularly.
Maybe we should not talk about investing.
Instead use the term savings.
If you think of putting money into the financial market in the form of savings, you don't expect to get your returns right away.  
You expect to get it over time and certainly that tricks people up.
Certainly, the returns had been terrible recently and if it is going to pay off, you must give it time.

Business Lessons From Billionaire Warren Buffett

Buffett: I would vastly prefer to own common stocks than fixed dollar income investments.

Stocks versus bonds, commodities.
Speculation versus investing.

I like to see what assets produce, rather than what they are worth.
I don't like fixed dollar investments at all.
Real test of asset is if you want it even if price were never quoted again.
I would rather have all the farmland in the U.S. than all the world's gold.
As an investor, I don't worry about where oil prices are going.
Stocks not as cheap as they were, but they still look attractive.
Sentiment has fluctuated while underlying fundamentals steady.
Good businesses are resilient and withstand inflation.
Railroad business is about 60% of the way back from bottom.
U.S. Companies saw great improvement in productivity during downturn.









ublished on 16 Jan 2014
View the original blog post: http://warrenbuffettnews.com/warren-b...

Warren Buffett: You should never sell a good business just to get money, this does not sense.

Warren Buffett on How to Buy a Business: Private Companies vs. Stock Market, Investing




A fair price to us is one where we get our money's worth in terms of future earnings.

Its easier for us to buy private businesses than public businesses.

If we have to pay 20% premium to market, we will generally do not wish to buy them.

If someone with a wonderful company wishes to sell and asked for my advice, I will asked them to just keep it.

If you own a wonderful business in life, the best thing is just keep it.

All you are going to do is to trade your wonderful business for a whole bunch of cash, which isn't as good as the business.

Then you have the problem of investing in other businesses and you probably have to pay the tax in between.

If you can figure out a way to keep your wonderful business, keep it.

Why do people sell? Family dynamics. Sometime, the person loses interest in the business.

YOU SHOULD NEVER SELL A GOOD BUSINESS JUST TO GET MONEY, THIS DOES NOT MAKE SENSE.


PAYING PREMIUMS FOR ELEPHANTS DOES NOT MAKE SENSE.

I DON'T CARE ABOUT LOCATION OF ANY POTENTIAL ACQUISITION.

Warren Buffett talks market all-time highs, says stocks "in a zone of reasonableness"

Market is in a zone of reasonableness at moment. In 5 years time, it will be higher.


"It is very important to talk to children about money very early on."
Warren Buffett

The younger the age at which a person starts his/her businesss determines his/her success.

Charlie Munger: I have seen so many idiots getting rich on easy businesses. Don't buy cheap bargains, but look for very good companies.

Don't buy cheap bargains, but look for very good companies.
I have observed what would work and what would not.
I have seen so many idiots getting rich on easy businesses.
Surely, I am interested in the easy businesses.

Alice Schroeder on How Buffett Values a Business and Invests

On November 20, 2008, Alice Schrooder, author of “The Snowball: Warren Buffett and the Business of Life”, spoke at the Value Investing Conference at the Darden School of Business. She gave some fascinating insights into how Buffett invests that are not in the book. I hope you find them useful.

1. Much of Buffett’s success has come from training himself to practice good habits. His first and most important habit is to work hard. He dug up SEC documents long before they were online. He went to the state insurance commission to dig up facts. He was visiting companies long before he was known and persisting in the face of rejection.
2. He was always thinking what more he could do to get an edge on the other guy.
3. Schroeder rejects those who argue that working harder will not give you an edge today because so much is available online.
4. Buffett is a “learning machine”. This learning has been cumulative over his entire life covering thousands of businesses and many different industries. This storehouse of knowledge allows Buffett to make decisions quickly.
5. Schroeder uses a case study on Mid-Continent Tab Card Company in which Buffett invested privately to illustrate how Buffett invests.
6. In the 1950′s, IBM was forced to divest itself of the computer tab card business as part of an anti-trust settlement with the Justice Department. The computer tab card business was IBM’s most profitable business with profit margins of 50%.
7. Buffett was approached by some friends to invest in Mid-Continent Tab Card Company which was a start-up setup to compete in the tab card business. Buffett declined because of the real risk that the start-up could fail.
8. This illustrates a fundamental principle of how Buffett invests: first focus on what you can lose and then, and only then, think about return. Once Buffett concluded he could lose money, he quit thinking and said “no”. This is his first filter.
9. Schroder argues that most investors do just the opposite: they first focus on the upside and then give passing thought to risk.
10. Later, after the start-up was successfully established and competing, Buffett was again approached to invest capital to grow the business. The company needed money to purchase additional machines to make the tab cards. The business now had 40% profit margins and was making enough that a new machine could pay for itself in a year.
11. Schroeder points out that already in 1959, long before Buffett had established himself as an expert stock picker, people were coming to him with special deals, just like they do now with Goldman Sachs and GE. The reason is that having started so young in business he already had both capital and business knowledge/acumen.
12. Unlike most investors, Buffett did not create a model of the business. In fact, based on going through pretty much all of Buffett’s files, Schroder never saw that Buffett had created a model of a business.
13. Instead, Buffett thought like a horse handicapper. He isolated the one or two factors upon which the success of Mid American hinged. In this case, sales growth and cost advantage.
14. He then laid out the quarterly data for these factors for all of Mid Continent’s factories and those of its competitors, as best he could determine it, on sheets of a legal pad and intently studied the data.
15. He established his hurdle of a 15% return and asked himself if he could get it based on the company’s 36% profit margins and 70% growth. It was a simple yes or no decision and he determined that he could get the 15% return so he invested.
16. According to Schroder, 15% is what Buffett wants from day 1 on an investment and then for it to compound from there.
17. This is how Buffett does a discounted cash flow. There are no discounted cash flow models. Buffett simply looks at detailed long-term historical data and determines, based on the price he has to pay, if he can get at least a 15% return. (This is why Charlie Munger has said he has never seen Buffett do a discounted cash flow model.)
18. There was a big margin of safety in the numbers of Mid Continent.
19. Buffett invested $60,000 of personal money or about 20% of his net worth. It was an easy decision for him. No projections – only historical data.
20. He held the investment for 18 years and put another $1 million into the business over time. The investment earned 33% over the 18 years.
21. It was a vivid example of a Phil Fisher investment at a Ben Graham price.
22. Buffett is very risk averse and follows Firestone’s Law of forecasting: “Chicken Little only has to be right once.” This is why Berkshire Hathaway is not dealing with a lot of the problems other companies are dealing with because he avoids the risk of catastrophe.
23. He is very realistic and never tries to talk himself out of a decision if he sees that it has cat risk.
24. Buffett said he thought the market was attractive in the fall of 2008 because it was at 70%-80% of GDP. This gave him a margin of safety based on historical data. He is handicapping. He doesn’t care if it goes up or down in the short term. Buying at these levels stacks the odds in his favor over time.
25. Buffett has never advocated the concept of dollar cost averaging because it involves buying the market at regular intervals – regardless of how overvalued the market may be. This is something Buffett would never support.

Here is a link to the video: http://www.youtube.com/watch?v=PnTm2F6kiRQ

http://www.valueinvestingfundamentals.com/?p=96

How to Invest in High Growth and Great Value Stocks with Accelerated Returns

Published on 18 Oct 2012

Kathlyn Toh - professional investor and trader in the U.S. and global stock market shared how we can invest into the greatest companies in the world by paying only 10% of the stock price and getting 10X faster returns.

The Scientific Approach to Achieving Double Digit Returns Using Value Investing

Value Investing and dividend growth investing (Webinar)

Simple Definitions of Value Investing

Value investing is buying QUALITY STOCKS when they are UNDERVALUED.

Value investing is buying GOOD COMPANIES when they are available at SENSIBLE PRICES.














Summary:

Buy quality companies when they are undervalued.

Dividends are key; especially increasing dividends.

Investing is not risky if you know what you are doing.#


Modest realistic aim:

To achieve a double digit dividend yield return based on your cost price over a reasonable number of years of investing in a stock.


# Invest in recession proof companies that are increasing dividend payments year after year.







More videos:
https://www.youtube.com/watch?v=GB6KQ_gvum0&list=PL8D865987D9956CD9

The Benefits of Dollar-Cost Averaging in a Volatile Market

The Benefits of Dollar-Cost Averaging


Volatile Market that ends up flat

Period      Amount       Price        No of shares 
             Invested $      $       Purchased 
1       1,000       100       10.00 
2       1,000         80       12.50 
3       1,000         60       16.67 
4       1,000         80       12.50 
5       1,000       100       10.00 
                  
Total Invested       5,000             
Total shares purchased                   61.67 
Average cost of shares purchased $                   81.08 
Value at period 5 ($)             6,166.67       
                  
                  
                  
Ebullient Market that rises continually                  
                  
Period      Amount       Price        No of shares 
             Invested $      $       Purchased 
1       1,000       100       10.00 
2       1,000       110       9.09 
3       1,000       120       8.33 
4       1,000       130       7.69 
5       1,000       140       7.14 
                  
Total Invested       5,000             
Total shares purchased                   42.26 
Average cost of shares purchased $                   118.32 
Value at period 5 ($)             5,916.32       


The table above shows that you actually end up with more money in the scenario where the market is very volatile and ends up exactly where it began.

In both cases, a total of $5,000 is invested over the 5 periods.  

In the flat volatile market, the investor ends up with $6,167, while in the scenario where market prices rise continually, the investor's final fund stake is only $5,915.



Learning Points:

Warren Buffett, has a nice way of showing that you might actually wish for lower stock prices (at least for awhile) after you begin your investment program.

He writes:

If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef?  Likewise, if you are going to buy a care from time to time but are not an auto manufacturer, should you prefer higher or lower car prices?  These questions, of course, answer themselves.

But now for the final exam:  If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?   Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.  In effect, they rejoice because prices have risen for the "hamburgers" they will soon be buying.  This reaction makes no sense.  Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

How to be a millionaire? Save regularly and save early.

Dollar Cost Averaging Can Reduce the Risks of Investing in Stocks and Bonds

Dollar cost averaging is not a panacea that eliminates the risk of investing in common stocks.  

It will not save your investment plan from a devastating fall in value during a year such as 2008, because no plan can protect you from a punishing bear market.  

You must have both the cash and the confidence to continue making the periodic investments even when the sky is the darkest.

No matter how scary the financial news, no matter how difficult it is to see any signs of optimism, you must not interrupt the automatic pilot nature of the program.  

Because if you do, you will lose the benefit of buying at least some of your shares after a sharp market decline when they are for sale at low prices.  

Dollar cost averaging will give you this bargain.  Your average price per share will be lower than the average price at which you bought shares.  

Why?  Because you will buy more shares at low prices and fewer at high prices.

Some investment advisers are not fans of dollar cost averaging, because the strategy is not optimal if the market does go straight up.  (You would have been better off putting all $5,000 into the market at the beginning of the period.).  

But it does provide a reasonable insurance policy against poor future stock markets.  

And it does minimize the regret that inevitably follows if you were unlucky enough to have put all your money into the stock market during a peak period such as March of 2000 or October of 2007.

There is tremendous potential gains possible from consistently following a dollar-cost averaging program.

Because there is a long-term uptrend in common stock prices, this technique is not necessarily appropriate if you need to invest a lump sum such as a bequest.

If possible, keep a small reserve (in money fund) to take advantage of market declines and buy a few extra shares if the market is down sharply.  

Though you should not try to forecast the market, it is usually a good time to buy after the market has fallen out of bed.

Just as hope and greed can sometimes feed on themselves to produce speculative bubbles, so do pessimism and despair react to produce market panics.  

The greatest market panics are just as unfounded as the most pathological speculative explosions.  

For the stock market as a whole (not for individual stocks), Newton's law has always worked in reverse:  What goes down has come back up.  

(A Random Walk Down Wall Street, by Burton Malkiel)

Roller coaster ride of the stock market (Market Volatility).

What is Financial Planning and How Can We Fix It

Cash Flow Investments

Cash-Flowing Investments
Private Equity
Hedge Funds
Alternative Strategies
Mortgages
Real Estates
High-Yield Bonds

versus

Volatile Stock Market

Fundamentals of Wealth Management - The Complete Lesson

Published on 7 May 2012
The complete lesson.

Dow Wealth Management offers the services of a world-class investment firm dedicated to improving clients' financial lives and making their futures more secure. As an independent firm, Dow Wealth Management provides objective advice and is committed to excellence for its clients. The Dow family has been investing traditionally in the securities markets since 1937.

Before attempting to structure a portfolio that might be capable of delivering long-term investment success, we must first understand the nature of the financial markets in which we will operate and the inherent limitations we are sure to confront as investors.

This video, Fundamentals in Wealth Management, will help to acquaint the investor with these dynamics and then illustrate how Dow Wealth Management seeks to position its clients' portfolios for long-term investment success. We could call it "How to survive bad markets...and thrive in good ones."



@6.08 The 3 issues addressed in this video.

1. The Life Cycle of Family Wealth: Accumulation, Preservation and Growth of Mature Wealth. Wealth preservation and growth became more important than wealth accumulation.
2. Defining the Investment Problem: The Dow Wealth Management Analysis
3. The Dow Wealth Management Approach

Burton Malkiel: How to Invest

Uploaded on 12 Feb 2010

Princeton economist Burton Malkiel says simplicity is key to a successful portfolio. He discusses emerging markets, index funds, and more with Eric Schurenberg

Random Walk Down Wall Street by Burton Malkiel

Uploaded on 13 Sep 2011

Dr. Burton G. Malkiel, the Chemical Bank Chairman of Economics at Princeton University and author of the widely read investment book, A Random Walk Down Wall Street, shared his investment views and strategies in a talk on September 12 to SIEPR Associates.

The fundamentals of portfolio management

Lessons In Financial Literacy: In this show, Anil Chopra, Group CEO & Director of Bajaj Capital Ltd and Gaurav Mashruwala, a financial planner, share their views to understand the subject of financial planning better. The show talks about the importance of investment planning, investment planning steps and ideal saving break-up.

https://globalconnections.hsbc.com/global/en/tools-data/country-guides/my-march-2013?utm_source=outbrain&utm_medium=click&utm_content=1&utm_campaign=global+gc+2013

Country Guide: Malaysia

In association with PwC

---

Malaysia’s export-driven economy is spurred by high technology, knowledge-based and capital-intensive industries. Political and economic stability, investor-friendly business policies, cost-productive workforce, and a host of other amenities, makes this country an enticing place for foreign investment - especially in areas such as manufacturing, and particularly in high- technology, biotechnology industries.

CFA Level I Portfolio Management An Overview Video Lecture

Uploaded on 26 Sep 2011
This CFA Level I video covers concepts related to:

• Portfolio Perspective
• Portfolio Definition
• Diversification
• Investment's Contribution to Risk and Return
• Markowitz Framework: Standard Deviation as a measure of Risk
• Diversification Ratio

For more updated CFA videos, Please visit www.arifirfanullah.com.

Create a Portfolio You Don't Have to Babysit

Great Q&A starting @ 42 min. Very insightful

Published on 14 Jun 2012
In this special one-hour presentation, Morningstar director of personal finance Christine Benz and ETF expert Mike Rawson discuss how to build a low-maintenance, hands-free portfolio that will help you reach your financial goals.

Note to viewers: Filmed in late April 2012, this Morningstar presentation was part of Money Smart Week, a series of free classes and activities organized by the Federal Reserve Bank of Chicago and designed to help consumers better manage their personal finances. Morningstar is a Money Smart Week partner.

Download the presentation slides here:
http://im.mstar.com/im/moneysmartweek_presentation.pdf

John C. Bogle - The Battle for the Soul of Capitalism

Dean Lawrence R Velvel interviews John C. Bogle, founder of the Vanguard Group, Inc. and president of the Bogle Financial Markets Research Center, about his book The Battle for the Soul of Capitalism. Bogle analyses what went wrong in corporate america, from pension plans to corporate profits to mutual funds to stock options to corporate greed.


2 markets:  Business market and the Expectation market

@ 34.30 min - Owner capitalism is now transformed into a pathological mutant form where the managers have taken far too large a proportion of the share of the profits.  Today financial institutions own 68% of all stocks; they are traders and speculators mainly, playing in the expectation market.

@ 49.30 min - Costs of mutual funds.

@ 53 min - The magic of compounding returns.  The tyranny of compounding costs.  The tyranny of compounding costs overwhelmed the magic of compounding returns.  Get rid of costs and emotions.

Mr. John Bogle speaks on many issues related to investing. Don's listen to history.

Lange-Bogle 1: Investment vs. Speculation
Published on 4 Feb 2013
Noted IRA expert and estate planning attorney, James Lange, interviews Vanguard Group founder, John Bogle. Here, Jim discusses Mr. Bogle's history as a leader in the financial world and delves into a discussion of his newest book, The Clash of the Cultures: Investment vs. Speculation. Mr. Bogle explains his definitions of investment and speculation and tells us why he feels only one of these path creates wealth.


Lange-Bogle 2: Speculation - A Loser's Game
IRA expert and best-selling author, Jim Lange and John Bogle, founder of Vanguard, discuss the cultures of investment and speculation. Investment is about long-term wealth creation by investing in the growth of corporations. The culture of speculation is akin to betting, and in John Bogle's perspective, the house always wins!



Lange-Bogle 3: What Hurts the Everyday Investor Now
James Lange, CPA/Attorney and host of The Lange Money Hour and John Bogle, founder of Vanguard, go over the hard facts. Of the 33 trillion dollars that change hands every year in the markets, only 250 billion of it can be characterized as true investing. John Bogle speaks plainly about the mess Wall Street is in, and the role speculation has played in getting it there.



Lange-Bogle 4: Conflict of Interest in Our Broken System
John Bogle, founder of Vanguard, shares with Attorney and CPA Jim Lange, where he feels the system is broken and how we find ourselves in our current speculative culture. There is a critical conflict of interest that prevents our money managers, agents, and financial institutions from being true fiduciaries. Who is looking out for the interests of the shareholders?



Lange-Bogle 5: The 10 Gatekeepers of our Financial System
Noted IRA expert and estate planning attorney, James Lange and John Bogle, founder of Vanguard, discuss Bogle's broad indictment of the gatekeepers of our financial system in his newest book, "The Clash of the Cultures: Investment vs. Speculation." The gatekeepers of our system, according to Bogle, are more interested in the current price of stock, the speculative aspect of it, rather than the support of thriving companies and creation of long-term wealth for shareholders.



Lange-Bogle 6: The Cause of the Recession and How to Fix It
John Bogle, founder and former CEO of Vanguard, talks to Attorney and CPA, Jim Lange, about the terrible fraud perpetrated by mortgage companies and how the severed link between the borrower and the lender sent our economy into a tail spin. If Bogle were Czar, he would pass a federal statute eliminating conflicts of interest and demanding fiduciary duty of money managers.



Lange-Bogle 7: The Need for Full Disclosure
IRA expert and best-selling author, Jim Lange and John Bogle, founder of Vanguard, discuss the need for an industry standard for full disclosure of not only potential conflicts of interest, but also the true cost of unreasonable fees and commissions. John Bogle feels that fees are often underestimated and if the public truly understood the costs of the investment choices they made, the world would be a different place in which to live and invest.



Lange-Bogle 8: "Don't do something, just stand there!"
James Lange, CPA/Attorney and host of The Lange Money Hour and John Bogle, founder of Vanguard, talk about the history of success in indexing and how the passive strategy behind "Bogle's Folly" (the Vanguard 500 Index) went from foolishness to genius with decades of proven results. Active managers do not beat their benchmarks a strong majority of the time. Owning all the companies and holding them forever has been proven a winning strategy and, in Bogle's opinion, is the only way of being a true investor.



Lange-Bogle 9: Time is Your Friend, Impulse is Your Enemy.
James Lange, CPA/Attorney and host of The Lange Money Hour and John Bogle, founder of Vanguard, talk about the importance of not relying on past performance to predict future results and the miracle of compounding interest. Like the Law of Gravity, Reversion to the Mean is an eternal rule. What goes up must go down, even in the stock markets. Time is your friend (the miracle of compounding pays off hugely). Focus on the long term. Resist the impulse during periods of adversity and fear.



Lange-Bogle 10: Simple Rules for Investment Success
Noted IRA expert and estate planning attorney, James Lange and John Bogle, founder of Vanguard, go over a few of the "10 Simple Rules" laid out in Bogle's newest book, The Clash of the Cultures: Investment vs. Speculation. These are some new twists on classic Bogle investment advice, or "Bogleisms," including: "Buy Right and Hold Tight," "The Bagel and the Donut," "Forget the Needle, Buy the Haystack," and "Minimize the Croupiers Take." Beware of your market returns being overwhelmed by the tyranny of long term compounding of your costs.



Lange-Bogle 11: There is No Escaping Risk
Less volatility doesn't mean less risk. It means different risk. IRA expert and best-selling author, Jim Lange and John Bogle, founder of Vanguard, discuss the dangers of ignoring inflation risk. Many retired people do not want to incur any risk, but there is no escaping it. Over time inflation eats away at the value and purchasing power of your money. John Bogle explains that you need to incur some volatility and investment risk in order to build a retirement fund.

Lange-Bogle 12: Beware of Fighting the Last War

In this video, John Bogle, founder of Vanguard and CPA, attorney and best-selling author Jim Lange, review some of the investment wisdom imparted in Bogle's most recent book, The Clash of the Cultures: Investment vs. Speculation. Mr. Bogle warns us not to listen to history! As interesting as it may be, where investment is concerned, it doesn't repeat itself. The founder of Vanguard also suggests something you may not expect... throw your statements away and don't ever look at them!  Fox versus hedgehog.  The foxes know a lot of things but the hedgehogs know only ONE great thing.



James Lange Talks to John Bogle
John Bogle, founder of The Vanguard Group, tells James Lange his most important piece of advice for investors.

John Bogle: Keep Investing

2 Oct 2008

The founder and former CEO of Vanguard talks to Morningstar's Christine Benz about why to stay the course amid the financial crisis.

A sharp market decline is bad for sellers but it is very good for buyers.

Wealth, fame and power. One should re-define what success should be other than these.

Burton Malkiel: How to Invest

12 Feb 2010

Princeton economist Burton Malkiel says simplicity is key to a successful portfolio. He discusses emerging markets, index funds, and more with Eric Schurenberg.

Burton Malkiel: Timeless Lessons for Investors

1.  Buy and Hold.  Don't time the market

He started his talk by tackling the issue :  "In the light of the 2008 Global Financial Crisis when the market dropped almost 50%, is buy and hold is now dead?"
The best days in the market that gave the best returns were usually the few days that leaped from the bottom of the market.
Don't try to time the market.  It is dangerous.  You can't do it and you will make mistakes.

2.  Dollar Cost Averaging

You make more likely to make more money in a volatile time than a steadily rising market, but this is not always the case.  Of course, if you know the market is going to be steadily rising, you will make more money if you invest a lump sum at the beginning..

3.  Rebalance your portfolio.

He advises rebalancing your portfolio once yearly, example, 60% stock and 40% bond target and rebalancing in January every year.  In a volatile market, rebalancing reduces the volatility and may also increase the return of your portfolio.  In a rising market, rebalancing will reduce the volatiltiy and may reduce the return of your portfolio slightly.

4.  Diversification

In 2008 and early 2009, there were few places to hide.  Many people opined that diversification doesn't work anymore.
Diversification works when the asset classes are not correlated.  Though many asset classes are now more correlated, you can still diversify, example, buying emerging markets and bonds.  How do you access China?  Why not through index funds? (@39 min)

5.  Costs matter

The lower the costs charged by the purveyor of the investment service, the better and the more is left for you.  "You get what you don't pay for!"  Cost you pay is the one thing you can control and you may increase your return by up to 2% per year just by ensuing the cost is low.  He advocates index funds.  Stock market is a zero sum game and costs of mutual funds of >1% shift the distribution of the stock market to that of a negative sum game.  90% of professional managed mutual funds are beaten by the index benchmark.  In his study of mutual funds over many years, less than 5 mutual funds have beaten the market by 2% or more ( @ 29 min).  Buy the index funds.  "It is like searching for the needle in the haystack.  Buy the haystack instead.".
Two-third of bond active managers are beaten by bond-index funds.  His advice is that the core of your portfolio should be in low cost index funds. (You can have more leeway in a satellite portfolio too.)


Q&A:
@ 43 min   Lump sum investing early or Dollar Cost Averaging when you have a big sum of money to invest.
Potential regret of getting into the high of the market.  Reduction in volatility.  Might not always be optimal.  At least some of this big sum of money should still put into the market in dollar cost averaging manner. Can you advise how long to spread this dollar cost averaging?  Depends on the returns from the alternative investments.  Spread your investing over a shorter period now, since the alternative investment return (interest rate)  is low.

@ 48 min.  Missing the 10 best days or missing the 10 worst days.  Some bias in presentation.

@50.30 min.  Corporate governance.

@53 min.  Dividend yield stocks of Warren Buffett.  Buffett is really the needle in the haystack.  Vanguard REIT - a good diversifier.

@1.04.50 min.  How would you invest $1 million?

@1.08.30 min.  What are the target percentages people of various ages should save?  Answer:  MORE.  If you start early, you may have to save a lot due to the compounding effect.  Those who did not save early, probably need to save a lot more to catch up (20% or more).  The opportunity cost of not saving $1 in your 20s might be $10 or $15 when you are in your 50s.






Uploaded on 1 Jun 2010
Dr. Burton G. Malkiel, the Chemical Bank Chairman's Professor of Economics at Princeton University, is the author of the widely read investment book, A Random Walk Down Wall Street. He has also authored several other books, including the recently published The Elements of Investing.

Dr. Malkiel has long held professorships in economics at Princeton, where he was also chairman of the Economics Department. He also served as the dean of the Yale School of Management and William S. Beinecke Professor of Management Studies. Dr. Malkiel is a past president of the American Finance Association and the International Atlantic Economic Association, and a past appointee to the President's Council of Economic Advisors. He continues to serve on several corporate and investment management boards.

Making Good Investment Decisions

HOLT - Making Good Investment Decisions

Uploaded on 29 Nov 2010

HOLT gives you the best perspective for making more confident investment decisions. Its flexible platform, which has been evolving for over 25 years, provides an objective view of over 20,000 companies around the world. HOLT lets you survey a company's entire capital structure and identify key drivers of value that others miss. 

https://www.credit-suisse.com/investment_banking/holt/en/index.jsp

E-learning

• by Credit Suisse 
• 21 videos

Our e-learning videos provide insight on the HOLT platform and methodology, give tips on management topics and explain broader economic issues.

http://www.youtube.com/playlist?list=PLE57332290C644C39

Importance of being Financially Educated. How To Be Wealthy And Why 95% Never Will Be

"You will never be wealthy working for someone else at a job - EVER!"

Once you have knowledge, you can seized opportunities when they come along, because you can recognize them.

Become an Entrepreneur. As an entrepreneur, you gain time freedom and financial freedom.

The broker buy stuff
The middle class buy liabilities
The rich buy assets that create passive cash flows which can then be reinvested to increase these passive cash flows further.  This is the wealth creation formula.
You cannot find these passive cash generating opportunities unless you are open to hearing about them.  Once you find them, you have to see which fits you and then act.







Published on 27 Aug 2013
How to become wealthy without a college degree
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These Are The 20 Best Jobs That Don't Require a College Degree ...
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Six Figures, No College Degree
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She has managed to reach a six figure salary without a college degree. ... Whatever the reason, don't become a cubicle-sitter unless you are not looking to .... Tens of millions, rich and poor, worked together at Elks Lodges and Rotary Clubs.
10 Best Jobs You Can Get Without a College Degree-Kiplinger
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To identify the ten best jobs you can get without a college degree, we focused on two critical factors: salary and job growth.
Skip college, make money fast: 10 high-paying jobs that don't ...
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Aug 11, 2010 - In a lot of ways, college is a great idea, for personal well-being, ... Either way, careers abound that allow you to make money without a degree.
Can I become rich without college degree? - Yahoo! Answers India
in.answers.yahoo.com › All Categories › Business & Finance › Investing‎
May 25, 2011 - We're all born with a sure path to being a millionaire, that of simply saving as much of our salary as we can and investing it in a simple no load, low ...
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Mar 9, 2011 - Making Money Without Degree - How to Become Rich Without a College Degree. Let's face the fact. Not everyone will be able to graduate with ...
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You can find a great job without having a college degree. Here are 19 examples...and a clear path on how to score one.
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Nov 29, 2010 - A bulky paycheck comes after a college degree for most, but not for ... or just plain luck, these 15 people are billionaires with no bachelor's ...

Seven Top Investment Ideas for 2014

• Investing: Q&A

By: Cushla Sherlock

Published: February 11, 2014

As the global economy continues its recovery, Credit Suisse’s top investment ideas focus on carefully selected themes which aim to help you generate more bang for your buck in 2014. 

Idea 1: Europe’s Recovery

Rationale: Europe’s recovery is slowly gathering pace and Credit Suisse anticipates an acceleration in earnings growth in 2014. Valuations are more attractive than in the US.

Investment implications: Buy (or overweight) European stocks. Among countries, Credit Suisse currently favors Germany given its operating leverage towards a recovery. For higher-risk investors: Europe-wide small and mid-cap stocks, cyclicals and selected banks on low valuations. For lower-risk investors: Dividend-yielding stocks offer potentially lower risk with higher yields than fixed income markets.

Idea 2: Seeking Equity Alpha

Rationale: Equities are the preferred asset class for 2014. After a good performance in 2013, the market recovery is set for a new phase in which active style, sector, country and stock selection can generate superior returns, noting that within both US and European stock markets, correlations among equities have fallen markedly.

Investment implications: Choose sectors, styles, countries and individual stocks based on prevailing market dynamics; cyclicals and momentum stocks from the IT and capital goods sectors are recommended.

Idea 3: Emerging Markets Reloaded

Rationale: During 2014 Credit Suisse expects that most emerging markets will benefit from a cyclical upswing supported by export opportunities to the developed markets. Emerging market trend growth rates remain above those of developed markets (albeit lower than before) and could further re-accelerate with structural reforms. Deficits still a source of volatility.

Investment implications: Gain exposure to export-led, growth-sensitive countries, such as Taiwan, and also look for those where the potential for successful structural reforms is not yet fully discounted. Compelling valuations can still be found (for example, China) where long term fundamentals – like consumption, urbanization, export potential – remain key investment drivers. Take a position in companies that benefit from emerging market cyclical recovery.

Idea 4: Fixed Income in a World of Rising Yields

Rationale: The need to obtain reasonable fixed income returns at a time when duration is unattractive since yields may rise on an economic recovery and tapering, and credit spreads are low.

Investment implications: Focus on short-duration assets in areas where value still exists, like corporate senior loans (usually held via a fund), bank subordinated debt, bank CoCos, corporate hybrids and distressed debt. Credit spreads on high yield and floating rate debt are near historic lows but limited amounts of such debt from strong issuers can be included in an overall portfolio. Avoid overvalued assets such as bank senior debt.

Idea 5: Forex as the Fed Tapers

Rationale: With tapering, the USD is set to strengthen against some currencies, like the JPY, and trade at the stronger end of the range against others, for example the EUR. In portfolios, a USD long position offers diversification in times of stress.

Investment implications: Buy USD/JPY, spot or forward. Opportunistically sell EUR/USD near the top of the range. Within emerging markets, sell currencies of deficit countries against those of surplus countries and of reformers.

Idea 6: Cash-Rich Companies

Rationale: Corporate cash piles remain near multi-year highs. Rising CEO confidence levels and pressure from shareholders to invest in growth or return cash bodes well for M&A activity.

Investment implications: Moderate risk-appetite investors should favor companies with a strong free cash flow and the ability to buy back shares. Investors with higher risk-appetite should prefer companies that are the potential targets of industry consolidation or which will benefit from asset disposals through restructurings.

Idea 7: China Reform Reaccelerates

Rationale: The Third Plenary Session of China’s Central Committee announced a clear direction for structural reforms, with accelerated product and financial market liberalization which should accelerate economic rebalancing, from exports and investment towards consumption. Concrete measures are expected in the coming months.

Investment implications: Stock selection is key. Gain exposure to global, regional and domestic firms that can benefit from China’s structural reforms with a focus on the private companies, services sectors and winners from economic rebalancing towards consumption. CNY and CNH (Chinese Offshore Yuan) remain our top emerging market currency ideas and are expected to sustain gradual appreciation in the course of exchange-rate reform.

http://www.thefinancialist.com/seven-top-investment-ideas-for-2014/

Characteristics of Great Investors

Thomas Barrack, Founder, Chairman, CEO, Colony Capital gives the keynote address to the Principal Investment Conference. Recorded: February 13, 2008