yvonne
Wednesday, September 7, 2011
Wednesday, July 27, 2011
The story of 2 Lolas
Plant In The Spring Or Beg In The Fall?
Do you want to prosper?
Do you want to prosper?
Then take this powerful message to heart: Plant In The Spring Or Beg In The Fall. It was Jim Rohn who said those wise words and I’ve never forgotten them.
Friend, life is always a choice.
God doesn’t force His plan of abundance to you.
You have to say YES to that plan of abundance if you want it.
Are you saying YES today?
Let me tell you the story of two Lolas (Grandmothers)…
The Story of Lola Penny
I have a friend who retired 7 years ago.
Let’s call her Lola Penny.
Actually, her real name was Lola Penang. She took a vacation in America, when she came back, she was now called Lola Penny.
Lola Penny is a widow with 4 children and 6 grandkids.
For 38 years, Penny worked as an accountant, crunching the numbers for her company. Because she was such a good accountant, she was promoted many times and became the manager of the entire department.
And she was earning very well.
But Penny told me that even if she was earning very well, she was living from paycheck to paycheck.
Which brings me to a very important principle: Income does not equal Wealth. It’s not how much you earn that makes you wealthy. It’s how much you invest from what you earn that makes you wealthy.
Yes, she saved some money. But like most Filipinos, she saved only for the big expenses: She saved to buy a house. She saved to pay for the schooling of the kids. She even saved for the wedding of the kids. But she failed to save for the biggest expense of all: Retirement.
Like many, she totally depended on the retirement package from her company.
When she retired 7 years ago, Penny got P3 million.
For the first year, it was heaven on earth.
Every Sunday, she brought her grandchildren to the mall to buy them toys.
And when her children needed money, they’d run to her.
“Mommy, can we borrow money to repair our car?”
“Mommy, we lack P20,000 for Junior’s tuition fee. Can you help?”
“Mommy, your apo (grandson) will compete in a swimming competition in Singapore. Can you pay for his plane fare?”
But very quickly, her money ran out.
After 7 years in retirement, Lola Penny was penniless.
This Isn’t Just A Story;
This Is Harsh Reality
Today, Lola Penny totally depends on her 4 children to give her money. But she knows that they have financial problems of their own.
One time, she overheard her daughter arguing with her Kuya (older brother) on the phone. What she heard tore her heart.
With anger in her voice, her daughter said, “Kuya, it’s your turn to give money to Mommy! I’m the one who takes care of her at home! I’m the one spending for her food everyday! And I’m the one buying her medicines. Last week, I spent P3000 for her meds! My husband is already complaining why we always don’t have money!”
When Lola Penny heard her daughter complaining, she began to cry.
The painful words she heard that day were like many knives stabbing her chest.
Lola Penny felt she was just a burden to her children.
And she wanted to die right there.
Here’s the irony: All her life, as an accountant, Penny was very good at managing the money of her company—but she never managed her own money.
This is not just a story.
This is harsh reality: According to surveys, 98% of people aged 65 and above are just like Lola Penny.
They depend on their kids, or they depend on their tiny pension, or they depend on charitable institutions, or they have to keep working—or they have nothing to eat.
Only 2% of people aged 65 and above are financially free.
Like Lola Pilar.
The Story Of Lola Pilar
You can retire in two ways.
You can retire like Lola Penny or you can retire like Lola Pilar.
Penny is a pseudonym. That’s not her real name.
But Lola Pilar is no pseudonym.
Pilar is my mother.
She is 85-years old.
Today, I give my mother a nice monthly allowance.
I do it not because she needs it, but because I need it. I need to show my love to her.
But in reality, my mother doesn’t need my money.
Let me tell you why.
Many moons ago, my mother worked in a small music store as a Cashier. Her salary was P120 a month. After working for 19 long years, she received a separation pay: A whopping P2000!
She invested that P2000 in the Stock Market.
The year was 1966.
And whenever she had extra money, she’d invest in very well known companies. My parents bought the stocks of giant companies of their time: San Miguel. Ayala. Etcetera.
My father retired at the age of 65. He passed away at 88. For those 23 years, my parents sold a portion of their stocks–little by little—for their big expenses.
After Dad passed away, Mom announced, “I’m selling all my stocks.” I was surprised that she still had P1 Million from that last sale—even if they were already withdrawing their cash from there little by little.
I asked her, “Did you sell everything?”
Mom said, “Yes, I did. Well, I left the crumbs…”
Crumbs?
“What crumbs?” I asked.
She explained, “Oh, I left the very little investments scattered in various companies. They’re very tiny. Nothing much.”
That conversation took place three years ago.
Just two months ago, I told her, “Mom, you’re 85. You better sell whatever you have left in the Stock Market. Yes, I know they’re crumbs. But just collect them anyway.”
She agreed. She called up her stockbroker and said, “Can you sell all the tiny stocks I have left?”
She was expecting P10,000. At most, P20,000.
But she got the shock of her life. The stockbroker told her, “Mrs. Sanchez, your stocks are worth P1.2 Million.”
Mom turned to me and said, “Bo, I’m rich!”
I told her, “Mom, you’ve always been rich. You just think you’re poor.”
Forty-five years ago, my mother planted P2000 in the Stock Market. And through the years, she planted little seeds of P50, P100, and P200 in giant companies.
Because she planted in the spring, today, she isn’t begging in the fall.
In her whole life, my mother never received a huge amount of money. She never inherited money. She never won the Lotto. She only built her wealth slowly.
Remember this truth I heard from David Bach: Wealth is not built in days; Wealth is built in decades.
There are two ways of retiring in life: Are you going to be a Lola Penny or a Lola Pilar?
God places the two roads before you.
Penny Poverty or Pilar Prosperity?
You choose.
God Says, “Plan Ahead!”
People today are living longer.
If you live until 90, will you have enough money for your needs? Or will you be depending on your kids?
God is telling you, “Plan ahead.”
Remember: No one plans to fail. We just fail to make a plan.
Jesus said, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.’ (Luke 14:28-30)
Today, think about the “tower” of your financial life.
God invites us to be like the ant. The Bible says, Go to the ant, sluggard; consider her ways and be wise; who, having no guide, overseer, or ruler, provides her food in the summer and gathers her food in the harvest. (Proverbs 6:6-8)
In other words?
The ant plants in the spring. So it won’t beg in the fall.
Plan To Be A Donor, Not A Donee!
Anawim is our home for the abandoned elderly. I built it some 13 years ago.
I know it’s a beautiful place. It’s so beautiful, some people tell me, “Bo, when I grow old, I dream of living there.”
No, I don’t want you to live there. That place is for the poorest of the poor. Old people who failed to plant in the spring and are now begging in the fall.
Don’t dream of being an Anawim resident. Dream of being an Anawim donor.
How?
The secret is in the next passage…
Don’t Borrow; Start Lending
Everytime I talk on finances, I ask the audience, “How many of you have debts?” The response is shocking. It was though I asked, “How many of you are human?”
Almost everyone has debts.
And Filipinos love the fact that they can borrow.
One woman told me, “I’m borrowing money from the SSS.” I asked, “Why?” She said, “Sayang if I won’t borrow.” (It would be waste.)
Huh? I don’t get it.
The Good Book says, For the LORD your God will bless you as He has promised you, and you will lend to many nations, but you will not borrow… (Deuteronomy 15:6)
Do you see what I see in that verse? It says that there are two signs that God is blessing you:
1. When you stop borrowing.
2. When you start lending.
Friend, stop borrowing. (Note: It’s okay to borrow for business; It’s not okay to borrow for your living expenses.)
Instead, start lending.
To whom will you lend?
99% of Filipinos “lend” to banks. How? You deposit your savings there.
But that’s not a good choice. The problem with banks is that they pay you a tiny interest of less then 1% a year.
I suggest you “lend” your money to others who can give you a higher return.
For example? Giant companies.
You can do that through the Stock Market or Mutual Funds.
If you really like banks, then don’t deposit your money in the bank itself. Instead, buy shares of the bank. Be an owner. How? Buy the stocks of Metrobank, Banco de Oro, Bank of the Philippine Islands…. Over a 20-year period, your returns will be much bigger!
The Universe Loves To Multiply
Do you want to prosper?
You need to learn these 6 important words from the Bible: Everything reproduces according to its kind.
A cat produces another cat.
A dog produces another dog.
I’ll be very worried if a cat produces a dog.
If that happens, the end of the world is near.
From my limited scientific knowledge, a cat produces another cat, a dog produces another dog, and a penguin produces another penguin. That’s just how God’s universe works.
The Bible says everything reproduces according to its kind. (Genesis 1:11) In fact, this line appears six times in the first chapter of Genesis. And you see it throughout the Bible.
When the widow of Zarapath gave Elijah her oil and flour, what did she get? More oil and flour. Not clothes. Not wood. But oil and flour.
When Jesus fed the multitudes, he did it by (Surprise, surprise) multiplying 5 loaves and 2 fish.
He didn’t turn stone into bread.
He didn’t turn stone into gold, and then bought bread.
He turned bread into more bread.
Jesus—the Son of the Living God—needed bread to reproduce more bread.
Why?
Because this is a principle that operates the entire universe.
Everything reproduces according to its kind.
If you want to prosper, you need to learn how to multiply the little money that you have.
In 1966, Mom invested her separation pay of P2000. 45 years later, that P2000 became millions of pesos. (By the way, 1966 was really a good year for Mom. Not only did she receive P2000, she also gave birth to her favorite son. Ahem.)
Learn to multiply the little money that you have and you will prosper!
My Driver Is Now Investing
In The Stock Market
Let me end with one last story.
Because of my bestselling book, My Maids Invest In The Stock Market, my Maids are now the most famous Maids in the world. (Haha!) Yes, they have been investing in the Stock Market for a year now and are doing very well.
But my Driver just started two months ago.
Reason: He’s a 33-year old married guy. He has 4 little kids. His wife is a full-time mom, so the entire family depends on his salary of P12,000 a month.
That’s not all. His extended family and his wife’s extended family depend on his generosity during emergencies. Which happens every time they breathe.
In other words, his P12,000 is feeding an entire village.
So how can he save and invest with all these expenses?
I didn’t force him.
Instead, I just let him listen to the stories of my Maids.
You see, every other week, I lead a small prayer meeting with our 3 Maids and Driver. And almost every meeting, my 3 Maids share how God is blessing their Stock Market investments.
I told my Maids that if they keep on investing the way they did last year, they’ll hit their first million in 7 years. That caught his attention. Finally, he said, “Ayokong ako lang ang hindi millionairyo! Magiinvest rin ako! (I don’t want to be the only one who isn’t a millionaire. I’ll start investing too!)”
Each month, he now sets aside P3000 of his salary for his Stock Market investments. And for the first time in his life, he has hope. He knows that he too will be a millionaire one day.
Today, when a relative or a neighbor begs for money, and he has no more money in his pocket, he can honestly say—“Sorry pare, wala akong pera ngayon.” (So sorry, I have no money with me now.)
Obviously, no one asks him, “Diba, may pera ka sa Stock Market?” (But don’t you have money in the Stock Market?)
No one knows about it. (Shhhhh!)
Note: By doing this, he’s also teaching them not to be parasites anymore. (But that’s another topic altogether.)
I’m very happy for him.
He’s 33 years old now. If he invests P3000 in the Stock Market each month at 12% until he retires at the age of 60, he’ll retire with P7 Million.
But analysts have backtracked the Philippine Stock Market’s history. If 20 years ago, you invested in the top 5 companies, your average growth rate would have been 20% per year.
So if my driver’s investments grow at 20% per year (especially with my guidance), by the time he retires, my driver will have P37 Million.
At P3,000 a month!
If you retire poor, it’s not God’s fault.
God is giving you a choice today.
Will you plant in the spring or beg in the fall?
May your dreams come true,
Bo Sanchez
Monday, July 4, 2011
Stock Investing 103: Learn some popular ratios used by investors
By Morningstar
Ratios are a common tool investors use to relate a stock's price with an element of the underlying company's performance. These quick and dirty ratios can be useful in their own way, as long as you're aware of the limitations.
But before we get to calculating any ratios, we must first cover some essential definitions.
Earnings per share
Earnings per share (EPS) is a company's net income (typically over the trailing 12 months) divided by its number of shares outstanding. EPS comes in two varieties, basic and diluted. Basic EPS includes only actual outstanding shares of a company's stock, while diluted EPS represents all potential stock that could be outstanding with current stock option grants and the like. Diluted EPS is the more "conservative" number.
EPS = (Total Company Earnings) / (Shares Outstanding)
Although EPS can give you a quick idea of a company's profitability, it should not be used in isolation. Investors should also look at cash flow and other performance metrics.
Market capitalization
Market capitalization is essentially the market value of a company. It is calculated by multiplying the number of shares outstanding by the current share price. For example, if there are 10 million shares outstanding of ABC Corporation and ABC's stock is currently trading at $25 per share, the market capitalization of ABC is $250 million. As we will find out shortly, market capitalization not only gives you an idea concerning the size of a company, it can also be used when calculating the basic valuation ratios.
Market Capitalization = (Stock Price) x (Shares Outstanding)
Profit margins
Just as there are three types of profits -- gross, operating, and net -- there are also three types of profit margins that can be calculated to offer insight into a company's profitability. Gross margin is simply gross profits divided by revenues, and so on. Margins are usually stated in percentages.
Gross Margin = (Gross Profits) / Revenues
Operating Margin = (Operating Profits) / Revenues
Net Margin = (Net Profits) / Revenues
Price-earnings and related ratios
One of the most popular valuation measures is the price/earnings ratio, or P/E. The P/E is the price of a stock divided by its EPS from the trailing four quarters. As an example, a stock trading for $15 per share with earnings of $1 per share during the past year has a P/E of 15.
P/E = (Stock Price) / EPS
The P/E ratio gives a rough idea of the price investors are paying for a stock relative to its underlying earnings. It is a quick and dirty way to gauge how cheap or expensive a stock may be. Generally, the higher the P/E ratio, the more investors are willing to pay for a dollar's worth of earnings from a company. High P/E stocks (typically those with a P/E above 30) tend to have higher growth rates and/or the expectation of a profit turnaround. Meanwhile, low P/E stocks (typically those with a P/E below 15) tend to have slower growth and/or lesser future prospects.
The P/E ratio can also be useful when compared with the P/Es of similar companies to see how the competitors stack up. In addition, you can compare a company's P/E with the average P/E of the S&P 500 or some other benchmark index to get a rough idea of how richly a stock is valued relative to the broader market.
One useful variant of P/E is earnings yield, or EPS divided by the stock price. Earnings yield is the inverse of P/E, so a high earnings yield indicates a relatively inexpensive stock while a low earnings yield indicates a more expensive one. It can be useful to compare earnings yields with 10- or 30-year Treasury bond yields to get an idea of how expensive a stock is.
PEG = (Forward P/E Ratio) / (5-Year EPS Growth Rate)
As with other measures, the PEG ratio should be used with caution. PEG relies on two different Wall Street analyst estimates -- next year's earnings and five-year earnings growth -- and thus is doubly subject to the possibility of overly optimistic or pessimistic analysts. It also breaks down at the extremes of zero-growth or hyper-growth companies.
Ratios are a common tool investors use to relate a stock's price with an element of the underlying company's performance. These quick and dirty ratios can be useful in their own way, as long as you're aware of the limitations.
But before we get to calculating any ratios, we must first cover some essential definitions.
Earnings per share
Earnings per share (EPS) is a company's net income (typically over the trailing 12 months) divided by its number of shares outstanding. EPS comes in two varieties, basic and diluted. Basic EPS includes only actual outstanding shares of a company's stock, while diluted EPS represents all potential stock that could be outstanding with current stock option grants and the like. Diluted EPS is the more "conservative" number.
EPS = (Total Company Earnings) / (Shares Outstanding)
Although EPS can give you a quick idea of a company's profitability, it should not be used in isolation. Investors should also look at cash flow and other performance metrics.
Market capitalization
Market capitalization is essentially the market value of a company. It is calculated by multiplying the number of shares outstanding by the current share price. For example, if there are 10 million shares outstanding of ABC Corporation and ABC's stock is currently trading at $25 per share, the market capitalization of ABC is $250 million. As we will find out shortly, market capitalization not only gives you an idea concerning the size of a company, it can also be used when calculating the basic valuation ratios.
Market Capitalization = (Stock Price) x (Shares Outstanding)
Profit margins
Just as there are three types of profits -- gross, operating, and net -- there are also three types of profit margins that can be calculated to offer insight into a company's profitability. Gross margin is simply gross profits divided by revenues, and so on. Margins are usually stated in percentages.
Gross Margin = (Gross Profits) / Revenues
Operating Margin = (Operating Profits) / Revenues
Net Margin = (Net Profits) / Revenues
Price-earnings and related ratios
One of the most popular valuation measures is the price/earnings ratio, or P/E. The P/E is the price of a stock divided by its EPS from the trailing four quarters. As an example, a stock trading for $15 per share with earnings of $1 per share during the past year has a P/E of 15.
P/E = (Stock Price) / EPS
The P/E ratio gives a rough idea of the price investors are paying for a stock relative to its underlying earnings. It is a quick and dirty way to gauge how cheap or expensive a stock may be. Generally, the higher the P/E ratio, the more investors are willing to pay for a dollar's worth of earnings from a company. High P/E stocks (typically those with a P/E above 30) tend to have higher growth rates and/or the expectation of a profit turnaround. Meanwhile, low P/E stocks (typically those with a P/E below 15) tend to have slower growth and/or lesser future prospects.
The P/E ratio can also be useful when compared with the P/Es of similar companies to see how the competitors stack up. In addition, you can compare a company's P/E with the average P/E of the S&P 500 or some other benchmark index to get a rough idea of how richly a stock is valued relative to the broader market.
One useful variant of P/E is earnings yield, or EPS divided by the stock price. Earnings yield is the inverse of P/E, so a high earnings yield indicates a relatively inexpensive stock while a low earnings yield indicates a more expensive one. It can be useful to compare earnings yields with 10- or 30-year Treasury bond yields to get an idea of how expensive a stock is.
PEG = (Forward P/E Ratio) / (5-Year EPS Growth Rate)
As with other measures, the PEG ratio should be used with caution. PEG relies on two different Wall Street analyst estimates -- next year's earnings and five-year earnings growth -- and thus is doubly subject to the possibility of overly optimistic or pessimistic analysts. It also breaks down at the extremes of zero-growth or hyper-growth companies.
Stock Investing 102: Pick a stock and buy it
By Harry Domash
It's time to participate in capitalism, so here's how to study stocks and place orders. But first, decide if you're a growth, value or dividend investor.
One of the first things to understand about buying stocks is that what you buy is in some ways a function of who you are. If you're an optimist, growth investing might be for you. Long on patience? Value investing may be the better fit.
Individual investors generally fall into one of three categories: growth investors, value investors or dividend investors.
Growth
A stock's price often reflects how profitable investors think a company will be in the future. So most investors follow a growth strategy, which means that they look for companies with strong prospects for growing their sales and earnings. Definitions vary, but stocks expected to increase their sales (and their net income) from one year to the next by at least 15% generally qualify as growth stocks.
Value
Value investors follow a different path. They believe that the broader stock market always overreacts to news about a company. They seek out formerly hot stocks that have stumbled and whose share prices are at bargain levels.
Being cheap, though, isn't enough by itself. Value investors try to zero in on stocks that were beaten down due to temporary problems that can be fixed. Here’s a link to an article describing how to pick value stocks. Here’s a link to the screen described in that article for finding value candidates.
Dividends
Dividend investors buy stocks that pay a cash dividend based on the number of shares you own, usually on a quarterly basis. Unlike value and growth investors, who only make money when they sell, dividend investors get paid while they hold the stock.
Thus, dividend investors buy stocks as much for the income as they do for capital appreciation (which is what you get when you sell a stock at a higher price than you paid for it). Dividend investors look for financially solid companies with the wherewithal to continue paying their dividends, regardless of what's happening in the economy.
Putting a price on a stock
How do you know whether a stock is a value or priced for growth? Most investors rely on certain ratios that compare a stock's price to the underlying company's results.
The most commonly used valuation ratios are:
Price-to-earnings (P/E): This is a company's stock price divided by how much it earns per share over 12 months (expressed as earnings-per-share, or EPS). Most often, the EPS used is the most recent 12 months' earnings. Another way to calculate P/E is by using the consensus of Wall Street analysts' forecasts for a company's earnings in the current fiscal year. P/E is the most widely used valuation gauge.
Price-to-sales (P/S): A company's stock price divided by the most recent 12 months' sales-per-share. Some investors favor P/S over P/E because sales don’t vary as much as earnings from quarter to quarter. Another advantage is that you can calculate P/S, but not P/E, when a company loses money in a quarterly or annual reporting period.
Price-to-book (P/B): Also called book value, this is a company's assets minus its liabilities. A P/B ratio divides a company's stock price by its book value per share. Value investors tend to favor P/B.
There is no universal agreement on ratio values that define value or growth. Here’s my simplified take.
Value
P/E: Less than 15
P/S: Less than 2.5
P/B: Less than 3
Growth
P/E: More than 20
P/S: More than 3
P/B: More than 5
Stocks with valuations in the gaps between the value and growth definitions -- say, a P/E of 18 and a P/B of 4 -- could be in either category, depending on the circumstances.
Your research doesn't end with these ratios. Figuring out whether a stock is worth buying is another task. A stock may be a value in terms of price, but its price may be depressed because something is seriously wrong. These ratios can help you understand whether a company's shares are cheap or expensive. If they are cheap, and you've done your work trying to find out why, then they may be attractive as a buy.
Making your trade
There are three basics ways to trade stocks: buys, sells and short sales. Here's a quick look at each:
A buy is an order to buy a specified number of shares, either at the best price the broker can get at the time you enter the order (a market order), or a specified maximum price (a limit order). If you place a market order, your purchase is usually executed within a few seconds. If you place a limit order, the order may not be processed if no seller is willing to sell at your specified price. Limit orders usually have a predetermined expiration date. If not filled, the order remains open until it expires.
A buy limit order is useful for preventing you from overpaying for a fast-moving stock. For instance, say the last time you looked, the stock you want was going for $25 per share. But big news has hit the wires and now the stock is starting to move. By setting a limit of, say, $27 per share, you can avoid overpaying.
A sell is an order to sell shares that you own, either at the current market price (market order), or at a specified minimum price (limit order). As with buy limit orders, a sell limit order will only be executed if a buyer wants to pay your specified price.
A sell stop is an order to sell a stock if it drops below a specified price. You can use sell stops to minimize your losses when you make a mistake. For instance, say you buy a stock at $40 and, instead of going up, it heads down. A sell stop at $36 would convert to a market sell if your stock hits that price, which, in most cases, would limit your loss to 10%. However, setting a sell stop doesn’t guarantee that you will get that price. Bad news could hit, for example, and the stock might open for trading on a given day at $30 -- after closing a $40 the day before. In that instance, you would only get $30 for your shares, even though you had set a $36 sell stop.
A short sale is an order to sell a stock that you don’t own. Short-selling involves borrowing shares from your broker and selling those borrowed shares in the hope that the price will drop, and you will be able to replace the borrowed shares by buying them at the lower price. Selling short requires that you have a margin (credit) account with your broker.
Submitting your order
Entering a buy or sell transaction is straightforward with most online stockbrokers once you've opened an account. Generally, all that’s required is the ticker symbol, the number of shares you want to trade and a decision whether you want to trade at the market price or want to specify limits.
Your broker will respond with the company's name and current bid (the price current buyers are willing to pay) and ask (sellers are requesting) price. If you confirm your trade, you will probably pay between the bid and ask.
This is the time to slow it down. You can make costly mistakes at this point. Confirm that the company name corresponds to the stock you really want to buy or sell. Make sure that you didn’t type 1,000 shares when you really meant 100 shares.
It's time to participate in capitalism, so here's how to study stocks and place orders. But first, decide if you're a growth, value or dividend investor.
One of the first things to understand about buying stocks is that what you buy is in some ways a function of who you are. If you're an optimist, growth investing might be for you. Long on patience? Value investing may be the better fit.
Individual investors generally fall into one of three categories: growth investors, value investors or dividend investors.
Growth
A stock's price often reflects how profitable investors think a company will be in the future. So most investors follow a growth strategy, which means that they look for companies with strong prospects for growing their sales and earnings. Definitions vary, but stocks expected to increase their sales (and their net income) from one year to the next by at least 15% generally qualify as growth stocks.
Value
Value investors follow a different path. They believe that the broader stock market always overreacts to news about a company. They seek out formerly hot stocks that have stumbled and whose share prices are at bargain levels.
Being cheap, though, isn't enough by itself. Value investors try to zero in on stocks that were beaten down due to temporary problems that can be fixed. Here’s a link to an article describing how to pick value stocks. Here’s a link to the screen described in that article for finding value candidates.
Dividends
Dividend investors buy stocks that pay a cash dividend based on the number of shares you own, usually on a quarterly basis. Unlike value and growth investors, who only make money when they sell, dividend investors get paid while they hold the stock.
Thus, dividend investors buy stocks as much for the income as they do for capital appreciation (which is what you get when you sell a stock at a higher price than you paid for it). Dividend investors look for financially solid companies with the wherewithal to continue paying their dividends, regardless of what's happening in the economy.
Putting a price on a stock
How do you know whether a stock is a value or priced for growth? Most investors rely on certain ratios that compare a stock's price to the underlying company's results.
The most commonly used valuation ratios are:
Price-to-earnings (P/E): This is a company's stock price divided by how much it earns per share over 12 months (expressed as earnings-per-share, or EPS). Most often, the EPS used is the most recent 12 months' earnings. Another way to calculate P/E is by using the consensus of Wall Street analysts' forecasts for a company's earnings in the current fiscal year. P/E is the most widely used valuation gauge.
Price-to-sales (P/S): A company's stock price divided by the most recent 12 months' sales-per-share. Some investors favor P/S over P/E because sales don’t vary as much as earnings from quarter to quarter. Another advantage is that you can calculate P/S, but not P/E, when a company loses money in a quarterly or annual reporting period.
Price-to-book (P/B): Also called book value, this is a company's assets minus its liabilities. A P/B ratio divides a company's stock price by its book value per share. Value investors tend to favor P/B.
There is no universal agreement on ratio values that define value or growth. Here’s my simplified take.
Value
P/E: Less than 15
P/S: Less than 2.5
P/B: Less than 3
Growth
P/E: More than 20
P/S: More than 3
P/B: More than 5
Stocks with valuations in the gaps between the value and growth definitions -- say, a P/E of 18 and a P/B of 4 -- could be in either category, depending on the circumstances.
Your research doesn't end with these ratios. Figuring out whether a stock is worth buying is another task. A stock may be a value in terms of price, but its price may be depressed because something is seriously wrong. These ratios can help you understand whether a company's shares are cheap or expensive. If they are cheap, and you've done your work trying to find out why, then they may be attractive as a buy.
Making your trade
There are three basics ways to trade stocks: buys, sells and short sales. Here's a quick look at each:
A buy is an order to buy a specified number of shares, either at the best price the broker can get at the time you enter the order (a market order), or a specified maximum price (a limit order). If you place a market order, your purchase is usually executed within a few seconds. If you place a limit order, the order may not be processed if no seller is willing to sell at your specified price. Limit orders usually have a predetermined expiration date. If not filled, the order remains open until it expires.
A buy limit order is useful for preventing you from overpaying for a fast-moving stock. For instance, say the last time you looked, the stock you want was going for $25 per share. But big news has hit the wires and now the stock is starting to move. By setting a limit of, say, $27 per share, you can avoid overpaying.
A sell is an order to sell shares that you own, either at the current market price (market order), or at a specified minimum price (limit order). As with buy limit orders, a sell limit order will only be executed if a buyer wants to pay your specified price.
A sell stop is an order to sell a stock if it drops below a specified price. You can use sell stops to minimize your losses when you make a mistake. For instance, say you buy a stock at $40 and, instead of going up, it heads down. A sell stop at $36 would convert to a market sell if your stock hits that price, which, in most cases, would limit your loss to 10%. However, setting a sell stop doesn’t guarantee that you will get that price. Bad news could hit, for example, and the stock might open for trading on a given day at $30 -- after closing a $40 the day before. In that instance, you would only get $30 for your shares, even though you had set a $36 sell stop.
A short sale is an order to sell a stock that you don’t own. Short-selling involves borrowing shares from your broker and selling those borrowed shares in the hope that the price will drop, and you will be able to replace the borrowed shares by buying them at the lower price. Selling short requires that you have a margin (credit) account with your broker.
Submitting your order
Entering a buy or sell transaction is straightforward with most online stockbrokers once you've opened an account. Generally, all that’s required is the ticker symbol, the number of shares you want to trade and a decision whether you want to trade at the market price or want to specify limits.
Your broker will respond with the company's name and current bid (the price current buyers are willing to pay) and ask (sellers are requesting) price. If you confirm your trade, you will probably pay between the bid and ask.
This is the time to slow it down. You can make costly mistakes at this point. Confirm that the company name corresponds to the stock you really want to buy or sell. Make sure that you didn’t type 1,000 shares when you really meant 100 shares.
Stocks 101: Stocks versus other investments
By Morningstar
We all have financial goals in life: to pay for college for our children, to be able to retire by a reasonable age, to buy the things we want. Unfortunately, spending less than we earn is typically not enough for us to reach our goals. We have to do more; we have to invest our savings and put our money to work. Stocks are quite simply one of the best ways to make your investment dollars work the hardest.
Investing in stocks is not rocket science. The only real characteristics shared among successful stock investors are basic math skills, a critical eye, patience, and discipline. Combine these with an understanding of how money flows and how businesses compete with one another, along with a dash of accounting knowledge, and you have all the mental tools needed to get started. We will teach you all these in this workbook series.
Although you don't need an advanced college degree to invest in stocks, selecting stocks is nevertheless an intellectual exercise. It requires effort, but it can bear many fruits. After all, investing in stocks not only leads to potentially higher returns on your investment dollars, it also leads to a greater understanding of how the world works.
What is a stock?
Perhaps the most common misperception among new investors is that stocks are simply pieces of paper to be traded. This is simply not the case. In stock investing, trading is a means, not an end.
A stock is an ownership interest in a company. A business is started by a person or small group of people who put their money in. How much of the business each founder owns is a function of how much money each invested. At this point, the company is considered "private." Once a business reaches a certain size, the company may decide to "go public" and sell a chunk of itself to the investing public. This is how stocks are created.
When you buy a stock, you become a business owner. Period. Over the long term, the value of that ownership stake will rise and fall according to the success of the underlying business. The better the business does, the more your ownership stake will be worth.
Why invest in stocks?
Stocks are but one of many possible ways to invest your hard-earned money. Why choose stocks instead of other options, such as bonds, rare coins, or antique sports cars? Quite simply, the reason that savvy investors invest in stocks is that they provide the highest potential returns. And over the long term, no other type of investment tends to perform better.
On the downside, stocks tend to be the most volatile investments. This means that the value of stocks can drop in the short term. Sometimes stock prices may fall for a protracted period. For instance, those who put all their savings in stocks in early 2000 are probably still underwater today. Bad luck or bad timing can easily sink your returns, but you can minimize this by taking a long-term investing approach.
There's also no guarantee you will actually realize any sort of positive return. If you have the misfortune of consistently picking stocks that decline in value, you can lose money, even over the long term!
Of course, we think that by educating yourself and using the knowledge in this Investing Classroom, you can make the risk acceptable relative to your expected reward. We will help you pick the right businesses to own and help you spot the ones to avoid. Again, this effort is well worth it, because over the long haul, your money can work harder for you in equities than in just about any other investment.
Your investment choices
Let's see how stocks stack up to some of your other investment options:
Mutual funds. Stock mutual funds can offer similar returns to investing in stocks on your own, but without all the extra work. When you invest in a fund, your money is pooled with that of other investors, and then it is managed by a group of professionals who try to earn a return by selecting stocks for the pool.
Beyond requiring much less effort, one key advantage of funds is that they can be less volatile. Simple statistics says that a portfolio is going to experience less volatility than the individual components of the portfolio. After all, individual stocks can and sometimes do go to zero. But if a mutual fund holds 50 stocks, it’s very unlikely that all of them would become worthless.
The flipside of this reduced volatility is that fund returns can be muted relative to individual stocks. In investing, risk and return are intimately correlated—reduce one, and odds are you will reduce the other. Another disadvantage to offloading all the effort of picking individual stocks is that you must pay someone else for this service. The professionals running mutual funds do not do so for free. They charge fees, and fees eat into returns.
Plus, the more money you have invested in mutual funds, the larger the absolute value of fees you will pay every year. For instance, paying 1% a year in fees on a $1,000 portfolio is not a big deal, but it's a much larger deal if the portfolio is worth $500,000. In the past, mutual funds often made the most sense for those with relatively small amounts to invest because they were the most cost-efficient. But with commissions of $10 or less per stock trade, this is no longer necessarily the case.
Just as picking the wrong stock is a risk, so is picking the wrong fund. What if the group of people you selected to manage your investment does not perform well? Just as with stocks, there is no guarantee of a return in mutual funds.
It's also worth noting that investing in a mix of mutual funds and stocks can be a perfectly prudent strategy. Stocks versus funds (or any other investment vehicle) need not be an either/or proposition.
Bonds. At their most basic, bonds are loans. When you buy a bond, you become a lender to an institution, and that institution pays you interest. As long as the institution does not go bankrupt, it will also pay back the principal on the bond, but no more than the principal.
There are two basic types of bonds: government bonds and corporate bonds. U.S. government bonds (otherwise known as T-bills or Treasurys) are issued and guaranteed by Uncle Sam. They typically offer a modest return with low risk. Corporate bonds are issued by companies and carry a higher degree of risk (should the company default) as well as return.
Bond investors must also consider interest rate risk. When prevailing interest rates rise, the market value of existing bonds tends to fall. (The opposite is also true.) The only way to alleviate interest rate risk is by holding the bond to maturity. Investing in corporate bonds also tends to require just as much homework as stock investing, yet bonds generally have lower returns.
Given their lower risk, there is certainly a place for bonds or bond mutual funds in most portfolios, but their relative safety comes with the price of lower expected returns compared with stocks over the long term.
Real estate. Most people's homes are indeed their largest investments. We all have to live somewhere, and a happy side effect is that real estate tends to appreciate in value over time. But if you are going to use real estate as a true investment vehicle by buying a second home, a piece of land, or a rental property, it's important to keep the following in mind.
First, despite the exceptionally strong appreciation real-estate values have had the past several years, real estate can and does occasionally decline in value. Second, real-estate taxes will constantly eat into returns. Third, real-estate owners must worry about physically maintaining their properties or must pay someone else to do it. Likewise, they often must deal with tenants and collect rents. Finally, real estate is rather illiquid and takes time to sell -- a potential problem if you need your money back quickly.
Some people do nothing but invest their savings in real estate and do quite well. But just as stock investing requires effort, so does real-estate investing.
Bank savings accounts. The problem with bank savings accounts and certificates of deposit is that they offer very low returns. The upside is that there is essentially zero risk in these investment vehicles, and your principal is protected. These types of accounts are fine as rainy-day funds—a place to park money for short-term spending needs or for an emergency. But they really should not be viewed as long-term investment vehicles.
The low returns of these investments are a problem because of inflation. For instance, if you get a 3% return on a savings account, but inflation is also dropping the buying power of your dollar by 3% a year, you really aren't making any money. Your real return (return adjusted for inflation) is zero, meaning that your money is not really working for you.
The bottom line
Though investing in stocks may indeed require more work and carry a higher degree of risk compared with other investment opportunities, you cannot ignore the higher potential return that stocks provide. And as we will show in the next lesson, given enough time, a slightly higher return on your investments can lead to dramatically larger dollar sums for whatever your financial goals in life may be.
We all have financial goals in life: to pay for college for our children, to be able to retire by a reasonable age, to buy the things we want. Unfortunately, spending less than we earn is typically not enough for us to reach our goals. We have to do more; we have to invest our savings and put our money to work. Stocks are quite simply one of the best ways to make your investment dollars work the hardest.
Investing in stocks is not rocket science. The only real characteristics shared among successful stock investors are basic math skills, a critical eye, patience, and discipline. Combine these with an understanding of how money flows and how businesses compete with one another, along with a dash of accounting knowledge, and you have all the mental tools needed to get started. We will teach you all these in this workbook series.
Although you don't need an advanced college degree to invest in stocks, selecting stocks is nevertheless an intellectual exercise. It requires effort, but it can bear many fruits. After all, investing in stocks not only leads to potentially higher returns on your investment dollars, it also leads to a greater understanding of how the world works.
What is a stock?
Perhaps the most common misperception among new investors is that stocks are simply pieces of paper to be traded. This is simply not the case. In stock investing, trading is a means, not an end.
A stock is an ownership interest in a company. A business is started by a person or small group of people who put their money in. How much of the business each founder owns is a function of how much money each invested. At this point, the company is considered "private." Once a business reaches a certain size, the company may decide to "go public" and sell a chunk of itself to the investing public. This is how stocks are created.
When you buy a stock, you become a business owner. Period. Over the long term, the value of that ownership stake will rise and fall according to the success of the underlying business. The better the business does, the more your ownership stake will be worth.
Why invest in stocks?
Stocks are but one of many possible ways to invest your hard-earned money. Why choose stocks instead of other options, such as bonds, rare coins, or antique sports cars? Quite simply, the reason that savvy investors invest in stocks is that they provide the highest potential returns. And over the long term, no other type of investment tends to perform better.
On the downside, stocks tend to be the most volatile investments. This means that the value of stocks can drop in the short term. Sometimes stock prices may fall for a protracted period. For instance, those who put all their savings in stocks in early 2000 are probably still underwater today. Bad luck or bad timing can easily sink your returns, but you can minimize this by taking a long-term investing approach.
There's also no guarantee you will actually realize any sort of positive return. If you have the misfortune of consistently picking stocks that decline in value, you can lose money, even over the long term!
Of course, we think that by educating yourself and using the knowledge in this Investing Classroom, you can make the risk acceptable relative to your expected reward. We will help you pick the right businesses to own and help you spot the ones to avoid. Again, this effort is well worth it, because over the long haul, your money can work harder for you in equities than in just about any other investment.
Your investment choices
Let's see how stocks stack up to some of your other investment options:
Mutual funds. Stock mutual funds can offer similar returns to investing in stocks on your own, but without all the extra work. When you invest in a fund, your money is pooled with that of other investors, and then it is managed by a group of professionals who try to earn a return by selecting stocks for the pool.
Beyond requiring much less effort, one key advantage of funds is that they can be less volatile. Simple statistics says that a portfolio is going to experience less volatility than the individual components of the portfolio. After all, individual stocks can and sometimes do go to zero. But if a mutual fund holds 50 stocks, it’s very unlikely that all of them would become worthless.
The flipside of this reduced volatility is that fund returns can be muted relative to individual stocks. In investing, risk and return are intimately correlated—reduce one, and odds are you will reduce the other. Another disadvantage to offloading all the effort of picking individual stocks is that you must pay someone else for this service. The professionals running mutual funds do not do so for free. They charge fees, and fees eat into returns.
Plus, the more money you have invested in mutual funds, the larger the absolute value of fees you will pay every year. For instance, paying 1% a year in fees on a $1,000 portfolio is not a big deal, but it's a much larger deal if the portfolio is worth $500,000. In the past, mutual funds often made the most sense for those with relatively small amounts to invest because they were the most cost-efficient. But with commissions of $10 or less per stock trade, this is no longer necessarily the case.
Just as picking the wrong stock is a risk, so is picking the wrong fund. What if the group of people you selected to manage your investment does not perform well? Just as with stocks, there is no guarantee of a return in mutual funds.
It's also worth noting that investing in a mix of mutual funds and stocks can be a perfectly prudent strategy. Stocks versus funds (or any other investment vehicle) need not be an either/or proposition.
Bonds. At their most basic, bonds are loans. When you buy a bond, you become a lender to an institution, and that institution pays you interest. As long as the institution does not go bankrupt, it will also pay back the principal on the bond, but no more than the principal.
There are two basic types of bonds: government bonds and corporate bonds. U.S. government bonds (otherwise known as T-bills or Treasurys) are issued and guaranteed by Uncle Sam. They typically offer a modest return with low risk. Corporate bonds are issued by companies and carry a higher degree of risk (should the company default) as well as return.
Bond investors must also consider interest rate risk. When prevailing interest rates rise, the market value of existing bonds tends to fall. (The opposite is also true.) The only way to alleviate interest rate risk is by holding the bond to maturity. Investing in corporate bonds also tends to require just as much homework as stock investing, yet bonds generally have lower returns.
Given their lower risk, there is certainly a place for bonds or bond mutual funds in most portfolios, but their relative safety comes with the price of lower expected returns compared with stocks over the long term.
Real estate. Most people's homes are indeed their largest investments. We all have to live somewhere, and a happy side effect is that real estate tends to appreciate in value over time. But if you are going to use real estate as a true investment vehicle by buying a second home, a piece of land, or a rental property, it's important to keep the following in mind.
First, despite the exceptionally strong appreciation real-estate values have had the past several years, real estate can and does occasionally decline in value. Second, real-estate taxes will constantly eat into returns. Third, real-estate owners must worry about physically maintaining their properties or must pay someone else to do it. Likewise, they often must deal with tenants and collect rents. Finally, real estate is rather illiquid and takes time to sell -- a potential problem if you need your money back quickly.
Some people do nothing but invest their savings in real estate and do quite well. But just as stock investing requires effort, so does real-estate investing.
Bank savings accounts. The problem with bank savings accounts and certificates of deposit is that they offer very low returns. The upside is that there is essentially zero risk in these investment vehicles, and your principal is protected. These types of accounts are fine as rainy-day funds—a place to park money for short-term spending needs or for an emergency. But they really should not be viewed as long-term investment vehicles.
The low returns of these investments are a problem because of inflation. For instance, if you get a 3% return on a savings account, but inflation is also dropping the buying power of your dollar by 3% a year, you really aren't making any money. Your real return (return adjusted for inflation) is zero, meaning that your money is not really working for you.
The bottom line
Though investing in stocks may indeed require more work and carry a higher degree of risk compared with other investment opportunities, you cannot ignore the higher potential return that stocks provide. And as we will show in the next lesson, given enough time, a slightly higher return on your investments can lead to dramatically larger dollar sums for whatever your financial goals in life may be.
Monday, June 27, 2011
The annoying scrollbars!
Good day boys and girls!
Ever wonder how that scroll bar is being removed while trying to print/print preview a page with scroll bar in it? Below is the screenshot.
As you can see above, some data are being trimmed-off because of the height restriction defined on the container(<div></div>)
Using the CSS:
By using the CSS, we can eliminate that scrollbar and print the whole page without worrying the layout.
<style type="text/css">
.text {width: 500px;}
.text1 {width: 500px;height: 200px;overflow: auto;border: 1px solid #ccc;}
@media print {.text1 {height: auto;overflow: none;}}
</style>
I hope this will help you guys.
Ever wonder how that scroll bar is being removed while trying to print/print preview a page with scroll bar in it? Below is the screenshot.
As you can see above, some data are being trimmed-off because of the height restriction defined on the container(<div></div>)
Using the CSS:
By using the CSS, we can eliminate that scrollbar and print the whole page without worrying the layout.
<style type="text/css">
.text {width: 500px;}
.text1 {width: 500px;height: 200px;overflow: auto;border: 1px solid #ccc;}
@media print {.text1 {height: auto;overflow: none;}}
</style>
I hope this will help you guys.
Financial Freedom Takes a Complimentary Partner
Regardless of how good you are at saving and investing, you can't achieve financial freedom if your partner is a spendthrift that rings up credit card debt. It's like trying to get out of quicksand but having someone pull you back in every day.
Moreover, no matter how successful you are, unless your partner is equally disciplined, frugal, and investment-oriented, your efforts toward a better, financially-free life are going to be like struggling in quicksand. Marry the wrong person and the emotional, financial, and social toll it can take on your life will overwhelm almost any progress you can make in your career or pocketbook. As you try to build a life, he or she will be out spending your money on status symbols, making it nearly impossible for you to achieve financial freedom.
To truly build a life, you need to have the kind of support that allows you to take risks because you know, always there to back you up, keep you motivated, no matter what happens, there will always be someone waiting for you at home that loves you unconditionally. It may sound surprising, but a tremendous amount of success is based upon proper temperament and psychology. How can you focus on your work and creating the life about which you always dreamed if you are worrying about the situation at home?
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