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Sion's How To Invest Thread [Everything you need to invest properly and much more...]

SionSion Moderator, Legion of Trill, AHH Content Producer, AHH EditorPosts: 45,419 Regulator
edited December 2011 in Strictly Business
Its been a long time coming but ppl have been hitting me up to post this for some time now. This thread is dedicated to the art of investing & will teach u HOW TO INVEST (properly). This isnt gonna be some b/s technical pseudo science - this thread is about investing. Most of the shit u see or hear about is speculating but wat im gonna show u is how to take the craft & develop the knowledge and skills to be able to obtain successful returns.

I tried to simplify this to the best of my abilities so i hope yall can comprehend the format & criteria. All of this was taken from Ben Graham's masterpiece The Intelligent Investor & his disciple Christopher H. Brown's "Little Book of Value Investing" & oversimplified where applicable. I hope u all pay attention to these principles..... because you gotta understand... millions & billions of people invest their money & most aren't successful at it but on WallStreet they pay A LOOOT of money to cats who can successfully allocate capital. The highest paid fund managers do NOT even beat the S&P500 index & get paid well... now imagine a dude who can beat the market ? This is an important trait to learn. You can read a ton of books on what stocks, bonds & other financial instruments are but it means fuck all if you can't apply it successfully.


I will be editing this thread & constantly adding to it so stay tuned....




Below are the topics I will touch on & expand upon. After reading this you should be somewhat of an amateur - and you can go pro if you read Ben Graham's The Intelligent Investor book.


Table of Contents Value Investing 101:

1 - What is Value Investing

2. What to Look for ( buy Stocks on the cheap , look past bad news - that is the time to buy )

3. How does one find a bargain ?

4. Mr.Market

5. Investing vs. Speculation


4. P/E Ratio - buying Earnings on the Cheap

5. Buy a dollar for 15 cents (same as Section 3)

6. Wall Street Jargon & Common Mistakes (IPOs, mutual funds, technical analysis/beta , trends, past performance, terrible investments/hot

stocks)


7. Start thinking Globally Now (the US only makes up for half of the total stocks in the world but elsewhere there are bargains too,

many co.s even in america have to grow internationally in order to grow at fast paces)

8. When execs start buying shares - u should too

9. Questions to ask yourself after making an investment


10. Other alternatives (Bonds, Preferred Stock, gold, real estate, index funds, ETFs, mutual funds etc.)


11. Criteria to Use & The Margin Of Safety

12. Its Not a Sprint its a Marathon - Invest for the long term (inconsistencies over the lost decade & more)

13. Discipline

14. Taxation
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jono wrote: »
This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
T. Sanford wrote: »
Message to the trills of the IC: May Legion Of Trill be your enemies downfall
BodhiSneakDZAmiamivice305illedoutVulcanRavenBetaits....JOHN BPapaDoc223King Eraunojayvon32The HueCarthaginianSplackavellijee504gman82MD_PROPER TheBoyRoAPEX_PREDATOROhMarsOlorun22goldenja32DaysOfInfinitisapp08_2001Peace_79buttuh_bthagreat45
«13456785

Replies

  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,419 Regulator
    edited August 2011
    hhhmmm I think that's it for now.... Im tired so I'll post more tomorrow & during the week.
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
    miamivice305thagreat45
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,419 Regulator
    edited August 2011
    Next I'll get into Diversification......
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
    thagreat45
  • Miles HIGHMiles HIGH Posts: 5,441 ✭✭✭
    edited August 2011
    Well damn...This is useful...Imma need some more time to really read through it all...But so you think now is a good time to start buying?...And if so, what companies would you recommend?
    thagreat45
  • blakfyahkingblakfyahking The IC's Resident Father Figure Posts: 15,774 ✭✭✭✭✭
    edited August 2011
    sionb55 wrote: »
    4. P/E Ratio - buying Earnings on the Cheap


    P/E = price to earnings, all this means is that given the current price on ur co.s current net income (after taxes) that is how long it would take for it to pay itself off based on current earnings. Typically a reasonable P/E is b/w 12-15 anything lower than 12 can be considered cheap. One form of investment others do is that they buy co.s that have very low P/E & then wait for more ppl to start buying until the P/E to shoot up b4 selling - in Graham's book he makes mention of this & hes quite critical of it.


    .....

    good shit

    but clarify the bolded better for me fam.............I think I know what you are saying but I'm not really sure



    also one thing to add when looking at P/E ratios: pay attention to the company's competitors in the same industry. classifying all P/E ratios for each individual company is misleading when you look at them alone


    if you looking at say a bank's P/E ratio, then it makes sense to compare it to other similar size banks' P/E ratios

    otherwise you might think you are value investing when really you are just buying a company where the share prices have already severely declined
    tumblr_maj8y0LU9Y1qimbeto1_500.jpg
    jayvon32
  • black caesarblack caesar Posts: 11,911 ✭✭✭✭✭
    edited August 2011
    Digging this right here my man. It's always good to keep staying abreast. Props.
    awq1l4.png


    xp0aqu.png
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,419 Regulator
    edited August 2011
    good shit

    but clarify the bolded better for me fam.............I think I know what you are saying but I'm not really sure



    also one thing to add when looking at P/E ratios: pay attention to the company's competitors in the same industry. classifying all P/E ratios for each individual company is misleading when you look at them alone


    if you looking at say a bank's P/E ratio, then it makes sense to compare it to other similar size banks' P/E ratios

    otherwise you might think you are value investing when really you are just buying a company where the share prices have already severely declined

    The stuff I posted was finished in April, & much of it still needed to be edited, that part just means that basically P/E is also a measure to see how long it will take a company to pay back ur investment per share.

    @ the bolded u goin over their heads fam lolol.... that might be a bit too much work for the typical investor to do as they also may not know what their looking at exactly since not all companies are the same.
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
    jayvon32
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,419 Regulator
    edited August 2011
    Digging this right here my man. It's always good to keep staying abreast. Props.

    Thanks fam, feel free to contribute.
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
  • black caesarblack caesar Posts: 11,911 ✭✭✭✭✭
    edited August 2011
    sionb55 wrote: »
    Thanks fam, feel free to contribute.

    Any good day trader simulators that you or anyone can recommend?
    awq1l4.png


    xp0aqu.png
  • traestartraestar Atlantic City, NJPosts: 6,022 ✭✭✭✭✭
    edited August 2011
    I really like the information provided Sionb55

    I myself am looking to get more involved into investing soon,
    right now I'm looking into alot of ETFs, Dividend Stocks, and Mutual Funds

  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,419 Regulator
    edited August 2011
    Any good day trader simulators that you or anyone can recommend?

    Questrade. It only costs 10$ to trade (9.95) & can go as low as $5 per trade. As for simulators ? Go to Investopedia Simulator, the only drawback is that Investopedia doesn't add dividends which could make a big difference.

    Here's a replica of my portfolio on there. My return for 2010 was 19.77% but with the dividends it should be 22%. My real portfolio returned 25%.

    InvestopediaAnnualizedReturnsasofDecember192010USD.jpg

    Investopedia is a good place to practice.
    traestar wrote: »
    I really like the information provided Sionb55

    I myself am looking to get more involved into investing soon,
    right now I'm looking into alot of ETFs, Dividend Stocks, and Mutual Funds

    Thats good to hear.

    http://tmx.quotemedia.com/quote.php?qm_symbol=SPY:US

    ^^^^
    This is a great ETF to follow. It tracks the S&P 500.

    This one is good too http://tmx.quotemedia.com/quote.php?qm_symbol=DIA:US but in Ben Graham's book I think he said something against holding an index that tracks the Dow, I cant remember but ill re-read & post his reason why. Personally I think its still a good grab. Especially given the recent drops.
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
    PapaDoc223APEX_PREDATOR
  • traestartraestar Atlantic City, NJPosts: 6,022 ✭✭✭✭✭
    edited August 2011
    sionb55 wrote: »
    Thats good to hear.

    http://tmx.quotemedia.com/quote.php?qm_symbol=SPY:US

    ^^^^
    This is a great ETF to follow. It tracks the S&P 500.

    This one is good too http://tmx.quotemedia.com/quote.php?qm_symbol=DIA:US but in Ben Graham's book I think he said something against holding an index that tracks the Dow, I cant remember but ill re-read & post his reason why. Personally I think its still a good grab. Especially given the recent drops.

    Nice!! DIA looks good, I'll add that to my portfolio, SPY is already in there!!

    I use Google Finance to track stocks and other information, Morningstar is second, even sometimes straight from ETrade. Forgot to mention Investopedia, but I basically use their calculators!!

    I've recently looked at this site for new ETFs or for people who need them for different reasons
    http://etf.stock-encyclopedia.com/

  • black caesarblack caesar Posts: 11,911 ✭✭✭✭✭
    edited August 2011
    I've been copping the WSJ for a week now. I always hear about the points dropping or raising. What does this mean and how is it calculated?
    awq1l4.png


    xp0aqu.png
  • it's me bi***esit's me bi***es Posts: 1,413 ✭✭✭
    edited August 2011
    Good drop! Thanks for tha knowledge! So i've been thinkin bout investing for years but havnt cuz to b real i dont get tha game and i dont like to lose money so how does sumone like me first of all, get started and second of all, lose tha fear that i have for loosing money cuz from what i can tell shit goes up and down on a daily basis...
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,419 Regulator
    edited August 2011
    I've been copping the WSJ for a week now. I always hear about the points dropping or raising. What does this mean and how is it calculated?

    The stock market is a what its name implies - a market place for ppl to invest cash into businesses who will use it to expand. When large trades are taking place whether thru buying or selling it has an effect on where the Dow,S&P or Nasdaq points will go. If bad news hits the airwaves people will sell their stocks which means that points will drop. If good news hits the airwaves then ppl will buy & points will go up. When this happens u want to take advantage - now this doesnt mean u should always buy if the general market falls (b/c u have to still consider if ur paying too much for the stock typically by seeing what its price-to-book value is) but u should be looking for bargains tho.


    Good drop! Thanks for tha knowledge! So i've been thinkin bout investing for years but havnt cuz to b real i dont get tha game and i dont like to lose money so how does sumone like me first of all, get started and second of all, lose tha fear that i have for loosing money cuz from what i can tell shit goes up and down on a daily basis...

    The number one thing to keep in consideration tho is not to get so warped up in where the Dow or S&P moves - this is a MAJOR problem why most ppl can never successfully invest b/c their emotions get the best of them. Understand this = You cannot predict how the markets will move in the short term & to some extent the long term BUT u can look at an individual co. & tell where it will be in 10-20 years from now.

    Take Johnson & Johnson (JNJ) for example - we KNOW that they haven't reported a deficit in a looooong time, we also know that they own the rights to the red cross symbol, the namesakes(rights) for vaseline, baby powder, the diaper, tylenol & much much more. We also know that they have the strongest competitive advantage of any co. in its field b/c of this & its profits and balance sheet dont lie. We can look at them & tell with near 95% accuracy that in 10-15 years they will most likely STILL remain at the top of their field & we can guarantee that it be a lot richer too.

    ^^^^^
    When u invest - dont pay attention to the stock market, the stock market dont mean shit, just ppl buying/selling. If u bought a farm, a cornerstore or say a mcdonalds restaurant would u be worried about where the stock market goes ? Hell nah, it makes no difference if u paid 10k or 25k for ur business & that the dow just dropped 10% b/c ur not affected, u know ur business will continue to make revenues & profits - THATS WHAT COUNTS. Another way to look at it is from this perspective, if u buy a business that sells at 0.30x book value (like Bank of America) ur essentially picking it up at a 70% discount. That means ur buyin a 222 billion dollar co. for 70 billion dollars. Now if it drops 10% more does that mean ur losing money ? Yes but no, yes in terms of market value NO in terms that u got the business far cheaper than its worth, at that point it only gets cheaper if it drops, ur investment might lose a couple bucks but the underlying truth is that ur business is still worth what u paid for it & given BAC's history we know it'll bounce back & most likely shoot ur investment 5 or 6 fold. & even if it were to hit zero on the stock market, or if it went into bankruptcy if they sold everything generally ud get the difference b/w 222 billion & 70 billion (this is why Warren Buffett can make billions even if a business fails).

    Another thing too, if ur getting into the field of investing u have to understand that YOU WILL LOSE money at some point. But if u follow the principles I laid out in my earlier posts I can guarantee that it will rarely happen to u, but still dont be naive except that at some point u will lose some money (ppl make mistakes). Now if ur terrified of losing money - invest it in an index fund that tracks the OVERALL MARKET like the ones I posted for traestar.

    Understand: the S&P in the long term will climb & be worth more in the future - new businesses will rise, ppl will invest in them, the most powerful co.s in the world will continue to grow, the economy will grow & more. Granted there will be moments where it plummets to historical lows one thing u need to know is that it'll go up. This is why I tell ppl to just buy an index fund that tracks the market if theyre still unsure about picking stocks.

    Peep the history over a 100 year period....
    Dow%2BLong%2BRange%2BTrend%2BGraph.jpg

    Dow%2BInflation-Adjusted%2BClosing%2BPrices.jpg

    Of course im oversimplifying but look at it like this - u see where the price drop offs are (peep 1931 & 1936 u see how far it fell & how far back up it shot) ? for the most part those are when recessions hit, niggas who sold must be pissed that in a few years it went back up & that over the long term that shit spiked.
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
  • it's me bi***esit's me bi***es Posts: 1,413 ✭✭✭
    edited August 2011
    Once again thanks for tha knowledge i appreciate it! Did u get my p.m?
  • CoolJoeCoolJoe Posts: 6,183 ✭✭✭✭✭
    edited August 2011
    Good shit good shit.
    Random question, my Financial Economics teacher hated Stock Brokers, would you suggest steering clear of them?
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,419 Regulator
    edited August 2011
    CoolJoe wrote: »
    Good shit good shit.
    Random question, my Financial Economics teacher hated Stock Brokers, would you suggest steering clear of them?

    LOL i dont wrong him. If u can yeah. But it also depends on the type of person/investor u are. If ur the type that has a soft stomach & is highly prone to emotional swings but have a good chunk of money u want to invest then it might be a good idea to get one. But if u do make sure u screen them properly. Stock Brokers live for the moment & it doesnt matter to them if u do bad or good - theyre still gonna get a nice pay cut at the end of the day. U dont have to avoid them there are some really good ones theyre just extremely rare LOLOL.

    Ill get more into this later....
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
  • SionSion Moderator, Legion of Trill, AHH Content Producer, AHH Editor Posts: 45,419 Regulator
    edited August 2011
    Once again thanks for tha knowledge i appreciate it! Did u get my p.m?

    Yup I got it fam

    *daps*
    IC Moderator and AHH Editor

    http://community.allhiphop.com/categories/site-help

    ^^^ If you need anything go here

    jono wrote: »
    This is the folly of the internet. Its become a bastion of misinformation, rumors, conspiracies and propaganda. A place where a person with no face or name can make accusations at any time with no verification or credentials and brainwash a small segment of people.
    T. Sanford wrote: »
    Message to the trills of the IC: May Legion Of Trill be your enemies downfall
  • CoolJoeCoolJoe Posts: 6,183 ✭✭✭✭✭
    edited August 2011
    sionb55 wrote: »
    LOL i dont wrong him. If u can yeah. But it also depends on the type of person/investor u are. If ur the type that has a soft stomach & is highly prone to emotional swings but have a good chunk of money u want to invest then it might be a good idea to get one. But if u do make sure u screen them properly. Stock Brokers live for the moment & it doesnt matter to them if u do bad or good - theyre still gonna get a nice pay cut at the end of the day. U dont have to avoid them there are some really good ones theyre just extremely rare LOLOL.

    Ill get more into this later....

    I see I see...
«13456785
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