Some resources for global portfolio management

To help the contestants of the portfolio management game that starts in another 4 days time I have compiled a few resources that could be useful. This is by no definition an exhaustive list. Then again too much information could lead to information overload for the inexperienced beginner. I will personally try to use these three websites for doing the research for my trades.

Seeking Alpha

Seeking Alpha should be the go to place to understand what is happening to the global economy. See what other people (from experienced professionals to speculators) have to say about specific markets, stocks, economies, commodities etc. It can be a good source to generate investment ideas for beginners like us who have never traded in developed markets before.

Yahoo Stock Screener

One could also generate own ideas from scratch using the Yahoo Stock Screener. Just simply put your own filtering criteria to get leads. Also, if you read a bullish report on a particular industry in Seeking Alpha you could try to combine both these tools and get your investment idea.

Yahoo Finance

To do the analysis on your investment ideas which you got from Seeking Alpha or from the Stock Screener you should use Yahoo Finance (there are alternates like Google Finance, Bloomberg etc).

You can use it in a number of ways. One way would be to look at the stock fundamentals like its earnings growth, leverage, valuation multiples etc. You could also look at the technical charts as well which would look something like this. I would personally try to use a combination of the two.

Added Bonus

I will also try to write as much as possible on stock investing in this blog in the next 4 days and also as the competition continues.

Furthermore, I will probably give explanations for my trades (whether fundamental or technical) to help my readers understand why I took position. This is something I am not requiring the other participants to do.

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Stock investing – the basics

Lesson 1: Why should someone invest in stocks?

Stock InvestingThe analysis of stocks should surely begin with the definition. Stocks represent ownership of interest in a company. If I own 10 shares of a company which has issued 500 shares in total then I own 2% of the company. That effectively means that I am entitled to 2% of the value of the company and 2% of the profit that is generated after tax.

Who should buy common stock?

Common stock (aka shares, aka equity) is an investment. Anyone with savings (Income>Expenditure) can invest in stocks with the hopes of increasing personal wealth. However, just because someone has some extra money does not mean that he should invest all of it in stocks. We will cover more of it in our “Personal Finance” section which I plan to launch after some while.

What are some alternatives to investing in stock?

Instead of stocks an investor in Bangladesh (and outside) can invest in fixed income instruments like bank deposits, government savings certificates, real estate and many other conventional and non-conventional (e.g. antiques and arts) assets. Typically, most people would hold a diversified portfolio of assets and the mix of these assets would depend on a number of factors including age, financial dependents, need for recurring income etc.

Doing our own homework

In Bangladesh most of the people do not spend time doing their own analysis or homework before investing in a stock. Therefore, they are typically speculating and going on a wild goose chase where the advanced insiders can rip them off. This stock investing series for beginners has been launched to help people avoid at least the most common pitfalls. Who knows, among my readers I could have the next Peter Lynch or Joel Greenblatt (using Warren Buffet would have been too cliché) in the making.

Skills needed to become a good investor

A good investor will actually need a large number of skills. Some basic mathematics (addition, subtraction, multiplication and division), a bit of finance, knowledge of the common financial statements, understanding of the economy will be necessary. None of these are stuff that a common person cannot learn and we will surely go over them.

On top of that there are some extra skill sets that would come in very handy like a strong network, good communication skills, knowledge of Microsoft Excel, analysis of body gestures etc. I am making it sound quite mysterious but once we are through the next lessons things will slowly come into place.

Conclusion

Investing is fun, especially when done the right way. It is like playing a computer game (think World of Warcraft or Counterstrike) and can get quite addictive. I hope these free lessons will be useful and full of fun.

 

 

 

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Basics of stock investing – Introduction

I was planning to write a series on Stock investing for a long time but was unable to make the time for it. Now is a good time to start the series as the blog is getting a decent amount of viewers. I plan to mainly write in very simple terms so that the absolute layman can also understand what I am writing. However, I do feel that even some experienced professional’s can get some different perspective by reading this series because investing at the end of the day is an art.

Stock InvestingI will be writing the content and will also give reference books, articles, videos etc. At times I might also upload excel files to properly prove the theory with practical examples.

I really hope that this attempt will make a small contribution in making the Bangladesh capital market less speculative and rumor based. The retail investor had played the ‘bigger fool’ game for too long and are ending up losing everything. Until and unless they understand that they need to make their own investment decisions themselves or find out true professionals with accountability to manage their assets they will continue to lose.

Since this is my first attempt at something like this there could be mistakes and editing involved. So please forgive me in advance for such errors as I have a full-time job and can only work on my blog on my spare time.

Photocredits: Freedigitalphotos/Photokanok

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The best books on stock investing

I read a lot and am highly passionate about the subject of stock investing. The following are the books that I consider a must read for almost all stock market ‘investors’ . Here I will give a short summary to each of these books. However I do plan on having detailed reviews on each of them later on.

1. The Little Book That Still Beats The Market by Joel Greenblatt

I usually recommend this book to anyone who wants to learn stock investing. However, I strongly believe that both new and old investors will benefit from the wisdom shared in the book. Greenblatt explains the logic and the irrationality of the markets using such a simple language that even a school going kid should be able to understand it.

2. Beating The Street by Peter Lynch

The celebrated Peter Lynch of the Fidelity Magellan fund demonstrates how a basic layman using common sense can actually beat the experts from Wall Street. Just like most other books I like it is written in very simple and easy to understand language. I plan on reading this book again very soon. Usually this is the second book I recommend to people.

3. The Little Book That Builds Wealth by Pat Dorsey

This is the type of book that I fall in love with. Easy to read, small and has a world of information. Don’t be fooled by the gimmicky title of the book as I rate it within the 3 best books on investing I ever read. The book explains the concept of sustainable competitive advantage (aka economic moat) that brings superior returns

4. The Little Book of Value Investing by Christopher H. Browne

Another brilliant book on value investing from the little book, big profits series. Explains the concept of value investing crisply. A great book by a great investor.

5. Market Wizard Series by Jack D. Schwager

There are four books in this series. Each of them are filled with interviews with some of the best traders and investors. From Ray Dalio to Joel Greenblatt to Paul Tudor Jones, Mr Schwager has interviewed them all. And these are not the typical interviews that we read. Each of them have very insightful and deep questions and answers.

6. Common Stocks and Uncommon Profits by Philip A. Fisher

Phil Fisher can be considered as one of the gurus of fundamental investing. Many great investors in the world have mentioned him as an influence. His strategy of a holistic approach to fundamental due diligence by not only looking at a company but also studying the suppliers, customers and competitors has become the gold standard in the equity analysis world.

7. You Can Be a Stock Market Genius by Joel Greenblatt

The ultimate guide to special situation (mergers, acquisitions, spin-offs, divestitures) investing. Greenblatt outdoes himself with this book and proves clearly that the efficient market hypothesis is a myth even in the highly developed markets. Special situations very often lead to irrationality in valuation and these can be exploited by the clever investor.

8. The Essays of Warren Buffet by Warren Buffet

This is a compilation of the letters Warren Buffet wrote to his shareholders. The letters have been organized according to category. The reader will clearly understand why this man is one of the richest people in the world.

9. Best practices for Equity Research Analysts by James Valentine

Hands down the best book on equity research. Short, compact and highly practical guide for both buy and sell side analysts.  A must read for all investors in my opinion. It might be a bit hard to apply in real life but the book title clearly mentions that these are the ‘best practices’.

10. Margin of safety by Seth A. Klarman

Another excellent book on value investing. The author shows with theory, logic and practical examples why investment fads are pretty much always bogus. The best way to make money is to have a strong disciplined fundamental analysis approach.

 

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