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Are You Worth Investing In?
Do you realise that if you're green you're growing and if you're ripe you're rotten? So says Winston Marsh, Business Marketing Guru in his recent newsletter.
Here's and excerpt from it ...
"Over the last week or so I have been presenting a...
Five tips for Investing
One of the most common requests I receive is for investing help.
In this article, I try to present just a few basic investing tips
to remember when you plan for your future through investing.
1. Have a plan and know where you are going with your...
How to pay less and get more: Discount broker vs professional
How do you invest? What do you really pay? At the end of the day, what are your real results? These are questions smart investors should be asking themselves (but usually don't). In this era of more fees, misc. charges, holding periods and back...
How to Work From Home and Enjoy Life
How would you like to have at least an extra hour in your day just for yourself so that you can have more fun? When you work from home there can be a tendency to work longer hours due to the flexibility that you have.
If you work from home,...
The Most Important Thing You Need To Know About Investing
The Most Important Thing That You Need To Know About Investing
That is a very grand title for a newsletter. But, I kid you not,
what I am going to discuss this month is a rather overlooked but
massively important factor in the success or...
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Emotion In Investing
Humans are all emotional being. We do not always make decisions
rationally. Emotion is part of us as investors. Investors might
feel better towards stocks at certain point or they might feel
that owning stocks are risky and avoid it at all cost.
Investors may also feel attached towards a specific company and
continue owning the stock without regards to its fundamental.
For example, you might like Google's search engine so much that
you decide to buy the stock at $ 350 without doing any research.
You figure that Google's search engine is so much better that
buying the stock will give you profit, right? Wrong. Now, I am
not here to bash Google as an investment, but analyzing an
investment goes beyond the products and companies. Most
investors can identify good companies and products. It is quite
easy. You know that a Mercedes is a better car than a Ford or a
Civic.
The next question is how much should you pay for a Mercedes or a
Civic? This requires us to put aside our emotion for a second
and think clearly. Sure, you'd like to have a Mercedes in your
life. It is luxurious and have a lot more fancy features than a
Civic has. But, that does not mean you should overpay for it. It
works similar with stock investing.
Google is a good search engine, probably the best that is ever
produced so far. Sure, you probably pay more for Google
than
other generic search engines. But, please don't over pay. You
invest in Google to profit from it not because you like its
products.
So, how do we eliminate emotion from our investing decision? We
can't eliminate it completely but there are certainly tools that
might help. One is to calculate the fair value of a common stock
that you are investing in. I covered this plenty of times but
basically, the fair value of an investment is dependent upon the
streams of profit generated by it. In the long run, if company A
earns more than company B, then company A will be valued more
than company B.
For a company that is growing such as Google, you can
incorporate its growth and calculate the fair value with growth.
I have talked about this once and you are welcomed to check our
commentary section.
I know I don't exactly give you the best solution to the
problem. Emotion is hard to ignore. I am not immune to that. But
following your emotion will cost you a lot of money. Just watch
those investors that bought during the NASDAQ peak in 2000.
Don't follow the herd and keep your focus on the fair value of
your stock. You will do really really well.
About the author:
Do you know of a better way to eliminate emotion in our decision
process? Please visit http://www.noviceinvesting.com and post in
our forum.
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