40 Gems for Traders and Investors

01. There are only three kinds of investors – those who think they are geniuses, those who think they are idiots, and those who aren't sure.

02. One of the clearest signals that you are wrong about an investment is having the hunch that you are right about it.

03. Investors who focus on price levels earn between five and ten times higher profits than those who pay attention to price changes.

04. The only way to be more certain it’s true is to search harder for proof that it is false.

05. Business value changes over time, not all the time. Stocks are like weather, altering almost continually and without warning; businesses are like the climate, changing much more gradually and predictably.

06. When rewards are near, the brain hates to wait.

07. The market isn't always right, but it’s right more often than it is wrong.

08. Often, when we are asked to judge how likely things are, we instead judge how alike they are.

09. Most of what seem to be patterns in stock prices are just random variations.

10. In a rising market, enough of your bad ideas will pay off so that you’ll never learn that you should have fewer ideas.

11. The more often people watch an investment heave up and down, the more likely they are to trade in and out over the short term – and the less likely they are to earn a high return over the long term.

12. Investing is not you versus “Them”. It’s you versus you.

13. The single greatest challenge you face as an investor is handling the truth about yourself.

14. Hindsight bias keeps you from feeling like an idiot as you look back – but it can make you act like an idiot as you look forward.

15. Ignorance of our own ignorance haunts our financial judgments.

16. Investing requires taking a stand on at least some of the uncertainties that the future holds. So your goal is to be as sure as possible that you don’t think you know more than you really do. How much you know is less important than how clearly you understand where the borders of your ignorance begin. It’s not even a problem to know next to nothing, as long as you know you know next to nothing.

17. Being part of the herd is fun while it lasts, but it’s seldom lucrative for very long, and it’s impossible to predict when the herd will change its “mind.” If you want to make more money than other people, you can't invest like other people.

18. Knowing, or even imagining, that someone else is relying on your advice can make you feel more accountable, forcing you to go beyond your gut feelings and fortify your opinions with factual evidence.

19. Find out who has a negative view and give this devil’s advocate a full hearing.

20. Whether you should take a risk depends not just on the probability that you are right but also on the consequences if you are wrong. You must always weigh how right you think you are against how sorry you will be if you turn out to be mistaken.

21. We are often most afraid of the least likely of dangers, and frequently not worried enough about the risks that have the greatest chances of coming home to roost.

22. When an intangible feeling of risk fills the air, you can catch other people’s emotions as easily as you can catch a cold.

23. Overreacting to raw feelings “blinking” in the face of risk is often one of the riskiest things an investor can do.

24. There’s safety in numbers only when there’s nothing to be afraid of.

25. Many of the world’s best investors have mastered the art of treating their own feelings as reverse indicators. Excitement becomes a cue that it’s time to consider selling, while fear tells them that it may be time to buy.

26. A mistake that stems from an action hurts worse than a mistake that results from inaction.

27. Once you have a handful of options, adding even more choices will lower you odds of making a good decision and increase your chances of regretting whatever decision you do make.

28. The harder the choice feels, the less people want to choose. Yet, the threat of having less choice almost always disturbs us.

29. The closer you come to hitting your target, the more regret you are apt to feel if you miss it.

30. The human brain is a brilliant machine for comparing the reality of what is against the imagination of what might have been.

31. There’s no end to the roads not taken.

32. Investors probably hurt themselves more by avoiding risks they imagine they might regret than by taking risks they really do end up regretting.

33. Instead of making judgments one at a time, you should follow policies and procedures that put your investing decisions on autopilot.

34. The more you can automate your investing, the easier it should be to control your emotions.

35. The pleasure you expect tends to be more intense than the pleasure you experience.

36. We often find out that what we thought we wanted before we got it is no longer what we really want once we have it.

37. There are two tragedies in life. One is to lose your heart’s desire. The other is to gain it.

38. Your memory of what was is shaped largely by what is.

39. If you focus too narrowly on the task at hand, you may never use your peripheral vision.

40. Chance favors the prepared mind.
Source:http://www.anirudhsethireport.com

_________________

Colombo Stock Exchange - Dividend History 14 + Years

CSE Dividend History 14 + Years

Investment Vs Speculation Vs Gambling

By Sunil Sahdev

Many people do not differentiate between the following terms when they invest their hard-earned money in different asset classes, particularly in stock market and often get confused between;

1. Saving

2. Investment

3. Speculations

4. Gambling


We often use the word savings and investment interchangeably, while both are different and both are necessary to secure our future. Saving is done for purchases and emergencies while investment is being done for creation of wealth. I have heard from most of the people that they are savings for their retired life, we need to understand that if we are saving for our retired life we need to invest that money to create wealth. We need to allocate the money wisely between saving and investment, it depends upon behavior of each individual and allocation can be made accordingly. In general, we shall allocate equivalent of three to six months expenses for savings and any excess over it should be allocated for investment.

There is a razor thin differentiation between investment and speculations, in reality it depends upon our own behavior as an investor to differentiate between investment and speculation. Investment and speculative deals are generally done for real assets.

Investment can be defined as “The employment of funds to acquire certain assets after due diligence for mid to long period of time, with the objective of wealth creation and additional income in future”.

Speculative investment can be defined as “The employment of funds to acquire assets for shorter duration of time to take advantage of fluctuations in prices of underlying assets”.

However, Gambling can be defined as “The employment of funds for entertainment/fun with the chances of return depends upon probability of certain situation or events”. For example, deploying funds on horse racing can be defined as gambling.

Key differential of investment vs speculation vs Gambling is:

1. Risk Analysis and Risk appetite: Investor will generally rely on the fundamental analysis of financials and other factors which can affect the price of the asset class and their decision to invest in particular asset is based upon certain fundamental values associated with the asset. Investors do have long term risk and return perspective. While speculators generally rely on the flow of the wind without analysing any fundamentals. Speculators do take higher risk for expects higher returns in short period. Gambler risk entire capital on bet and relay mainly on luck. They are the highest risk takers and ready to lose original investment also.

2. Price of the asset: Investor does not look at the price of the asset rather it looks at the asset itself to determine the decision to allocate some money now to get some money back later on. Investor does not get influenced by daily fluctuations of the asset price, because his/her allocation of money decision is based on the intrinsic value of the assets rather then price. Speculators look at the price of the asset to allocate the money and they do get influenced by the daily fluctuations of the price of the assets, aim of the speculator is to get some quick reward. Gambling is based upon odds and bets are placed only on assumptions.

3. Time Horizon: Investors allocate money for a particular asset for longer period while speculators allocate money for shorter period, on the other hand gambler place bet for immediate gain.

4. Leverages: An investor allocates money from its own resources for investment while and speculators may also rely on borrowed money to allocate. This is applicable mainly to assets belongs to equity market. Gambler generally allocate their own money and place bet for entertainment or fun.

An individual’s approach towards investment identifies the individual either investor or speculators. If an individual is investing without fundamental analysis, only on the basis of market sentiments and certain news, for a shorter duration can be defined as speculative investor. An Individual who invests with proper fundamental analysis for longer period of duration can be defined as investor.

In conclusion, Investor will get stable return over a long run and I advise all my readers to invest wisely after proper analysis of the company to secure their hard money for fairly good chances for creation of wealth. If you are a speculator, make sure your entry and exit to the market is at right time and always be ready to higher risk of loss of original investment in worst circumstances. Gambling should be avoided always and in most of the cases gambling is not legal also.
Source: via twitter

Things People Say During a Bull Market

Here are some things you've probably been hearing during the current bull market from a wide range of investors including some tongue-in-cheek translations about what they really mean.

On Fair Value:

Bears: We think the market’s fair value is much lower than current levels. (Translation: We have to say it’s way lower than the level where we called for a crash four years ago.)

Bulls: We think the market is fairly valued at current levels. (Translation: I have no idea what the fair value of the market is and neither does anyone else.)

Investment Strategists: If earnings grow at a consistent rate forever into the future and you slap a P/E ratio of 16x on the market we think stocks will rise 8-10% this year. (Translation: Stocks are up 3 out of every 4 years so if I keep predicting this I’m bound to be right eventually.)

Value Investors: The market is overvalued but our stocks are trading at a 30-40% discount to fair value.

Growth Investors: The monthly active user numbers are off the charts for this 3 person company that’s worth $50 billion.

On Market Gains:

Bears: It’s all artificial. (Translation: I didn’t participate.)

Bulls: We’re constructive from here and see a period of consolidation. (Translation: Please don’t fall, we’re all in).

On Sentiment:

Bears: Everyone is all in on the market. These people are delusional. No one sees the risks building up under the surface.

Bulls: Everyone is still bearish. Stocks climb the wall of worry.

On Interest Rates:

Everyone: Rates are going higher.

On Reading Material:

Bears: Did you read Hussman’s latest piece?

Bulls: Did you see what Siegel wrote today?

How it All Ends:

Bears: This will end badly (Translation: I will be gloating during the next bear market but will be too scared to buy).

Bulls: We predict a soft landing with a healthy correction that will make for a nice buying opportunity. (Translation: I will be too scared to buy during the next bear market.)

Private Equity: We have plenty of dry powder for the distressed opportunities that will arise from the next crisis. (Translation: All of that money will be used to shore up current investments that run into trouble.)

On Corrections:

Bulls: A 3% loss is the new 10% correction.

On Bubbles:

Bears: Biotech? Bubble. U.S. stocks? Bubble. Bonds? Bubble. Gold? Not a bubble. It’s going to $5,000 an ounce.

Bulls: This is not a bubble. The technology boom and bust of the 1990s, now that was a bubble.

Venture Capitalists: It’s a new era, not a bubble. We’re changing the world one app at a time.

On Strategies:

Index Investors: I’m a long-term investor through thick and thin (Translation: I become a long-term investor during bull markets.)

Active Investors: Yes, we’ve underperformed, but we will protect you during the next bear market (Translation: A few of us will and we really hope it’s us.)

Source:http://awealthofcommonsense.com/

Zen and the Art of Share Market Investing

By Wade Adams

It is all too easy to get caught up in the daily movements of the share market. One day it is up, the next it is down and so too are your emotions – and as a share market investor your emotions can be your undoing. Unfortunately it may not just be your portfolio that suffers either, when share market investing if we don’t wisely manage how we invest we can loose everything – from our sleep at night to the shirt right off our back. After investing in and studying the markets for over 12 years or so now I am very comfortable with it. That doesn’t mean I know what is going on all the time or even half of the time, all it means is that I continue to invest and I don’t loose any sleep over it. Here’s how I manage my portfolio and my emotions.

Practice like a Monk

For the purposes of this article I use the term ‘Zen’ in it’s slang definition – ‘Feeling peaceful and relaxed.’

You may have seen similar footage to that below of Buddhist Monks creating ‘Sand Mandala’s. (It is actually Tibetian Buddhists that do this practice, not Zen Buddhists, but I like the example none the less.) Sand Mandalas are tedious and slow works of art to create, taking days or weeks to complete. Shortly after the Buddhist Monks complete the Mandala it is then destroyed in a ceremony. The whole idea is to put your heart and all of your focus into your work without holding on to the outcome. This is all to symbolize the Buddhist doctrinal belief in the transitory nature of material life.

Do the work

What has Monks making Sand Mandalas got to do with investing? Almost everything if you are a value investor. Many investors both new and ‘experienced’ just can’t help themselves but get caught up in the daily action of the markets. I love this kind of enthusiasm, but I also believe chasing numbers on a board or lines on a chart can be a very distractive and hazardous habit. Instead be like the Monks – focus on the work (research), commit to your work (invest) and then… let it go. Getting all worked up everyday over the latest share price direction or ‘charting trend’ isn’t going to changing anything accept your quality of sleep. This is the trick – focus more on the work and less on what happens day to day once you make an investment.

Focus

Your focus is one of the hardest things in the world to manage. One minute you are hard at work and the next, ‘Oh, look it’s a squirrel.’ Focus is a human trait that we still don’t fully understand and it is ridiculously powerful – both meditation and hypnotism are forms of deep focus.

As an investor there are two focus points that I believe make all the difference to your portfolio. We’ve already discussed the first one, focusing on doing the work. The second one is focusing on what you understand.

Focusing on what you understand is a practice in working your strengths and avoiding your weaknesses. There are over 45,000 listed companies on stock exchanges all around the world, that is an overwhelming number of companies to try and understand. If you believe you can understand them all, power to you – but personally, I’m going to keep on keeping it simple.I stick to researching products and service that I can understand, made by companies that I can understand, in industries that I can understand, in markets that I can understand. Don’t get me wrong, I’m always reading, studying and aiming to broaden my knowledge and understanding, but if I’m not comfortable with my current level of understanding – I simply don’t invest.

The Secret to a Deep Sleep – Buy Cheap

Value Investors call this ‘a margin of safety.’ When you break this down into dollar terms this essentially means buying a dollar for say 70 or even 50 cents. You see, I believe that what a company is trading for on a stock market at any given time doesn’t necessarily mean that is what the underlying company is actually worth. Here’s an example:Quite a few years ago now I found a listed Gold Miner trading at slightly less than it had in cash in the bank. In other words, (if it worked this way) you could have bought your shares, walk into the company and said ‘I want out,’ grabbed your share of cash out of the vault and have made an instant profit. Now this discount to cash in the bank in itself isn’t enough to get me interested to invest, as companies have an uncanny knack to chew through cash, but it did get me looking further. Long story short, the miner not only had a big wad of cash in the bank and no debt, it also had a lease on a proven ore deposit and had nearly finished construction on their mine and processing plant. But because gold was tanking at the time the market wasn’t interested in a non-productive gold mine – even though in 6 months it would be productive. So, I ran the numbers, took off a discount to allow for any errors and assumptions in my research bought in and continued to sleep really well (as I knew I’d bought a solid asset at a large discount). Then I just waited for the market to catch on to this discrepancy – 10 months later the investment had more than doubled.

Patience

Patience is a hard virtue to get on top of. Personally, in many facets of my life this one has brought me unstuck and taught me a lesson more than once. If you want a solid incentive to help you practice patience, investing is a good one.

Often during a bull market as a value investor you will be searching and searching for undervalued investments and to no avail. This is when your patience is really tested. It is hard to continually keep doing all the work without getting any of the action. But you have to hold tight and remind yourself to stick to your rules, be patient and know that it will all pay off when the market turns or you do find that one undervalued gem.
Discipline

One of my filters for proceeding with an investment is, ‘Do I believe it has the potential to double within 2-3 years?’ This doesn’t ever mean it necessarily will, but it does make me ensure I am buying an investment cheap enough to provide that kind of potential return.

Often I will be watching a company on my Watchlist or researching a new company and it will not quite be low enough to make my ‘buy-in price.’ This can be oh-so frustrating and a good test of will power and conviction to your rules. I have missed out on purchasing great investments in the past from this, but I have also found that once you start breaking or simply relaxing your rules this is when you start to slip-up.
Getting in over your head

Which brings me to debt. Debt can definitely help to increase and compound your returns (I will talk about my experiences with debt and how I continue to use debt in a future post), but it can also completely destroy your portfolio and possibly all of the rest of your savings. If you ever find yourself ‘in a rush to get rich’ and start gearing up your borrowings faster and faster, it is probably a good time to step back and check yourself – preferably before it is too late.

Conclusion

I believe that to be a decent share market investor 20% of it is research and 80% of it is building the psychological strength to stick to your research and valuation rules – it is a funny ol’ game. There are no short cuts. If you do try and take short cuts time will eventually catch you out and teach you the lessons you are trying to rush past – just like a good Zen Master. So I continue to try and learn from the patient and persistent monks, keep myself in check and stick to my rules with each and every investment.

Enjoy the ride!

www.sharedinvestor.co

20 Golden Rules of Investing to Live By

Author: Francesco Casarella

1. If it sounds too good to be true, it's definitely not true!

2. Anyone promising returns over 15% per year should be asked why they're not counted among the greatest investors like Warren Buffett, Peter Lynch, or Ray Dalio.

3. To gain more, you often have to risk more, but sometimes your risk tolerance is zero (and you might not realize it).

4. Only invest in what you can explain to a 5-year-old or even a German Shepherd. In investing, complex thinking isn't necessary.

5. Minimize costs – if you're overpaying, someone else is cashing in.

6. When everyone agrees, everyone's likely mistaken.

7. Investing is like snagging a pair of top-notch shoes – it's a real deal when they're on sale.

8. Those who can, do it – those who can't just talk.

9. A great book is worth more than an expensive course.

10. Doing the right thing might make you feel foolish at times, but it eventually pays off.

11. Time is on your side: Use it as much as you can.

12. You're not your neighbor or coworker; everyone charts their own path and outcomes.

13. Diversify – remember, you're not Warren Buffett!

14. All extremes tend to balance out in the end.

15. Invest because you comprehend the business, not because you like the name or have a connection.

16. Evaluate results across years, not days.

17. Every invested dollar should have a purpose; never invest without understanding why.

18. Develop a clear strategy before committing your money.

19. Compounding is a marvel, but you have to leverage it for it to matter.

20. Speculation isn't investing – it's the price paid by those who rush in without thinking.

Source: investing.com

Manage Your Money Like A Pro With The 50/30/20 Method

By Steve Burns

Managing your money can feel overwhelming, but with the right budgeting strategy, you can take control of your finances and achieve your goals. One popular and practical approach is the 50/30/20 method, a simple yet powerful budgeting rule that helps you allocate your income into three main categories: needs, wants, and savings/debt repayment.

In this article, we’ll dive deep into the 50/30/20 method, explore its benefits, and guide you through implementing it in your own life.

What Is The 50/30/20 Rule For Managing Money?

The 50/30/20 budgeting rule was popularized by Senator Elizabeth Warren and her daughter, Amelia Warren Tyagi, in their book All Your Worth: The Ultimate Lifetime Money Plan. This method simplifies budgeting by dividing after-tax income into three main categories: 50% for needs, 30% for wants, and 20% for savings and debt repayment.

By following this formula, you can ensure that you’re covering your essential expenses, enjoying your life, and building a solid financial foundation for the future.

The beauty of the 50/30/20 method lies in its simplicity and adaptability. It provides a clear framework for managing money while allowing flexibility based on your unique circumstances and goals.

Whether you’re just starting your financial journey or looking to optimize your existing budget, the 50/30/20 method can help you manage your finances and maximize your income.

Breaking Down The 50/30/20 Method

To fully understand how the 50/30/20 method works, let’s break down each category and explore what expenses fall under each one.

50% Needs

The “needs” category encompasses all the essential expenses you can’t live without. These bills and costs are necessary for your basic survival and well-being. Some examples of needs include:

• Housing (rent/mortgage)
• Utilities (electricity, water, gas)
• Groceries
• Transportation (car payments, fuel, public transit)
• Insurance (health, car, home/renters)
• Minimum debt payments (credit cards, student loans)

When allocating 50% of your after-tax income to needs, it’s essential to be mindful of your spending and look for ways to reduce costs where possible. For example, you might consider downsizing to a more affordable home or lower rent, negotiating better interest rates on your debt, or finding cheaper alternatives for groceries and transportation.

Increasing your income is also a solution to most money problems as long as you don’t keep spending at the pace of your wage growth and avoid lifestyle inflation. A frugal lifestyle helps bring your numbers into the correct percentages for this method.

30% Wants

The “wants” category covers all the non-essential expenses that enhance your lifestyle and bring you joy. These are the things you can live without but choose to spend money on for your satisfaction. Examples of wants include:

• Dining out
• Entertainment (movies, concerts, streaming services)
• Hobbies
• Vacations
• Shopping for clothes, gadgets, or home decor
• Gym memberships or fitness classes

When allocating 30% of your income to wants, it’s essential to prioritize what matters most to you and be mindful of your spending habits. Consider setting a budget for each type of discretionary expense and tracking your spending to ensure you’re staying within the 30% limit.

20% Savings And Debt Repayment

The remaining 20% of your income should be dedicated to savings and debt repayment. This category includes:

• Emergency fund savings
• Retirement contributions 
• Other long-term savings goals (down payment for a house, college fund)
• Extra payments towards high-interest debt (credit cards, personal loans)

Building a solid savings foundation and aggressively paying down debt will help you achieve financial security and freedom in the long run. Aim to have at least 3-6 months’ worth of expenses saved in an emergency fund and prioritize paying off high-interest debt to save on interest charges.

Implementing The 50/30/20 Method In Your Life

Now that you understand the basics of the 50/30/20 method, let’s walk through the steps to implement it in your own life.

Step 1: Calculate Your After-Tax Income

Start by determining your monthly take-home pay after taxes and deductions. This is the total amount you have available for budgeting. If your income is irregular, calculate your average monthly income over the past few months.

Step 2: Identify Your Needs

List all your essential expenses and categorize them as needed. Review your spending and ensure that your needs don’t exceed 50% of your after-tax income. If they do, look for ways to reduce these costs, such as finding a more affordable living situation or even moving to a lower-cost area.

Step 3: Track Your Wants

Keep track of your discretionary spending to ensure you stay within the 30% limit for wants. Use a budgeting app or spreadsheet to categorize your expenses and monitor your progress. Be honest about what brings you joy, and prioritize your spending accordingly.

Step 4: Automate Savings

Set up automatic transfers to your savings and retirement accounts to ensure you consistently save 20% of your income. This will help you build a solid financial foundation and make progress towards your long-term goals. If you have high-interest debt, consider allocating more funds towards debt repayment to save on interest charges in the long run.

Tips For Successfully Using The 50/30/20 Method

To make the most of the 50/30/20 method, keep these tips in mind:

Be Flexible And Adjust As Needed

Your financial situation and goals may change over time, so be prepared to adjust your budget accordingly. If you experience a significant change in income or expenses, revisit your budget and make necessary adjustments to ensure you follow the 50/30/20 rule.

Leverage Budgeting Tools

Take advantage of the many budgeting apps and tools available to help you track your spending and stay on top of your finances. Apps like Mint and Everydollar can automatically categorize your expenses, provide insights into your spending habits, and help you stay accountable to your budget.

Regularly Review And Reassess

Make a habit of reviewing your budget regularly, ideally every month. This will help you stay on track, identify areas where you may be overspending, and adjust as needed. As you review your budget, also take time to reassess your financial goals and make sure your budget aligns with your priorities.

Take Control Of Your Finances With The 50/30/20 Method.

The 50/30/20 method is a simple yet effective budgeting approach that can help you manage your money with confidence and clarity. By allocating your income into needs, wants, and savings/debt repayment categories, you can cover your essential expenses, enjoy your life, and build a solid financial foundation for the future.

Conclusion

Budgeting is a process, and finding the right balance for your unique situation may take some time. Be patient with yourself, celebrate your progress, and keep working towards your financial goals. With the 50/30/20 method as your guide, you can take control of your finances and create a life of economic security and freedom. This method gives you quantifiable parameters to aim for with your money.

Source: www.newtraderu.com