There are two kinds of assets to buy. One is the asset itself that delivers a return to you (a rental property, stocks, a farm). Then there are the assets you buy, that you hope somebody else pays you more later on, but the asset itself doesn’t produce anything (art, gold, etc,).
Those are two different games, and the second can be regarded as speculation. Speculation is a belief that price will go up or down (depending on the needs of the investor). Only demand, shortage, fear, or a lack of these will move the price higher or lower.
For the average investor there is a lack of time to constantly follow the market gathering information needed to be able to take an educated guess on the direction of oil, cotton, soybeans, corn, silver, gold, etc, in a timely manner to be able to benefit the portfolio in a positive manner. Remember, old news is news after the fact, and too late for entry into the market to be of use.
The second type of asset, which I favor are stocks. When you look at a stock, as a business, the decision to buy or not is made much easier. As in any business we want to know what the growth was historically, and what will be the future growth. The simple questions are, was the business doing well in the past, and can the business be expected to continue doing well?
Investing with confidence, means you have the knowledge to gather and understand the information provided about the stock you’re considering.
At www.YouControlinvesting.com each step is explained in our course, so that anyone willing to put in the effort to understand stocks can profit.
There is a wealth of information available to the stock investor to determine past and future business performance. At www.YouControlinvesting.com you will learn to always start with Return of Invested Capital (ROIC), to find the best stocks for further fundamental analysis. With ROIC we can learn if management puts all company assets to good use. When we find a company with ROIC, at a growth rate of 10% or greater, that is a good start.
There is more information available to the investor to determine the growth rate (very important), or non growth rate (equally important, to prevent loss of your investment). When considering a business, we will look at Earnings Per Share (EPS), Revenue or Sales (the same thing), Equity, and with ROIC, we can understand how the business performed in the past, and estimate future performance.
With all the above information, we can also determine the correct price to pay for a business. Remember, that the price of a business (stock) you see on your computer, is the price the last person was willing to pay. Did that person pay too much? You need to know. Paying too much for anything will make it hard to find somebody willing to pay even more to give you a profit.
Paying only half of what a stock is worth is an important part of investing. If the current price of a stock you are considering is priced at $40, and you determine that what it’s worth is $30, that is a savings when it comes time to buy.
To save even more visit www.YouControlinvesting.com and ask for your free Lesson 1 about ROIC to get started.
Stocks are a part of a business. A quality business has the ability to make money over time. Look for a business that has consistent predictable growth rates. Consider any business with the idea of buying the entire business. Spend the time to do the work needed (research) before buying. When you buy a quality business, and the stock moves lower because of the market, you will know the only reason the price is falling, is not due to the business being of low quality, but only due to the market.
Think of it this way, buy a house at half of what its worth, a good price. This allows you to make a profit when you sell in the future. Now the price of houses in the area falls because of the housing market. There is no change in the quality of the house, or the ability for you to sell it in the future to make a profit. If you had the money, you would buy a second house at this even better lower price. Over time the value of the houses in the area will return to where they were when you bought the first house, and rise above that level, allowing you to sell both houses at an even greater profit as planned.
Buying more of your quality business as the stock falls, is an opportunity to create more wealth when the price bounces back. By paying only half of what a business is worth allows more shares to be bought. Knowing what the business is worth allows you to buy more as the price falls, due to the markets’ normal moves. This gives you confidence and allows you to sleep at night.
There is no trick to investing in stocks. We don’t buy and hope. Past company performance, and expected future performance are two of the things needed to find quality companies to invest your money. Visit our site, www.YouControlinvesting.com and get started on your way to understanding buying and selling stocks to create profits.
Good Investing,
Bruce Cortez
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Some interesting suggestions nice post interesting.
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