A Newbie Guide to Investing

[Greenrookie]

Hi Fern,

I am no expert, but just give my 2 cents worth, if I am not wrong, even online trading accounts are linked to your brokers, although internet commission is cheaper than calling your broker, your broker still get a cut whenever you trade.

Er... not sure about others in this forummers (might be super high net worth,hehe), I have 2 accounts with lim andtan and uobkayhian. Both brokers don't really bother with me, one broker forward me research reports, the other send me complimentary "shares" book when I trade more often, hahaha. I was rather frequently given trading tips from the Lim and Tan broker based on TA, but I would choose to ignore it. Following his advice for 3 times had lead to bad calls, I do not blame him, but now I focused on what I do, and no longer care about what he says.

As for discounted cash value, the n should be future ba, since its talking about future cash flow discounted to present value. I never use DCF for my calculation. I simply calculate possible earnings, and then the impact on various ratio etc,and how long can the growth last, and decide if I have good deal

Happy investing

[KopiKat]

I've tried looking at Investopedia to get an idea of how to determine intrinsic value. There's the Discounted Dividend Model, DCF, etc...

In all of these, I still find it quite vague, like when they mentioned period n, does it refer to future or past? If it's the future, how do you determine the value?

Is there a good place/book to read up more on determining intrinsic value? Appreciate getting any recommendations to facilitate my learning.

Thanks!

I will be a spoilsport and spoil all the fun of self discovery (took me a while to figure it out as my brains had become more left inclined ie. towards Math & Science).... Figuring out the Intrinsic Value is more Art than Science... If it were pure or mostly Science, there'd have been a lot more successful stories to read about....

Whatever the method used (DCF, NAV,..), there'd be quite a few assumptions to be made... that's the 'Art' part and I believe, can become more accurate with practice (from being wrong and losing $$). A single wrong assumption can easily mean that the computed Intrinsic Value can be totally wrong... If I'm not wrong, that's one of the reason why a huge Margin of Safety (50%?) was being prescribed, which, hopefully, can cover for most of the mistakes due to wrong assumptions...

Some of the easier to understand books I'd suggest are by Joel Greenblatt (he makes it more Science than Art). You can search within this forum for a start as I remembered reading quite a number of posts / threads with useful links.

Enjoy your learning journey!

[Ferns]

@Greenrookie
From what I understand, I don't think it's linked, because I remember there's a form to sign and a name to fill up during the registration, of which I knew I didn't because I wanted to be "bothered".

@Kopikat
Thanks, I'll check out Joel Greenblatt. It's taking me 2 weeks to finish 1/3 of "intelligent investor", quite academic in nature. Got me a little discouraged there. I'm more of a Math person, majored in pure and applied math but hated financial mathematics, I think the module covered DCF, but I wasn't paying attention! Haha, regretting it now.

In any case, is it ok to ask for forummers to share their empty spreadsheets with formula inside to understand the mechanics of how calculations are made? Or is it wrong to do so, probably because of some intellectual property reason?

When my banker sent me the amortization table for my home loan, it made everything so much easier to understand!

[AlphaQuant]

@Ferns:

I will suggest for you to think abt your personal finance first before thinking abt investment. The best place to start in the whole of singapore, imho, is this thread:

http://www.valuebuddies.com/thread-389.html

The name of the thread is "Insurance & Costs of having and raising a child" but it's much much more than abt the kid.

Try reading all 48 pages of the thread and i think it will be the most important first step.

[Ferns]

Thanks AlphaQuant.

Just started reading 3 pages and it's already very educational. I did start reading at Moneysense, but as you said, that thread is a lot more educational because of the real life examples given! Each person is like a case study, allows me to parallel to my own situation. As an educator, I love case studies

Kinda trying to manage personal finances and investment at the same time, partly because I've set aside money that I can afford to "lose" in order to learn a bit. I'm not talking about large capitals, more like 10-20k only.

Another thing about index funds, does it make sense to invest in an index fund then liquidate it when I feel that it's overvalued and I see a better opportunity where? or just keep to it for as long as I can until I need it?

Investing in an index fund is the first thing I'm going to do, been letting inflation eat into my savings for too long because I couldn't decide when to buy a property. Now that I'm done buying a place, it's easier to manage my savings.

[AlphaQuant]

Another thing about index funds, does it make sense to invest in an index fund then liquidate it when I feel that it's overvalued and I see a better opportunity where? or just keep to it for as long as I can until I need it?

After a while, i find that investing involves more than a touch of self-inspection and inward-looking. In the end, how one invests really tend to be a reflection of who one really is - so look deep and you should probably be able to answer your own questions.

Other scenarios that are missing from your outcomes in index funds (other than rising and getting overvalued or stable and at your disposal for liquidation) are those of
a) another crisis where the index collapses 50% (?) See 1997 AFC, 2007 GFC
b) anaemic growth leading to deflation aka the 20 lost Japanese years where the index drips away.

etc.

[Temperament]

Another thing about index funds, does it make sense to invest in an index fund then liquidate it when I feel that it's overvalued and I see a better opportunity where? or just keep to it for as long as I can until I need it?

After a while, i find that investing involves more than a touch of self-inspection and inward-looking. In the end, how one invests really tend to be a reflection of who one really is - so look deep and you should probably be able to answer your own questions.

Other scenarios that are missing from your outcomes in index funds (other than rising and getting overvalued or stable and at your disposal for liquidation) are those of
a) another crisis where the index collapses 50% (?) See 1997 AFC, 2007 GFC
b) anaemic growth leading to deflation aka the 20 lost Japanese years where the index drips away.

etc.

In fact, it's better to learn all about yourself first in terms of your relationship to the market.
"First principles" of the Market always apply.
Like this one:- (Everyone can't escape. My favorite. Ha! Ha!)

(1) Are you prepared to lose 50% in value of your portfolio (or some stock holdings) during a very BIG BEAR MARKET CYCLE? Not once but many times. Are you really prepared???

i suggest try to read and learn as many principles of investing and then try to practise it. i admit it is easier say then done. i sometimes go against some principles and i lost money lol. And never stop reading and learning about the market. That's you must have this passion for a lifetime. And you will/should be O. K. at the end of the day.
Oh! It's important to remember this saying:-
{In theory there is no difference between theory and practice. In practice there is." - Yogi Berra quotes from BrainyQuote.com}
Hope you enjoy yourself, in your journey finding out about yourself and the markets.
Shalom.

[8ALEX8]

Hi all out there. Im a new investor learning to learn how to valuate companies. I've tried some methods like NAV, discounted earnings and discounted free caah flow. But i somehow just doesnt know how to link those bacl to the current share price an how do i get a margin of safety.

Can any1 out there pls enlighten me.
God bless.

[arthur]

Hi all out there. Im a new investor learning to learn how to valuate companies. I've tried some methods like NAV, discounted earnings and discounted free caah flow. But i somehow just doesnt know how to link those bacl to the current share price an how do i get a margin of safety.

Can any1 out there pls enlighten me.
God bless.

No offence, I am not sure how come you have tried some methods and yet can't link back to share prices. Have you read books with examples?

There are plenty of rudimentary investing books in local context selling in Popular bookstores. Most will have hidden agenda to ask you to sign up for their courses though. Ignore them for now and try to utilise the examples within.

Hope this helps.

[opmi]

Hi all out there. Im a new investor learning to learn how to valuate companies. I've tried some methods like NAV, discounted earnings and discounted free caah flow. But i somehow just doesnt know how to link those bacl to the current share price an how do i get a margin of safety.

Can any1 out there pls enlighten me.
God bless.

step 1, start with the easy and most predictable method - NAV.

step 2 , make adjustment to the NAV (Asset - Liability) component by revaluing conservatively and discounting agressively each component. total it up. for RNAV.

step 3, Buy when share price is 30-50% below RNAV. this is your margin of safety (MOS). MOS comes from 2 parts - discount to RNAV and your very conservative RNAV.

that;s all to it. simplisticly...haha...