BOOK TIDBITS: The Best Investment Advice I Ever Received Part 2

More insights from America’s moneymaker…

 

RICHARD BERNSTEIN (Chief US Strategist, Merrill Lynch & Co.)

Save.  Save a lot and Save often.

Saving and Consumption are mutually exclusive. You can’t do both.

Most people think they’re saving for their retirement. Their credit card balances is compounding at 9% per year, whereas their investments are earning 8% per year.  In other words, they’re “saving” at an interest rate of  negative 1% per year!

 

PETER COHAN ( President, Peter S. Cohan & Associates)

7 Principles that Drive Corporate Value in any Economy

1. Value Human Relationships

2. Foster Teamwork

3. Experiment Frugally

4. Fulfill your commitments

5. Fight Complacency

6. Win through Multiple Means

7. Give to your Community

BOOK TIDBITS: The Best Investment Advice I Ever Received Part 1

In this Book (as compiled by Liz Claman), more than 65 of America’s top moneymakers share their winning strategies  to their most fundamental points. Famous people like Warren Buffet, Jim Cramer, Suze Orman, and Steve Forbes share their insights on finance and investing.

WARREN BUFFETT (Berkshire Hathaway)

Billionaire Investor shares 3 Principles:

1. Look at a stock as being part of a business versus something that has a lot of flash about it or something your broker or neighbor simply tells you about.

2. Stock <arket fluctuations are there to serve investors rather than to instruct them. Investors shoudl turn a deaf ear over daily market gyrations. Good quality companies can withstand these gyrations.

3. One can never be precise in calculating the worth of a stock, but what you can do is estimate. If you compute that a stock is worth $120, and the current market price is at $60, then buy it. In the long run, you should be able to realize hefty returns.

 

JIM CRAMER (host, CNBC’s Mad Money)

Lessons from my dad, Ken Cramer…

All that matters is inventory. If you have too much inventory, you’re in trouble. If you have too little inventory, you’re in trouble. If you have t pay too much to keep inventory, you’re going to get hurt. And if you have the wrong inventory, you will get stung.

Though his dad may be in the retail industry, such universal concept is very much applicable in the world of stock trading and investing. 

 

SUZE ORMAN (host and author, Personal Finance Expert)

It is better to have 50% of SOMETHING, than 100% of NOTHING.

In investing, we tend to cling so much on something even if admittedly we have committed a blunder.

If you buy a stock for $100, it only takes 50% drop to cut your investment into half (down to $50). But to regain its original value,  it will take 100% increase to bring it back to $100.

 

STEVE FORBES (President & CEO, Forbes Magazine)

If you want to get rich, start your own business.

If you invest, pay more than lip service to disciplined investing and long-term investing. Everyone is a disciplined and long-term investor until the market goes down.

THE MILLIONAIRE NEXT DOOR

If you want to know the secrets of millionaires, I suggest you grab this book — The Millionaire Next Door by Stanley and Danko.  Though, it talks about millionaires in the United States, concepts are very universal that anybody can relate to it. I got my copy from National Bookstore at 20% less (book sale ends by Sept. 28, so i suggest you do your book shopping now for serious discounts)

Going back, the book profiles a typical millionaire in the US. Their background, habits, and outlook towards money.

It may sound like a cliche, but millionaires do “live well below their means”. True millionaires cease the moment to invest and grow/accumulate their wealth than spend it.

There are 2 typres of people — the Prodigious Accumulators of Wealth (PAWs) and Under Accumulators of Wealth (UAWs).  To become a millionaire, you have to be a PAW… you need to live like a PAW and act like a PAW.

There is a simple formula to know whether you’re a PAW or UAW. Your current NET WORTH, should be your ANNUAL PRE-TAX INCOME multiplied by your AGE, and divide it by 10. If the value is greater than your present NET WORTH, then you’re a PAW. I hope by now, you know how to compute your Net Worth, otherwise you can check my previous post about SAL and PSIE.

For example, Person A’s NET WORTH is 1,000,000 (Assets minus Liabilities), let’s find out if he’s a PAW or UAW. (is he truly a millionaire in the making)

ANNUAL PRE-TAX INCOME = 600,000 (50,000 monthly income x 12 months)

AGE = 40 yrs. old

Therefore, (600,000) x (4) / 10 = 2,400,000 should be Person A’s Net Worth to be a PAW.

Since, 1,000,000 is less than 2,400,000, Person A is a UAW.

Just imagine, despite Person A accumulating 1,000,000 (current Net Worth), he’s still an Under Accumulator of Wealth (UAW). Since by now, with his INCOME and AGE, he should have accumulated 2,400,000, only if he behaved like a true PAW, invested and grew his wealth all these years.

To know more about the traits and charecteristics of PAWs, i highly recommend this book. Since the book is based on actual study conducted by the Auhtors, it presents the data with concrete examples and real life experiences, which makes it easy to read and understand.

BUFFETT – Part 1

Recently, I got hold of a great book by Roger Lowenstein, Buffett: The Making of an American Capitalist, and the storytelling of Buffett’s lifestory is simply amazing.

So far, I’ve read 3 chapters, and I would like to share 2 tidbits, which I find simple yet profound …

“Leave off in time to pay your debts and save your credit, for that is better than money.” (I believe this applies for business – when things turn sour, be sure to save your credit)

 “You try to be greedy when others are fearful and you try to be fearful when others are greedy.” (I believe this is true for the Stock Market — remember, the psychology of stock trading goes beyond charts and data. As people can’t set apart emotions from objectivity, the herd mentality will always prevail as everyone wants to hit the jackpot everytime)

to be continued… (for more insights)

Also, check out “EIC – Warren Buffett Biography #1 to #7″ from MY VIDEOS. The documentary gives you a preview of the content of this book by Roger Lowenstein. (this is multimedia as its best!)

PERSONAL FINANCE BOOKS

Highly Recommended Personal Finance Books… here’s my BOOK LIST:

1. Robert Kiyosaki’s books/audio books (Rich Dad Poor Dad, Cash Flow Quadrant, etc.)
2. Francisco Colayco, Larry Gamboa, Bo Sanchez’s Personal Finance Books (Philippine perspective)
3. One Minute Millionaire  – by Robert Allen
4. The Smartest Investment Book You’ll ever Read – by Daniel Solin
5. The Best Investment Advice I ever Received — by Liz Claman