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Showing posts from September, 2018

Five Reasons to Build Your Own Investment Models

Would you choose a prefabricated house or something you designed yourself?   Take pride in what you build. There isn't a correct answer, it's situational.  Sometimes you need shelter quickly.  Sometimes you want to see your vision turned into reality. Generally when you are first starting out, working with what's readily available makes perfect sense.  Why would you put a lot of time and effort into building something when you don't know what you want? But as you grow in knowledge, you start to develop insight and preferences.  You see what materials you like, you know how a certain layout would be not only beautiful but highly functional and you know the neighbourhood where it would fit in perfectly. I think something similar applies with investment analysis.   When you start out, you work with ratios and statistics that were built by someone else.  The cost is low and they do the job, hopefully. But as you work at it and are exposed to new ideas you

Using Images in Your Investment Analyses

Visual content in your articles is a must nowadays. This post will provide some guidelines for incorporating images into your work. 1. The first image attracts. These people are all consuming information.  Images help guide them to your's. ​ ​ The first image you pick for your article should be eye-catching, draw readers in and make them curious.  Large, colourful or beautiful images are good choices, as are images of people – we’re drawn to pictures of other human faces. A shocking image can also work but use with caution.  You might attract some people, but you can also alienating your readers.  If you go this route, make sure it’s relevant. 2. Use a meta-tag to tell search engines what your web-page is about.  Choose clear, simple language that will describe the image in terms of what people may be looking for. 3. Generic or stock photo images that you see everywhere aren't as powerful as unique, scarce or premium images. 4.  Use approximately one image to

Using a Scientific Framework in Your Investing

It's fun. What is a scientific framework for investing and how can it help you? The scientific method is arguably the most important development in the history of humankind.  It's a creative structure that stimulates curiosity.  It pushes you to be objective, rather than emotional in your approach and it encourages you to look at the world with uncluttered senses. It also gives you a decision-making system that, if you are faithful to it, should see you avoid pitfalls like buying high and selling low or following the crowd. The scientific method Incorporating a scientific framework starts with the scientific method.  Let’s revisit it: Step 1 ~Be curious and observe the world around you~ Step 2 ~Ask a question when something intrigues you~ Step 3 ~Do background research~ Step 4 ~Build a hypothesis~ Step 5 ~Create an experiment to test your hypothesis and run It~ Step 6 ~Collect and analyze the data and draw a conclusion~ Step 7 ~Report your findings

Three-Dimensional Stock Analysis

1D, 2D, 3D, more... Most analysis is done on a single stock and rarely involves contrasting it to similar companies. The value of peer comparison is well understood, but few people do it because the time investment makes it untenable.  If, for example, it takes you one hour to analyze a stock, comparing it to just four peers means a four-fold increase in time. This time hurdle is what forces most analyst/investors to limit themselves to two-dimensional analysis – vertical (ratios created by going down financial statement/market data at a single point in time) and horizontal (ratios created over more than one period). The third dimension is peer comparison . When you take a horizontal or vertical ratio or valuation calculation and you compare it to a group of peers, you are adding a third dimension of analysis. Let’s say you are using a p/e ratio.You know what it is currently, you know how it ranged historically.  You’ve got two-dimensional insight on that value. But whe

Improving Your Security Analysis and Writing Skills

Your stock is rising in every respect. Whether you’ve been analyzing stocks for a while and want to improve your skills or you're just getting started, this postl will discuss some simple ideas about how to boost your craft. It's a two-part answer.  Practice, of course, analyze and write,  but also  read the work of other people. On practicing You’ve probably heard the maxim that practicing for 10,000 hours at anything will make you an expert.  Well today’s the day to start putting in the time. Below is a strategy that focuses on the  process , not the outcome, of meeting your goal.  It's about developing the habit that will carry you to success.   On the other hand, focusing on the outcome, for example, writing an article a day, might not be possible sometimes.  Circumstances beyond your control can arise and will leave you feeling frustrated.   However, committing to a process  always  results in success.  And there are just three simple steps to it. F