Sunday, April 20, 2014

Constant progress

Reading is the most important part of becoming a better investor over time. It might even sound as a cliche expression, but let's look into the matter closely and try to understand what makes reading an important element in becoming a batter investor.

Types of reading.

In my view there are several types of reading. The important distinction is that there are a passive rerading and active reading. Passive form is more applicable when one reads for leisurly reasons, just to entertain or relax. Comic books, or materials that adds nothing material but just entertain a person. This type of reading is the easiest one, and the one that becomes a bad habit we don't take active measures to place a limit between these two types of reading.

The second type is active reading, which means reading to learn something and add tools that have practical use for us.Take for instance reading of company filings. Company filings in of itself are not the most entertaining materials to read to relax. They often contains a lot of factual and statistical data that has a limited use for an average person. But they are of utmost importance to an investor. Because the company filings are sort of report cards of companies. They give us a factual informayion about the status of progress at the company, or give us information to us to make a better judgement about the viability of company business plan foing forwards. These mataerials should be read with extra focus and attention, as they give us a picture to make a judgement.

Any time, we read an important document, be it an article that falls into our circle of interest, or company filing, that we care about, we have to make a habit of taking notes to to be able to think deeper about the issues. This way, we make ourselves more focused and might understand things a little better.

Wednesday, April 16, 2014

Entrepreneurship or investing? What is the difference?

The topic of entrepreneurship is widely discussed matter. People have various ideas about the ways to make money. Most people also agree on the topic of having own business is the clearest and the only way for making a fortune.

But is it the only way?

In my view it is not the only way and one has to also consider counter arguments in considering the aforementioned question.

First, entrepreneurship is not for everyone. It is always easy to state that anyone can achieve what has Richard Bransons, Sam Waltons of the world has acheieved. But the untold truth is that, it is impossible. These people, have either had extraordinary amount of luck at some point in time, or had brains larger than most of the people.

Wednesday, April 2, 2014

Ways for achieving financial independence

People ask me why not save money and open a business? 'Hey, why not open a hot dog stand?". Well, although I enjoy eating hot dogs, I don't know if I'd like standing in one spot for 9 hours at a time serving them up. Although opening a hot dog stand is a very simplified version of the question, it is valid. Why not open a business instead of investing in dividend growth stocks? Why stocks in general? Let's examine that question.

1) Dividend investing is just a fancy name for becoming a part-owner of a dividend paying company. Why dividends? Dividends are simply put the litmus test for a company's health and well-being. And if one looks into historical records, he can see that over the last hundred years, dividends make up almost the 50% of total return in the stock market.

2) Investing in a public company, i.e. becoming a part owner, is a passive way for earning an income. Therefore, I have chosen this particular path very consciously. Dividends, that companies share with shareholders is a passive income, that I am after.

3) Evert person has unique personalities, and mine doesn't suit perfectly to becoming a business operator, but more attuned to beiung a business owner. So, again my goal is to generate as much capital as possible and become a proud owner of a number of great businesses, with valuable franchises.

4) Time is on my side. Time is in essence another litmus test, that over a long period shows if it has a sustainable business model and  attractive products. The companies, that I invest in are companies, that usuually has already proven to the world, that their mdoels work. So, the only conclusion that I like here, is that, I'd rather be a part owner of a great business, than try to compete with theses businesses. It is always better be a fan of a Barcelona, than Spartak Moscow.

These are just a number of reason, why I consider investing in securities of public companies is of utmost importance. This particular way works for me, but might not work for someone else.

Why Companues Go Public: Rationality Comes First

This is a post that was written as a response to the post on FB. Here is the link: