Author: InvestingNook

3 Reasons to Question Stock Analyst’s Recommendations

Why do analysts’ reports exist? Possibly like sheep, it is of innate human nature that we seek social proof and validation. When we fall in love with a stock we researched on, we actively seek out affirmation in the media. Often, you would be finding analysts’ reports and consensus that are in your favour. The more satisfied you get, the more you want to read up on them. Very soon, you will end up just listening to the analysts’ consensus. The reason why the industry is so lucrative is that it is able to exploit the human psychology. The...

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Why Invest in Real Estate, and Why Not?

The housing market offers a lot of opportunities for many investors as it can provide steady and strong passive income throughout the years. It is rather likely that you know of an individual who has a few properties that yield a tens of thousands a year. In this article, we share the reasons why people have the propensity to invest in real estate and some of the reasons why we tend to avoid investing in that asset class. Am I even eligible to invest in properties? Many investors believe that investing in properties is a rich man’s game. While...

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Creating Passive Income From Dividend Investing

Have you ever heard of stories where others are able to reap tens of thousands a month without working at all? The amount of cash flow they receive is sufficient for them to retire comfortably at a relatively young age. But if you are like most of us and do not possess a huge amount of capital, bringing in thousand-dollar passive income doesn’t seem like achievable in the near horizon. Don’t worry, by the time you’ve read finish this article, we assure you that you will have a clearer direction on your journey towards financial freedom from dividend investing....

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How To Read An Annual Report

In the previous article, we touched on what you should be looking out for in an annual report. We shared with our readers that many investors skim through the annual report and perhaps only go into detail in 1 or 2 sections of the annual report, namely the financial statements. However, we argued that they are not fully exploiting the utility of analysing annual reports. We believe that the annual report reveals much more than such numbers and figures. Hence, we highlighted three large segments that investors should be focusing on, in order. Letter to shareholders Comments and remarks...

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What Should You Look Out For In An Annual Report

Everyone in the financial market knows that if you want to understand about a company, most of the essential information you need are embedded in the annual report. It is very important to know the information you can get out of it and the information you can’t. Only then will you be able to know what you should be looking out for in an annual report. Many investors are very messy in the way they analyze. While this may work for some, having no structure in investing may suggest that the individual is lost. Having no structure also leads...

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Tweedy, Browne: 10 Ways to Beat an Index (Part 2)

This article is a continuation of the 10 ways to beat an index by Tweedy, Browne. If you have no idea what Tweedy, Browne is and what they do, we strongly advise you to refer to the previous article for a complete story. Before we proceed with the remaining 5 ways, we would like to provide you with a short summary of what we have shared with you in the previous article: Invest in companies with characteristics that have produced market-beating returns in the past Invest in both big- and small-cap stocks Statistics and Specifics – Each company has...

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Tweedy, Browne: 10 ways to beat an index (Part 1)

There are numerous studies that have shown that most equity investment managers fail to outperform the stock index over the long term. What this suggests is that most investors are actually better off buying an Exchange Traded Fund (ETF) tracking the index and let the magic happen by itself. Why bother picking stocks when there’s a better and stress-free alternative? There is always an upward bias by glorifying the outperformers by Wall Street. If there isn’t any allure in making your own trades, there are no fees for the industry to be made. Having the full picture hidden from...

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The Importance Of Having A Circle Of Competence

The circle of competence is an idea that is espoused by the legendary value investor, Warren Buffett. Essentially, he encourages investors to stick to what they are good in and stay within that circle. Know what you don’t know and be better at what you know. “You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.” – Warren Buffett This doesn’t mean that you should narrow your lens...

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5 Key Traits of a Successful Investor

We believe that every successful value investor shares similar traits and characteristics that had played a pivotal role in their successes. There is a lack of comprehensive studies on the relationship between these traits and success, but common sense and early research have shown promising results. For instance, psychologists have discovered that the level of conscientiousness leads to an increased performance in the workplace, along with intellect and emotional intelligence. Of course, this is unsurprising. An individual who is hardworking and intelligent is more likely to do better in their role. This article will highlight 5 important traits that...

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Diversification, The Way To Reduce Risk

Diversification, as defined by the experts, is a risk management process of allocating capital in a way to reduce overall risk by investing in a variety of assets. Before asking what financial risk truly means to you but let us first introduce what majority of the finance industry believes risk to be. Here is a short excerpt adapted from Investopedia: “Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which calculates the expected return...

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Are All Great Companies Great Investments?

What are some of the great companies that came to your mind when you read the title? Is it your favourite fast food restaurant McDonald’s or the well-known consumer electronics company Apple. Perhaps even American Express and Coca-Cola have popped up too? These are exactly the companies Warren Buffett’s Berkshire Hathaway has invested in. These are great companies with strong brand names. There are not many other companies in the world that are able to rival their standings in their respective industries. Investing in great companies While there are in different industries, you may have already noticed some common...

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Thoughts on Recent Yield Curve Inversion

Recently, on 25th March 2019, markets started panicking due to the yield curve inverting, where the 10-year yield dipped below the 3-month yield. Markets started fearing a looming recession. Why does this spark fear of a recession? Normally, yield curves should all slope upwards. This is because, all things being equal, people would demand higher interest rates for longer duration loans. Given that longer-term loans have various risks involved when lending (e.g. inflation risk) and the risks gets riskier over longer time horizons. So for the curve to invert implies that investors are forecasting that something unusual will happen. Something...

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Is Deep Value For Everyone

The idea behind value investing is very simple for most people. It is essentially about buying a business cheaper than how much it is worth. However, most find it extremely difficult to implement this simple logic in practice. Many may conclude that deep value investing does not work. Instead of buying low and selling high, they land into many psychological pitfalls in the market and end up doing the converse. Needless to say, their returns are probably nowhere near spectacular but yet, these are the very investors that make the most noise in the market. If not value, then...

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Essentials of Making Money by Walter Schloss [Part 2]

Walter Schloss, a legendary value investor, shared with us about the key guiding principles that have led to his success. In the previous article, Schloss shared with us 3 crucial mistakes value investors should never ever make. To summarize the first article, the crucial mistakes that you should never make are: Don’t buy on tips for a quick move Don’t let your emotions affect your judgement Don’t be in too much of a hurry to sell The underlying guiding principle to avoid the above three grave mistakes simply is that you must have an investment philosophy to keep you...

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Essentials of Making Money by Walter Schloss [Part 1]

Before we dive head down into the factors, you have probably heard of outstanding value investors such as Warren Buffett, Seth Klarman and probably Peter Lynch, but who is Walter Schloss? Walter Schloss was a legendary value investor who was also under Benjamin Graham’s guidance, along with Warren Buffett. Amongst the numerous capable investors highlighted in The Superinvestors of Graham-and-Doddsville by Warren Buffett, Schloss’s performance was nothing short of stunning. His partnership’s overall gain (gross and net of fees) has superseded the S&P 500 index by a large margin, consistently beating the index for many years. How can academics...

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