020-2020 Alles uber Aktien

Title: Alles ueber Aktien

Author: Joachim Brandmaier

Hello dear investors.

Unfortunately this book is only available in German, and won’t be of much use to non-German speakers. However, I still think that the message I learnt from this book is valuable to those that would like to get to know this investment strategy.

There might be quite a few investment strategies out there and every slowly develops their preference for one, or more of them. However, this one was new to me until February this year, and I hadn’t heard it before from any other fellow investor before.

It is called the Growth Strategy, but not growth of new/small/medium companies. Rather, investing with bigger companies that are already well established in the market, but still have some power of potential growth left within them yet. Especially since the world is consistently changing, companies (even big ones) need to continue to make changes to keep on fitting in.

To get started as a new investor, the suggestion is:

  1. Invest in the market leaders of the industry
  2. As a starter, invest in at least 10 – 12 different shares, across different branches, and potentially even different countries
  3. Investing in shares is something that should be done for the long term, not the short-term horizon, as the greatest value is derived from long-term investing
  • Strong emphasis is added to long-term, because the money that should be used for this form of investing should be money that can be afforded to be invested (i.e. won’t be needed for anything in the next month/s or even year/s, but can actually lie and be ignored – it can be ignored since it is with big, and well-established companies, and not volatile jumpers)

For those new to investing, you might have heard of the word ‘index’ when someone talked about shares. Basically, that is the benchmark against which you can measure your own share’s performance. The index is a composition of the biggest companies in the same industry, or general economy (depending which index you are using).

Another thing you should know is taxes. When you invest over the long term, your shares have an opportunity to grow significantly in value and if that was the case, once you dispose of them, you could get a bigger gain when you sold them off. If you traded them regularly you would not only always pay more in taxes for the gains you made, you would also pay more brokerage fees.

Next, one message that you will hear from Warren Buffet, Peter Lynch and many more long-term investors. Stop listening to the noise in the crowd. They will cause you to panic, and sell off your shares when there is a frenzy, and since the crowd is doing it as well, the price of the stocks drop significantly.

  • Message = stop listening to the crowd.

Since investing for the long run is a commitment, it is a wise choice to analyse different companies out there for different factors in order to find a good company to acquire shares when you have funds available for investing. Some of these include:

  1. Turnover = $1 bn
  2. Profit = $100 mn
  3. Which products does the company produce?
  4. How popular are the products among customers?
  5. Is the company busy in filling orders regularly?
  6. What are the chances for the products continued future success?
  7. Who are the main competitors?
  8. Will price increases significant the market?
  9. How well does management function within the firm?
  10. How has the turnover and profit developed over the past period?
  11. Have there been strategic problems in the past?
  12. How large is the companies debt?
  13. How much cash reserves does the company have, and is it liquid?
  14. How large is the company equity?
  15. How are the dividends developed over the periods?
  16. ….etc. (this list is not exhaustive)…

Another few factors that can be analysed are the following:

  • the companies EPS (earnings per share), P/E Ratio (price earning ratio), Dividend Yield (and its consistency in pay-out)
  • how the turnover has developed over the long-term
  • how the profit has developed over the long-term
  • operating profit vs. net profit
  • turnover and profit p/operating segment
  • cash flow
  • Dividends
  • Dividend pay-out ratio
  • Book Value
  • R&D expenditure
  • No. of staff
  • Company/group structure
  • Market capitalization

Essentially, why the author stresses the importance to differentiate between long-term and short-term investing is because in the short term the prices of a stock tends to be volatile since investors don’t know what to expect from the firm and therefore sell and buy frequently at inflated and deflated prices. However, as time passes the price becomes somewhat stabilized in a certain range, until investors once again buy and sell frequently, and cause the price to be volatile once more.

  • For new investors, the message I wish to give to the above scenario is the following: the share price doesn’t necessarily reflect that true value of the company, but only the value of investors. The true value of a company lies in the value of the revenue and profits it generates during the year. Therefore, when the market is excited for a stock, it generally results in the share price being over- or understated from its true value.
  • By buying a share in a company, you have the opportunity to participate in the long-term success of the company.

As an intro book to the investment world, the book teaches you to get-to-know the world of investing, by buying the top companies, investing for the long-term, only bring a small amount of companies into your first portfolio, so that you also do the analysis exercise, and not be overwhelmed by the numerous companies out there. Most importantly, it teaches you to learn to be patient, and not become a speculative investor, without knowing the game as well yet.

Summary:

Great book, teaches everything you would need to know as a newcomer to the world of investing. Teaches the importance of being patient, the value of investing for the long-term, seeing the importance of analyzing a company before buying it, and making smart decisions. The book deserves a strong 4.7/5

I hope that this new strategy is of some value to anyone that is new, and would like to give it a go, as well as to experienced investors who would like to change their strategy somewhat with a new goal.

Happy reading, and happy investing!!!

019-2020 Failing Forward

Title: Failing Forward (Turning mistakes into stepping stones for success)

Author: John C. Maxwell

Hi there, and I hope you had a great chance already to read some of the reviews this year so far. I hope with the next one you may also see some benefit and give the book a chance.

This was my first book from this author, and I strongly believe that I will give a chance for his other books as well some time in the future. But for now, I want to tell you what I learnt from this book, and why I think many more can grasp the benefit from the book.

The book is broken up into 15 steps the author believes are necessary to change your perspective on what failure is, and how changing your perspective can ultimately determine whether you will yet achieve success in that activity, or not.

I have listed all the steps below, but want to only go into more depth on a few of them:

1…Realize that there is one major difference between average people and achieving people

2…Learn a new definition of failure

  • The message that I got from this step was that we should redefine failure to having made a mistake, and learning from it to better ourselves for the future.
  • If you change your mindset to reclassify a failure to something that you can and/or need to improve, then you open yourself up to change

3…Remove the “you” from failure

4…Take action and reduce your fear

  • Fear for/of something can/keeps us from sometimes engaging into something new. This fear started with a past event, and could be the hindrance to us exploring something new. Not taking on new risks or opportunities are due to the festered fear cycle.
  • The fear cycle starts off with 1) the fear we have for something in the past. Due to this fear we 2) don’t take action (ie. we avoid getting ourselves in a situation where we become confronted with this fear). This inaction results in 3) us not gathering experience (experience to build our skills), and not gaining experience can result in 4) our inability to deal with new/tough situations (ie. due to a low level of exposure to the feared event we didn’t build our skills to deal with the event should we be confronted with such an event).
  • To shed more light on that, let’s go through an example. You had to speak in public once, and it didn’t go so well (you fear this outcome will happen again, if you try it again). At school, university and work events you don’t take the role of leadership. Through this inaction you didn’t take the chance to build up your skills of becoming a better speaker in public. As work longer in the same firm, eventually you gain seniority and become the leader for others. Now, somewhere you are expected to hold a presentation in front of colleagues or even the client. However, now your fear is awakened, but this time, it’s far stronger.
  • This cycle could be applied to different situations, but ultimately the message remains the same.

5…Change your response to failure by accepting responsibility

  • In taking the step of changing your perspective of what failure is, we need to at first acknowledge that we did something wrong. Thus, taking responsibility for the mistake, and learning from that for the future.

6…Don’t let the failure from outside get inside you

7…Say good-bye to yesterday

8…Change yourself, and your world changes

  • The message that came through with this step was that our attitude is one of the strongest influencers on our life. Our attitude not only reflects to us personally, but also to those around us. If our definition of failure is not of learning from the mistake, the outside perceives that as well, and they might be less inclined to work with us, since they have a preview of what will come their way should a failure occur.

9…Get over yourself, and start giving yourself

  • I believe this also comes close to one of the lessons that you will learn from “How to Win Friends and Influence People”. Probably even one of the first lessons. Stopping to think of yourself only, and also thinking of others. Being there for others as well.

10…Find the benefit in every bad experience

  • Every experience we have is either good or bad. However, if you convert your perception of what a bad experience is (ie. to something that you learn from) then such an experience can even be re-categorized as a good experience.

11…If at first you do succeed, try something harder

12…Learn from a bad experience, and make from it a good experience

13…Work on the weakness that weakens you

14…Understand there’s not much difference between failure and success

15…Get up, get over it, and get going

  • The final thing, that you should see failure as something that can be overcome, and not something that pushes you down, and keeps you down. If you got the message from the second lesson, then the final lesson will make more sense, since an error is seen now as something you need to improve, and carry on going.

The book is one in a series of four, all of which focus on the REAL concept. R = relationships ; E = Equipping ; A = attitude (this book) ; and L = leadership. The book is mainly set up to have you see the potential benefits that you can get when the thing that holds you back is your attitude.

Summary:

Personal development is something that we need to keep working on on a continuous basis since there’s always room for improvement in our personal and professional environments. The book is great for getting you started since it can be applied to the smallest events, and worked up to even bigger events. The book thus gets a rating from me of 4.5/5

I hope the book gives you as much pleasure as it did me.

Keep well!

018-2020 Meine Strategie

Title: Meine Strategie

Author: Joachim Brandmaier

This is the third investing strategy that i was introduced to overall. The first was Value Investing, the second Wealth Preservation, and now the third Growth Investment.

It is a German investment book which was introduced to me by an investor I met via an uncle. The strategy centers around investing in strong established companies who have a good track record, and are expected to maintain that in the future of our investment term.

He introduces you to his ‘ruler method’ to measure the growth trajectory of the company for the past few years. You would determine via this method how the avg. growth of the company was maintained over the last few years, and whether it was on a steady path of growth, or whether it experienced some drops that it couldn’t withstand as well as other companies during the same time period.

Some other criteria he looks out for in a a company are:

  • annual profits
  • minimum revenues of USD 1billion, as well as net profits of USD 100million
  • the background of the company is understandable to you and you’re willing to go with the risks in those industries
  • diversification in your portfolio should surround different industries, and potentially a few countries with stable economies

As well as giving a lecture on what should be a bare minimum that should be considered for inclusion into your portfolio, he also gives warning to investments we can easily fall prey to:

  • not having/ following a strategy/plan
  • buying shares in only one company, or one industry
  • overestimating your skills and abilities to predict shares future value accurately
  • regularly looking at the stock price movements
  • buying trending stocks when they are high

Since the value of stocks is driven by shareholder sentiment and not economic activity, one must be careful where to put ones money.

However, the ultimate message in the book (which is the same for Value Investing) is that when we buy shares we should be looking at the long-term, and not short term since the greatest value for the average investor can be acquired in the longer term.

Another way how we distinguish Value Investing from Growth Investing is the timing when shares are bought.

  1. Value Investing – the investing strategy looks at the share price and earnings history (among many things) and then determines the ideal price at which the share will be acquired
  2. Growth Investing – the investing strategy suggests you should buy consistently since we cannot determine the ideal point in time when the share price will be in our favour. Therefore, it suggests you should buy regularly, thereby you buy when the price is high, dropping, low and rising, evening out.

Consider long-term investing as an opportunity to participate in the long-term economic success of an enterprise.

However, as much as he suggests you should buy and hold the investment for the long term, he does admit that circumstances do change that may require us to liquidate the investment. However, he tries to limit this to to barely essential circumstances, and not unnecessarily.

Summary:

Simple reading, and good introduction for a new investor. I would say an investor will still need to read up on different investment strategies to become familiar with different portfolios possible, to find the perfect fit for themselves. However, this is serves as a good intro, and therefore gets a rating of 4,2/5

017-2020 The Road to Ruin

Title: The Road to Ruin (The Global Elites’ secret plan for the next financial crisis)

Author: James Rickards

As much as I value it to read investment books that paint a bright future, I obtain as much value from reading investment books that paint a rather bleaker picture of our future.

Why?

To get perspective on different investment approaches, and adjust my portfolio if I ever so desire. It’s the exact same what companies do when they run their business. In many cases they don’t only hire a new leader for their business, but also have an exit strategy should it reach a point that they need to part ways.

Also, it gives you a little sense of reality, away from the clouds that the opportunistic investments paint. Because not everything works out all the time, so we take a little more time to reflect on whether the investment should be worth our time and money. We need to dream, but also be realistic.

Different authors give a different outlook (and different investment strategy) and the one written in the book is one for wealth preservation, and caution.

Only a few months back I lived in a third-world country which, however, had a financial sector that was functioning superbly. Most banking has already switched to mainly online, however not completely since it was still in third-world levels to some degrees. Then I came to a first world country, where (mainly in this country) cash was largely still king. My initial thought was, it would be so much more efficient if we were just digital.

Now, reading the background to this book, I see that holding back from becoming completely absorbed in a digital world is maybe not so great, specifically when then contents of this book become reality.

One Money. One World. One Order.

  • Floating Exchange Rates definitely make global trading subject to volatility. Daily events can change the exchange rate of a country better or worse. However, with one world currency, trading could bring some stability to the system, especially when currencies are not covered by gold as they were before.
  • Bringing everyone to the digital platform enhances efficiency, however, when the state has the power to stop trading and shut accounts in the event of a crises, you effectively have nothing to fall back on to. Therefore, as states gain more control to reduce the impact of financial crises, we really learn who has control over the money in our online accounts.
  • Another way control can be held over more people is by bringing them closer to the cities in concentrated masses. Compared with being widespread around the country, the state simply needs to exercise.

This already gives me the creeps that something like this could happen. Some might say this is not really in our close future, and others might say that it may be closer than most think. It’s something we’re definitely not hoping to have come experience. Imagine the state of “V for Vendetta” happening in Europe.

Giving us this background, the author introduces us to invest in asset classes that preserve wealth as well as they have done in the past for some other families. One of the methods he elaborates this in the best is the Rule of Three’s, as was applied by a family for the last 900 years in Italy, Palazzo Colonna. 1/3 invested in land, 1/3 invested in art and 1/3 invested in gold.

If we switch over to the portfolio structure that is suggested in the book, the structure is as follows:

  • 10% physical gold & silver – tangible
  • 30% cash – tangible
  • 20% real estate – tangible
  • 5% fine art – tangible
  • 10% angel and venture capital – intangible
  • 5% hedge funds – intangible
  • 10% bonds – intangible
  • 10% stocks – intangible

From the above structure we see that 65% consists of tangible assets (inside your control that cannot be blocked by bank closures) and are therefore mainly aimed at wealth preservation. The remaining 35% is included in markets to try and set off some of the market inflation created every year.

Summary:

There are many different investment strategies, some focused on growth, some on wealth preservation, some of a combination of the two. It is up to us to determine which one works for us, and then work towards building our own financial plan. The insight is something that is worth keeping in the back of our minds since the future is always uncertain, and being prepared is something we could work prepare for. The book is somewhat tricky to follow, but still holds a good rating of 3.6/5.

016-2020 Guide to investing

Title: Rich Dad’s Guide to Investing (what the rich invest in that the poor and middle class do not)

Author: Robert T. Kiyosaki

It’s been quite a few hectic weeks on my side, but every day offers an opportunity to learn and grow.

I have a grand book that I cannot wait to share with you today.

This is another installment to the Rich Dad Poor Dad franchise, and I am still hooked to them. One of these days I would wish they might send me a free copy to read and review. Fingers crossed, because then I could maybe get you to read it as well, and step up your financial education. 🙂

This is probably the first investment book where I took notes (outside of the book) and keep them close around to make applications to my financial planning. Yes, it was so convincing I took an active step to develop a financial plan for myself after it was suggested in the story.

I wish I could break down all the lessons from the book into a few small paragraphs for you to read, but I don’t think it would serve it justice since many things could possibly be lost in translation, or otherwise the moral of the story not understood. Hence, I have decided to mention some of the most relevant topics that I felt have a strong lesson behind them for everyone.

1…Changing your mindset

Half of the book is dedicated to make it clear that you need to adopt the right mentality if you want to become rich, not just financially secure or comfortable, but rich.

Investing is a plan, not a product or procedure. An investment product /vehicle simply takes you from where you are financially, to where you want to be sometime in the future, financially. Trading is a profession, but is not to be mistake for investing.

Develop a financial plan, refine it and stick with it. You need to develop three financial plans (to become rich, comfortable and secure)

  • First, write down a financial plan for lifetime financial security
  • Then discuss it
  • Second, write a financial plan on how to become financially comfortable
  • Then discuss it
  • Third, write a financial plan to become financially rich
  • Then discuss it

By writing down these plans you become visually aware in what position you are presently, and what it would take for you to move into a new position. Once you become aware what it takes from you you can focus your attention to achieve small goals that build on to that ultimate goal. However, it is very important to note that these plans might require some fine-tuning in the future since many things can happen in between that won’t enable us to stick to the old plan.

In order to achieve a secure or comfortable level one mainly needs to invest their money properly. However, to reach the next level, the rich level, requires something more. It requires from an investor to dedicate their time. Time to learn financial literacy, tax laws, company laws, etc. to understand how to develop a business or how to use those laws to build a strong investment portfolio. Invest your time efficiently.

How do you start your journey on investing like the rich?

…1… Always know what kind of income you are working for (earned income/ portfolio income / passive income)

…2…Convert earned income into portfolio income or passive income as efficiently as possible

…3…Keep your earned income secure by purchasing a security you hope converts your earned income into portfolio income or passive income

…4…it is the investor who is the asset or the liability

…5…a true investor is prepared for whatever happens (train your brain to look for bargains and be prepared to take on an opportunity when it presents itself)

…6…if you are prepared and you find a good deal, the money will find you, or, you will find the money

…7…having the ability to evaluate risk and reward (to be able to evaluate risks properly you need to have the 1) Education, 2) Experience, and 3) Excess Cash)

https://www.richdad.com/six-basic-rules-of-investing

2…Knowing what kind of investor you want to become

When you enter into an investment there are different positions you can hold. However, ultimately we would want to know as much as possible and have much control. Yet, not all investors have the same position and therefore you need to familiarize yourself with the different classes of investors and see how you reach the investor class that you would most comfortable in.

3…What you should keep in mind if you want to start a business

If you have no experience how to run a business, and even less how to start one off, then a good intro of what you should include as important considerations for your foundation lie in the BI Triangle.

https://www.richdad.com/business-systems

Each aspect can serve a valuable purpose in building a strong foundation for a business that should last you for a long period of time. The best thing you can do is read the chapters behind these topics and take great notes.

4…What is a sophisticated investor

A sophisticated investor is simply someone that has attained sufficient Education, Experience and Excess Cash to make more money and hold on to that wealth by evaluating new investments for their risks and rewards.

He has considered how he can obtain control over most of the following areas:

…a Control over oneself

…b Control over the income- and expense ratios, as well as the asset- and liability ratios

…c Control over the management of the investments

…d Taxes in the company

…e Control over when to buy/sell an investment

…f Brokerage transactions

…g Control over ETC (the entity, the timing of payments, characteristic within the firm)

…h Terms and Conditions of the agreements

…i Access to information of the invested company

…j Philanthropy

More on these you can get from the Rich Dad Poor Dad Company website https://www.richdad.com/sophisticated-investor

5…Also giving back

As much as the book teaches you how to grow wealth, it also stresses the importance on giving back. Yes, giving back is just as important. Some do it by giving donations to institutions, others build institutions. With Robert he sells his books at affordable prices, and hosts regular seminars. However, it remains for us to come and attend.

I have taken my time to read this book, and absorb as much as possible to reflect on the most important points. Even though I haven’t made a plan to start a business right away, the key points i have taken away as of today are the following:

  • drafting a financial plan
  • update my financial literacy
  • analyse investments efficiently, and don’t invest blindly

Summary:

This book is something that I would recommend to anyone who wants to have a guide to get their financial situation under control, and also develop a plan to work towards a strong financial goal. The book is written to be easy understandable, and elaborates in great depth the importance of each lesson.

Therefore, the book deserves a whopping 4.9/5

Keep it up everyone!