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From the Publisher

BEFORE YOU START TO INVEST; CONSIDER…

THE PRICE OF THE STOCK DOESN’T DETERMINE THE VALUE OF IT

Another common misconception I hear is:

“I’m not buying that stock because the stock price is too high, it’s better to invest in stocks with cheaper stock price. I.e. Google is trading at $1,200/share and it’s too much, it has higher chance of coming down.”

You must understand that Google may not be worth it at $1,200/share or maybe a bargain, but don’t determine it just based on its price.

Berkshire Hathaway-BRK’A, in 1982 was selling for $485 per share! In 1982 $485 was a lot of money for a share and one may have thought it was too expensive to buy! In 1992 it was selling at $10,000/share! In 2002 it was selling at $70,000/share! In 2012 it was selling at $120,000/share. In 2019 is selling over $300,000/share! Now was this overpriced in 1982 at $485? Even if you take the cost of inflation out, this provided great return!

To understand this concept, you must understand the correlation between stock price, outstanding shares and market capitalization.

DON’T BE FOOLED PRICE IS BAKED INTO THE VALUE

One of the biggest mistake novice investors make is they will see something or come across a product or service they like so they buy a stock in it; because a friend or a colleague highly recommends it, or because it has dropped a lot and it must go up now.

An example of this would be; I like coffee from “Starbucks”, so I’ll buy their stock. All my friends use “Facebook”, so I’ll buy their stock. I found my spouse from “match.com” and she is so awesome, so let me invest in their stock. President Trump tweets a lot so “Tweeter” stock must go up!

The problem with this thinking is you are 1 person, maybe 2 if your friend recommended it to you, do you know a company could have billions of outstanding shares, and millions of people who have invested in those company at different price interval? Do you know that thousands of people knew about this stock before you?

Do you know thousands more have invested in these securities way before you had their product or used their services?

VALUE OF THE STOCK VS. CURRENT PRICE

You have picked few stocks that you think might be a good investment, but you are not sure if it would be a good buy or a bad buy. It would be nice if you can figure out how much the stock is worth before you buy it!

I like to see the profile of that stock online. Read what the company does.

When I’m investing (not trading) in a company, I want to connect with that company! I want to know that company inside-out, I want to believe in their upper management, I want to share their passion and above all I want to understand that company and maybe that industry.

Once I do this, then I can better start to understand their financials and understand how to value that company. This is all part of fundamental analysis, that will help you evaluate and see if the company is worth investing in. NOT OPINIONS BUT REAL UNDERSTANDING.

The idea of “I think that company is great because of … [add your theoretical reasons]” ends here.

ASIN ‏ : ‎ B07MTR1VR9
Publication date ‏ : ‎ January 14, 2019
Language ‏ : ‎ English
File size ‏ : ‎ 4713 KB
Simultaneous device usage ‏ : ‎ Unlimited
Text-to-Speech ‏ : ‎ Enabled
Screen Reader ‏ : ‎ Supported
Enhanced typesetting ‏ : ‎ Enabled
X-Ray ‏ : ‎ Not Enabled
Word Wise ‏ : ‎ Enabled
Sticky notes ‏ : ‎ On Kindle Scribe
Print length ‏ : ‎ 78 pages