Investment planning
Question # 1
Why do you want to invest?
http://www.isc.hbs.edu/pdf/Value-Investor-Insight-12-13-Michael-Porter-interview.pdf
The fundamental purpose of investing is to deploy capital to productive uses in the real economy.
Question # 2
What research do you do?
https://www.goodreads.com/review/show/4920297060
How well do you understand the investment?
What is the likelihood / probability that your analysis is right?
https://www.goodreads.com/review/show/4920297060
Page 576.
Look for companies that are managed by people who think like owners - not just managers. Two tests:
1. How understandable are the company's financial statements?
2. Are extraordinary charges extraordinary, or do they occur repeatedly?
https://www.goodreads.com/review/show/4920297060
Page 440.
Question # 3
What are sources of growth and profit?
The performance of the stock market depends on 3 factors:
1. Real growth: The rise of companies' earnings and dividends. In the long run, the yearly growth in corporate earnings per share has averaged 1,5% to 2%
2. Inflationary growth: The general rise of prices throughout the economy.
3. Speculative growth or decline: Any increase or decrease in the investing public's appetite for stocks.
https://www.goodreads.com/review/show/4920297060 Page 105.
9 examples of sources of growth and profit:
1. Strong brand.
2. Monopoly in the market.
3. The ability to supply large amounts of products cheaply.
4. A unique intangible asset. Example: Coca-Cola formula.
5. A resistance to substitution.
Example: Many people have no alternative to electricity from a certain utility company.
6. The company is a marathoner - not a sprinter.
7. The company spends neither too little nor too much on research and development.
8. Leaders of companies say what they will do and do what they said.
9. The company generates more cash than it consumes.
10.Leaders find good ways of putting cash to productive use.
https://www.goodreads.com/review/show/4920297060
Pages 336 and 342.
Question # 4
How can you reduce risk?
The interest and principal payments on good bonds are much better protected and therefore more certain than the dividends and price appreciation on stocks.
https://www.goodreads.com/review/show/4920297060
https://www.goodreads.com/review/show/4920297060
Bonds have almost always fluctuated much less than stock prices.
https://www.goodreads.com/review/show/4920297060
If the investor is in doubt as to which course to pursue, she / he should choose the path of caution.
https://www.goodreads.com/review/show/4920297060
One of the most persuasive tests of high quality is an
https://www.goodreads.com/review/show/4920297060
https://www.goodreads.com/review/show/4920297060
Question # 5
How do you make decisions?
https://www.virgin.com/entrepreneur/richard-branson-the-three-rules-of-investment
Even when an idea immediately strikes you as a really good one, push aside that first reaction and carefully and objectively weigh the potential pros and cons.
https://www.goodreads.com/review/show/4920297060
One of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years
Question # 6
At what price will you buy?
https://www.goodreads.com/review/show/4920297060
https://hbr.org/2014/04/how-unusual-ceos-drive-value
When the stock market is low, buy stocks.
Question # 7
How do you diversify investments?
https://www.linkedin.com/pulse/diversifying-well-most-important-thing-you-need-do-order-ray-dalio/
Diversifying well is the most important thing you need to do in order to invest well. Among important ways to diversify is to invest across industries / sectors as well as across countries.
Question # 8
How do you help out?
http://mashable.com/2011/05/20/startup-investment-tip/
A big part of angel investing is helping companies by mentoring people and/or connecting people to other people, who can help them succeed.