Stock investments can be a very fulfilling journey and this is one big theme of this website, and we focus on Singapore and US stocks. At Journey With Money, we practise Value Investing.
One can generate passive income by “investing” in the stock market. I have put investing in quotes because it is investing if you know what you are doing but “gambling”, “speculating” if you do not know what you are doing in the stock market.
It is common to hear tips about the stock market, like “buy low sell high”, “don’t put everything into a single basket”, “diversify”, “contrarian theory”. In addition, you will also hear advices like “do not time the market”, “do cost averaging”, “buy only companies you understand”. I am illustrating how confusing this can all get.
Then again, you have the one seemingly solid advice which is “buy the blue chips”, “buy good dividend yield counters”, “buy the growth stocks”, “buy and hold”. You also start digging into fundamental analysis and technical analysis.
Very soon, the myriad of tips, advices, methodologies, strategies can be compiled into a PhD thesis. The problem is that you still don’t have a proven stock investing strategy and the more you read up, research, do you homework, the more frustrated you may get.
I have been through this journey myself, and finally I just decide that perhaps the best approach is to fall back to fundamentals and learn the fundamental investing principles from none other than Warren Buffett. Much has been written about Warren Buffett and it does not help when there is too much information out there with regards to his investment principles. I have found a good summary write-up here.
Warren Buffett said: “Price is What You Pay, Value is What You Get”. When you are investing in the stock market, get used to the fact that prices move up and down as stock holders are bombarded with daily market news and rumours. Prices don’t necessarily reflect the actual value of a company.
When a particular company is traded at a price lower than its intrinsic value, it is considered undervalued and that’s where value investors can profit from identifying them and investing in fundamentally sound companies with growing earnings or stable earnings.
This sounds simple enough but how to determine the intrinsic value (valuation), when to buy and when to sell?
May be it is easier to just invest in index fund? But again which index fund promises the biggest return?
We are excited that we will be featuring different topics related to both the art and science of stock investment.