Sunday, December 6, 2009

How can we start investing?

What can be considered an investment?
Actually, the moment when you buy a product, it's a sort of investment.
For example, you intend to buy a LCD tv. What are the considerations that will run through your mind?
Do you decide to buy a product by just looking at the price? Or is there other considerations, like brand, history of the brand, your past experience with the brand and so on?

In summary, I feel that when we buy a product, we do ask ourselves if it is value for money, isn't it?

It's the same thought in investment in companies. When we buy the shares of a company, we need to ask ourselves these questions:-
1. What is the value of the company that I intend to buy?
2. How do I know if the company will do well in the future?
3. Do I pay the right price for this company?

Well, investing your own money in companies always creates the doubt if you have made the right choice.

All these doubts can be eliminated if you have done your homework to check on the company's past results.

You may ask, "Do I have to spend so much time to 'investigate' the company that I am interested to invest in? Can't I just follow the crowd or even the analysts out there?"

I would just say, "There is no free lunch in this world." How would you know if the crowd or the analysts made the right choice too?

With the Internet, it is much easier to start your own investment research in the comfort of your own home.

Meanwhile, here are some of the easy to read investment books that I would recommend to my friends.
1. Rule #1 by Phil Town
2. Understanding Wall Street by Jeffrey Little
3. The Buffettology Workbook: Value investing the Warren Buffett Way by Mary Buffett and David Clark

Here are some others that you can check out.
1. The Intelligent Investor by Benjamin Graham
2. Security Analysis by Benjamin Graham, David Dodd and Warren Buffett

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