Stock Basics (Part 1)

In my opinion, women should be better stock buyers. Why? They seem to know a good deal when they see one! Take a look at what they do when you visit Tesco the next time. See how they make a beeline for the weekly promotional brochure on cheapies. E.g. Maggi Tomato sauce at RM1.90.

Jokes aside, buying stocks is all about buying a great company at a good price. Benjamin Graham wrote at length about this concept of "value investing" in his book, "The Intelligent Investor". Some other golden nuggets worth mentioning from this book are:

1. Are you an investor or speculator? Investors are in it for the long haul whereas the speculator
is in it for the quick buck. Odds are the long term investor will amass great wealth while
the speculator will end up on the losing end.

2. Mr. Market.
This refers to the prices of stocks being traded. Some go into panic selling mode when share
prices take a tumble while others become overly exuberant and buy more when share prices
are rising through the roof. The intelligent investor refuses to be swayed by Mr. Market and
makes rational decisions on the buying & selling of stocks. Basically, be very greedy when
others are fearful and be fearful when others are greedy.

3. Margin of safety.
Always add in a safety margin after you have worked out the fair valuation of a stock. Eg.
based on your analysis of Company X, the fair price to pay for a share is RM3.00. Margin of
safety at 15% (of RM3.00) means if Company X hits RM2.55 per share, you pounce.