What is Investing?
The idea behind investing is that money is put to use in such a way that it is
likely to turn into more money. This could happen only because someone is
willing to pay interest to use the money or the value of whatever security
the money was used to buy increases during the period of ownership. Destinations
for invested money includes savings accounts, stocks, bonds, mutual funds
and numerous other investment options.
What makes a person or organisation invests the
money rather than spending? The common answer is savings. People and organizations
anticipate future cash needs, and expect that their earnings in the future
will not meet those needs. Another motivation is the desire to increase wealth,
i.e. make money grow. Sometimes, the desire to become wealthy in the future
can make you willing to take big risks. For most investors, charitable goals
aside, the key measure of benefit derived from a security is the rate of return.
Stock market Investing:
One of the greatest popular myths about investing in stocks is that in order
to be successful, you must be able to predict the stock market's movements. It
is because people do not understand that stocks give a positive and substantial
return over time - they falsely assume that stocks bounce around in the same
range forever, and they therefore conclude they must predict movements in order
to be able to sell at the top of the range and buy at the bottom of the range.
For others, the desire to predict is borne out of human nature, which puts a
premium on certainty. Hence to know what will happen in future, it is usually
assumed by the beginning investor that to be successful, one must first become
an expert at forecasting future market trends.
A multifaceted approach to value investing with
stock valuation based on intrinsic value estimated from cash returns, appraised
value of assets, and other facets of value. Investing is a life-long activity
focused on creating a better future. A sound disciplined investment plan can
help you reach your goals -- for retirement, family, or business.
The Four-Step Common Stock Investment Program serves as a point of departure
for investing in common stocks. Following these steps is like waltzing your way
The first two steps can help the investor overcome fear and greed and escape
from the wilderness. The third and fourth steps are required to overcome ignorance
and cross the desert to reach the promised land. At the final step, we identify
the most appropriate valuation model to estimate the absolute investment value
of a company and its common stock. The choice of models is critical because some
models have self-contradictory premises. Global Value Investing addresses these
four crucial choices.