Why Are We So Clueless about the Stock Market? – Book Review

bookIn last 10 or 15 years, the meaning of investing has drifted from being part owner of the business to mere buying a ticker stock. Even the concept of value investing, which at core means buying a good business at cheap, has drifted towards using volatility to value or price the stock. The relative basis has shifted from using quality of business to what is the price it is being traded. The fundamental concept of owning a good business has taken a back seat. The ease with which one can buy and sell stocks at a click of few mouse buttons, has distracted us from understanding the business. We have started to believe that buying and selling stocks online is investing.  In my viewpoint, this is what makes us clueless about the stock market. Business comes first and stock market comes later. That’s what is focus of the book I recently finished reading, Why Are We So Clueless about the Stock Market? continue reading rest of the article….

Dividend Investing: Two Common Questions?

Whenever I have a conversion about dividend investing, I get few different types of questions. It is very natural for people to ask questions. What is interesting is often these questions can be grouped into following two:

  1. If any dividend stocks in your portfolio become overpriced, do you sell?
  2. How many number of stocks do you need in a dividend portfolio?

Selling a dividend stock when it is overpriced? This comes from the thought process that say any of my dividend stock is overpriced by 1.25x or 1.5x. In that case, it is likely that the dividend I expect in 10 years, I may get by selling the overpriced stocks. Why wait for that long for dividends to trickle in? continue reading rest of the article….

Dividend Tree Potpourri – January 24, 2010

You may have notice a bit of slow down on my blog in last couple of months. I am still here and I hope get back to writing 12 to 15 post per month. However, I have continued to read articles from fellow bloggers. I am listing some of the articles that I enjoyed reading.

Economy, Finance, Investing.…..

These are some diverse set of articles from fellow bloggers and business magazines. I hope you enjoy reading all or some of these interesting posts.

Understanding Risk and Return Characteristics

riskIn general, there is school of thought that if risk is higher, then probability of “returns are also higher”. On many occasions almost all investors would have used this interpretation. This is only true to certain extent, it is a partial truth. It is incomplete.

What gets missed is that higher risk (or the complexity) does not mean “higher probability” of higher returns. The implied meaning is “probability of those higher returns” is much lower. The point I am trying to make is, understanding risk-return is not that simple. Taking higher risk definitely means higher return, but the probability of those higher returns is smaller, or lesser.

I was doing some research on Indian equity market index to understand it little better so that I can increase my allocation. In the process, I came through an interesting paper on Scribd which explains my above risk-return interpretation with an example. It is only four pages so you can read it pretty quickly. Focus on Table 1 and Figure 1 which quantifies this interpretation. You may ignore that that it is for Indian equity market. continue reading rest of the article….

LOWE’S Company – Steady Company for Dividend Growth Portfolio

lowes_masthead_logoLOWE’s Company (LOW) is a home improvement retailer. It focuses on retail do-it-yourself (DIY) customers and do-it-for-me (DIFM) customers who utilize LOW’s installation services, and commercial business customers. Its product lines include products and services for home decorating, maintenance, repair, remodeling, and the maintenance of commercial buildings. It has approximately 1650 retail stores in US and Canada.

LOW is member of Dividend Aristocrats, Mergent’s Broad Dividend Achiever Index, and S&P500 Index. The most recent dividend increase was in July 2009. continue reading rest of the article….

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