I remember there was a speaker who said this on stage,
“There are 3 types of people in the world. Those who can Count and those who cannot Count.”
I think we Singaporeans are very fortunate to be able to count relatively effortlessly. Most of us probably have taken this for granted and although i am not very keen on commenting on the current educational system we have, I am grateful for the fact that most of us can look through numbers and be generally comfortable.
So why is counting so important and why am i bringing it up in this post? The answer is that in order to be a Value Investor, we have to Buy Assets at Sensible Price!
Whenever i talk about “price” and “calculation”, there will inevitably be some people would rather avoid the topic entirely. And as much as i want to attract all people to continue to listen to my nagging regarding Winning the Game, i just can’t avoid talking about the need to calculate numbers as it is part and parcel of Financial Edu-ACTION. So please stick with me because I promise you that it is going to be really simple maths and it is going to be worth it.
As Warren Buffett said, “If calculus or algebra were required to be a great investor, I’d have to go back to delivering newspapers.”
All you need to be a great investor or a.k.a Assets Buyer, if to know Addition, Subtraction, Multiplication and Division.
So what does it mean to Buy Assets at a sensible price? Let me give you some examples in this posting in the subsequent postings, i will go indepth. (So do note that this post is a simplified version!)
Stocks a.k.a Business:
When we are buying Stocks (which are Businesses), we should buy them at sensible price. A simple example is that when a stock has announced that it earns $x per share, we should buy it at a time when the returns make sense.
E.g. ABC Stock earns $1 per share consistently and you would want your money to make you at least 20% per year. When do you buy it?
A. When its Stock Price is $20
B. When its Stock Price is $10
C. When its Stock Price is $5
D. When its Stock Price is $2
The answer, logically speaking will be when the stock price is $5 and also $2. Because when you buy this piece of asset at $5 and this asset earns you $1 per year, you are getting 20%. (We will talk more about how this is realized in subsequent postings).
And what is the kind of returns you are getting if you manage to buy it at $2? It is 50%!
So as Investors, we look at the returns the asset can bring. Fortunately for us, there are many speculators out there who disregard the stock as an Asset, and that is why the price fluctuates. But as Benjamin Graham (teacher of Warren Buffett) says,
“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”
If you want to learn more about our VIA Target Price Calculator and know how to buy Stocks at Sensible Price, do join us at our free workshop where we discuss more in depth so you can invest more confidently, knowing that you have bought as Asset at a sensible price!
Click HERE to book a Free Investing Workshop.
To your dreams,
Mind Kinesis Research Team
Master Trainer (Value Investing Options Strategy)
Investment in Stocks Blog
Value Investing Academy – the Warren Buffet Way
