Investing is the process of putting aside money today in exchange for more money in the future. This process involves risk but, when well managed, can help grow your wealth over time due to the power of compounding. This is the investing archive that includes articles published on JoshuaKennon.com. If you are looking for more great content, visit Joshua’s Investing for Beginners site at About.com, a division of The New York Times.
One technique I find helps a lot of investors act more rationally is one I developed during my late teenage years. I would convert all companies I was analyzing to $100 per share to make comparison of the figures and yields easier. In essence, this allowed me to ask the question, “How much profit am I buying for every $100 I put into this company?” If I paid a high multiple for a particular business, it forced me to justify the higher valuation by writing down my reasons for my belief.
I thought it might be useful to show you how I’d analyze an investment portfolio and calculate a reasonable estimate of not only expected growth in capital but the overall economic characteristics of the holdings.
Years ago, I vaguely remember hearing someone comment that it was interesting how differently we measure wealth today compared to British society at the end of the 19th century. This made me realize that most people don’t even know there is a difference; that there are primarily two ways you can think about measuring your wealth and which you choose for your own household will influence how you behave, the capital structure you employ, and even how you think about risk.
One of the most common questions I receive is, “how do you come up with a list of stocks for your portfolio that you then research further?”. Here is a brief overview.
In 1928, Irving Fisher published The Money Illusion (seriously, buy it – it’s only $7.95), which discussed the human fallacy of thinking about things in the nominal currency of your home country instead of in terms of purchasing power. The concept phrase “money illusion” was coined by legendary investor and economist John Maynard Keynes. The…
The older, more experienced, and wealthier I am, the more I am convinced that the average person has no business managing their own money. People are too busy living their lives and getting ahead in their careers to focus on growing their capital. As a result, they make stupid decisions that cost them enormously in the long-run.
The Graham-Newman Corporation was a stock company that essentially served as a hedge fund through which legendary investor Benjamin Graham managed money for his shareholders. It is the same firm where Warren Buffett worked in his twenties before moving back to Omaha and establishing the original seven partnerships upon which his fortune is based. According…
I’ve written about Walter Schloss and his value investing philosophy in the past. Tonight, I’m thinking about the lessons someone can glean from studying his career. [mainbodyad]Alice Schroeder tells us on page 852, in the notes of The Snowball, that in 1951, Walter Schloss was making less than the average secretary working for Benjamin Graham…
I’ve been thinking a lot lately about Buffett Associates, Ltd., which is the most famous and first “real” professional investment partnership that Warren Buffett established on May 1st, 1956 after he returned to Omaha following his time working for Benjamin Graham at the Graham-Newman Corporation. He was 25 at the time (would turn 26 that…
I’ve been writing quite a bit about dividends and dividend investing over at Investing for Beginners at About.com. One of the things I wanted to explain, but I feel is still advanced for that particular readership base, is something known as the dividend discount model, or rather a back-of-the-envelope adaptation of it. (Please note that…
