Learn from 0 to 100 to invest in stocks (must read) malaysia novice stock investment, towards the road to financial freedom.
Objective
Every day Facebook has a lot of “teachers” sharing screenshots of 20-30% of their profit, letting you join their “team” or buy their courses. In fact, with the teacher stock speculation,
The result of being cheated money or lose a lot of money news has emerged endlessly, how to avoid being deceived? The best way is to learn by yourself and not to rely on others.
Cold-eyed warning of the horse novice stock investors to invest in stocks is to invest in a company, that is, take money and people to do business together, since so how can other people’s company situation is not fully understood to lose money into it?
The ultimate goal of investing is to use money to help you earn more money, and if you invest less of your money, it’s better not to invest. I hope you can rea
d the full text to basically analyze the situation of a company, let you decide whether it is worth investing your hard-earned money.
2 Investment Principles Buffett Warns the World:
- First: Don’t lose money
- Second: Never forget the first principle
Why invest in stocks?
Redeem your life
If you just graduated today and you’re reading this article, congratulations! You will achieve “financial freedom” earlier than others. When we fi
rst started working, we usually stayed at home, ate at home, and didn’t have to worry about utilities, which was the best time to accumulate your first bucket of g
old. One of my classmates had just graduated from his first salary of 3000, deducting some living expenses he could save 2000-2200. If he makes the best use
of the money to invest, perhaps he will be able to achieve financial freedom within a decade and start living the life he wants after the age of 35. On how to use com
pound interest to achieve financial freedom, the word “compound interest” can be read if you don’t know it yet, “the three types of mone
y invested in stocks are not the only way to “financial freedom”, but he is “one of them” can take you to reach. Buying
a company’s stock means you’re his “little boss” and you don’t have to manage it yourself to get a return on the company’s growth. The initial amount is
relatively low compared to other investments, but the return is “likely” to be high.
How to generate profits
The most straightforward purpose of investing is to make money, so how can stocks help you make money? The
re are two types of returns on investing in stocks:
- dividend
- Stock price differences
Dividends – When a company makes money, it gives back to shareholders in the form of a di
vidend (dividend). Example: Company A earns 5sen per share this quarter, he pays 3sen per share as a dividend, and you hold 100 shares (1 Lot) of the company and you get 100 shares x 3sen , although it seems very small. But if you buy at 0.6
0sen per share, you get a 5 per cent dividend, so you get a higher-than-regular profit. Stock Price Difference – Sell low, sell high, buy s
tock at the floor price, sell at a high price, and earn the difference. Is to buy company A s
hares at the price of 1 yuan, these two years the company’s profits rose, the stock price to 2 yuan, you sell at this time to earn a difference of 1 yuan. At tw
o years’ time, the annual return rate is 50%, which is even more if the company pays a dividend.
The risk is high but low
The risk of investing in stocks is “high” but also “low”, how to say? In his 30 Year
s of Investing, Cold Eyes notes that investing in stocks is more risky than investing in real estate, but lower than doing business directly. Because in business you can on
ly do a business with one sum of money, and stocks you can use a sum of money to own shares in several different companies at the same time, so that you can achieve the effect of diversification of investment
risk. You can also read “How risky is the investment in stocks” to learn more.
Rich people can invest in stocks?
Many people feel that stocks seem to take thousands, or even tens of thousands, before they know anything about them, because when they were young, they bought them for millions. In fact, the fact i
s the opposite, small capital of ordinary office workers should be more with every extra free money to invest in stocks.
- The threshold for investing in real estate is too high
- Term deposits, investment bonds return relatively low.
- The threshold for entrepreneurship is high, the risk is high, and it is not possible to work part-time.
In 2020 you can be a small minority shareholder in AirAsia with only RM100, and RM250 can be a small minority shareholder in Genting. That’s the amount most office workers can afford. At the age of 18, he be
gan reading books about investments by Buffett, Fisher, Graham, and so on, but it wasn’t until this year’s 10 years passed that he began to invest, why? Because of fear, conceit be
at me, feel that they only have a few thousand yuan to go to the bank to open a stock account feel very “what”. Did I have the guts to open an account after 10 years? No, I’m still that
wage earner, the bank is still only a few thousand dollars, I still don’t have that guts, but with the development of the internet era.
Rakuten platform so that you do not have to contact anyone, at home can open a hukou “quiet” at home investment, immediately go to open a hukou! Think a hundred times is better than one action. Only 10 bucks are needed to open an account.
Learn more about current events
Most people choose brands that are common in their lives when they buy their first stock, such as AirAsia and Genting. But when you broaden your
horizons, you find that there are some listed companies in Malaysia that have their place on the world stage. Malaysia, for example, supplies 50 pe
r cent of the world’s medical gloves, meaning that more than half of the world’s gloves for drug research and surgery come from Malaysia. Originally from Malaysia as
a native of 28 years, do not know that Malaysia also has a world market share of more than 50% of the company. If you were to start a business, would y
ou choose a business that could only do 30 million local people, or a business that would do the world? Answer: Obviously, so companies that need to know more before investing can take advantage of good investment opportunities. In addit
ion to gloves, the horse is still:
- One of the world’s top 10 furniture exporters
- One of the world’s top 5 exporters of palm oil
- Johor’s GUANCHONG ranks among the top 5 cocoa production and processing in the world
- Penang is known as the Silicon Valley of the East, learn more
- To learn more, go to the Malaysia Investment Development Authority (MIDA)
Believe me, when you start investing in stocks, you get used to watching the news, and then you’ll find that the world is so much going on every day. I haven’t noticed it all these years.
Understand the company’s financial situation
Before you start buying stock, learn how to look at a company’s basic financial situation, which you can find online.
All you have to do is break into Google and share price and you’ll see the basic stock price movements and financial position.
Here are three of the most popular horse stock information sites:
- Klse.i3investor.com
- Malaysiastock.biz
- Klsescreener.com
They each have their own good, you can also use three together, anyway is free.
These sites usually provide the following, these basic company financial situation.
- Market Cap
- Earnings per share (EPS)
- BenYby (PE)
- Return on equity (ROE)
- Net interest margin
- Price-to-book ratio (PB)
- Net Assets (NTA)
- Dividend Yield
- CAGR
market value
Market capitalization is 100% of the value of the company’s stock, that is, how much money can be used to buy the whole company.
It’s common to see headlines like billions of dollars lost by the boss of a big business overnight.
In fact, it is that his company’s market value is less, not his bank billions are gone.
The FTSE bursa Malaysia KLSE index is a composite index of Malaysia’s 30 largest companies by market capitalisation.
FTSE bursa Malaysia Mid 70 index is the 31st to 100th room.
The FTSE bursa Malaysia Top 100 index is just over 100.
If you want to know which companies are inside you can go to Bursa for inquiries or click here.
Market value : Number of shares (Number of shares) X share price
Example: Based on the total number of shares of the company in the chart above is 339 million, his market value is 256 million, we can tell that his share price is 0.755.
Earnings per share
Earnings per share are how much money a company earns minus costs and taxes, divided by the total number of shares.
Of course the higher the better, which means the company can make money.
Earnings per share – Net profit (gross profit – tax) / total number of shares
Ben Yibi
This Yibi refers to how many years it will take a company to recover the book based on the previous year’s earnings per share, and PE10 is a ten-year return.
PE is often used to compare the price of shares between peers, such as the two construction companies A and B shares are 1 yuan.
- Company A: The share price of 1 yuan per profit 10sen, then his PE is 10 to 10 years to return the book.
- Company B: The share price of 1 yuan per profit 20sen, then his PE is 5 as long as 5 years can return the book.
If the business of the two companies is the same, then of course we choose Company B because he only needs 5 years to return the book.
Attention:
Average PE varies from industry to industry, such as technology, which is usually higher, and the market depends on the room for annual profitability in its area.
For example, in 2020 the glove stock PE is above 70, because the market has high expectations of his future earnings will be higher than before.
Remember:
PE high does not mean can not buy, he may be a short-term decline in earnings led to PE high, as long as future earnings rebound, PE will come down.
PE low does not mean cheap, PE low pay attention to whether there is a one-time profit, or the market does not expect the company’s future earnings.
PE – Share Price/Earnings Per Share (EPS)
Return on equity ROE
ROE is one of Buffett’s favorite indicators, and it is used to calculate whether a company makes good use of the company’s resources (assets) to generate higher returns for shareholders.
A company with a high ROE is not necessarily because he earns a lot of money, or because his business model requires less net worth (plant, equipment).
Digi, for example, has a ROE of 228 per cent because he is primarily intangible (goodwill, technology), with very few tangible assets as little as NTA 0.08, EPS18.31 (2020)
Buffett believes that companies with such business models will be better off than companies that need big assets to generate returns.
Example:
Company A needs 10M to generate earnings per share of 10sen.
Company B needs 50M to generate a profit of 20sen per share.
That means that Company A can generate double the return by investing more than 10M of principal, while Company B needs 50M of principal to generate the same return.
Coupled with equipment damage, depreciation, a large amount of equipment in the long run will dilute a certain rate of return, if the company’s net interest rate is not high enough.
Depreciation of equipment alone eats up half of the gains, so Buffett argues that companies with high returns on small capital would bring higher returns to investors in the long run.
Attention:
ROE is not high, you know why high, data is for people to refer to. You can’t blindly believe in data, you have to see through the principle.
ROE – Earnings per share/net assets (Share Equity)
Net interest margin (Margin Profit)
The company’s loss is not necessarily because there is no business, some companies revenue of 100 million or can lose money, if the company’s net interest rate is too low such as 1-2%.
100 million revenue 1% only 1 million, large equipment damage you fall into a loss, so when we choose the company as far as possible to choose a higher net interest rate.
Net Interest Rate – Net Profit/Revenue X100%
Price-to-book ratio (PB)
Look at PE when you’re in a bull market, because you want to see how quickly the company can get you back to ben.
Look at PB in a bear market because you want to see how much you buy a company at a discount.
“If a company has land, real estate, building materials machinery, its net assets per share are RM1 but only RM 0.50.”
Then you bought the company at a 50% discount because his assets already exceeded the value of the stock price.
But know that the assets are no more, but also only when the company is in liquidation and you have a relationship, otherwise there is no way to actually bring you anything in return.
It depends mainly on whether the company can use these assets to generate more revenue, such as developing the company-owned land into apartments and selling it to generate revenue.
The price-to-book ratio is the share price/net asset
Net assets per share (NAT)
Net assets are the company’s total assets minus liabilities.
Net assets per share (total assets – liabilities)/total shares
Dividend Rate (DY)
Dividends are how much money you get per share, for example 3sen is RM0.03 per share.
The dividend yield is the ratio between the current share price and the total dividend for the previous year.
2 forms of dividends
- Cash dividends – is distributed in cash
- Stock dividends – is to give you extra shares instead of cash
3 processes for dividend payouts
Dividend Announcement Day – The time at which the dividend payout is announced at the time of the general meeting of shareholders
Ex-date – Buy shares before ex-dividend to receive a dividend
Dividend payment date – is the time to receive the dividend
Dividend Yield – Dividend/Share Price X100%
CAGR
The compound annual growth rate is to see how much the average company has grown in recent years.
You don’t have to do it yourself, you can find it in the Research/Financial/Last 10 FY of klse.i3investor.
instance:
Assuming that a company’s earnings per share grew at a compound annual rate of 10% per annal for the first decade, you expect it to grow at the same rate over the next decade.
We can take a look at his future earnings per share, assuming his current earnings per share (EPS) is 10.
EPS – 10 X（1+10%）^10 = 25.93
Using the above formula, we can draw the future earnings per share as a reference.
Formula for calculating history s (existing value/base value) s 1/year – 1 x 100%
Calculating the formula for the future is the number of years of the base value × (1 plus compound growth rate).
How many indices you can see on the malaysia stock biz website is healthy, how much is good, and if a company is all excellent, you can consider buying the company’s stock at the right price.
How do I choose stocks and how are they valued?
- Kelly formula
- Dividend discounting
- Free cash flow discounting
Kelly formula
In the stock market we most often see some people leave a message ALL IN, but we can actually use a formula to calculate how much money we should invest into this investment, remind yourself that we are investors, not gamblers.
Capital invested ( probability of possible profit X possible return – probability of possible loss) / possible return
If you think about this investment today, you have a 70% chance of making a profit and a 5x chance of getting a return.
64% = （0.70 X 5 – 0.30 ）/ 5
Then you should put 64% of your total money into it.
Discounting
Today’s $1 is > future $1
From an investor’s point of view, today’s $1 is worth more than next year’s $1, because now $1 you put in the bank, or invest in the stock next year after getting a dividend, then your 1 yuan will become 1.03 yuan (assuming a div
idend of 3%) discount rate calculation method, 1 (principal) x (1 plus r) (retu
rn) discount rate (r) – you give money to the bank or company to develop, you estimate the return:
- Risk-free interest rates
- Risk compensation
- inflation
Dividend discount model
bond
Valuations – Dividends / (Discount Rate – Dividend Growth Rate)
The asking price of the bond is 100
Annual interest is 4.5 units of interest
Discount rate s (risk-free interest rate 3% s risk rate 1% plus inflation 4%)
Uncertainty over discount rates leads to fluctuations in valuations.
Valuation : “Interest” / “Discount Rate”
Valuation : 4.5/8% – 56.25
In this example, a $100 bond with an annual interest rate of 4.5 is not worth it unless his price is less than 56.25.
stock
Valuation – Dividend/Discount Rate – Dividend Growth Rate
Dividends – 2.5sen
Historical dividend growth rate : 4%
Discount rate : 8%
0.025/（8%-4%） = RM 0.625
If the share price is below RM0.625 you should buy.
Free cash flow discount rate
Valuation – Free cash flow/discount rate per share – dividend growth rate
Free cash flow per share is 2.5sen
Free Cash Flow Growth Rate : 4%
Discount rate : 8%
0.025/（8%-4%） = RM 0.625
If the share price is below RM0.625 you should buy.
Dividends are calculated in the same way as cash flow, except that dividends per share are converted into free cash flow per share.
The correct valuation must be three points
- The correct valuation model
- Correct cash flow definition and discount rate criteria
- The right way to forecast the company’s long-term cash flow in the future
Buffett thinks free cash flow is the right valuation because it calculates the company’s source of value.
We can understand the business of the various parts of the company, and they can bring real intrinsy value to the company.
The emphasis here is on using this method to value, and the biggest difficulty is how to assess the correct discount rate.
How do I buy stock?
If you have very little money, you want to slowly start learning and buy some stable blue chips (Genting, Maybank, Gamuda) that you know.
Rakuten Trade is recommended because you don’t have to go to the bank to open an account and you have less money to pay for each transaction. Click here to view water money
Or you can go to the bank to open an account, as to which bank you can look here.
Trading hours
The trading hours of the Malaysian stock market are divided into up and down.
- 9.00-12.30pm (first half)
- 2.30-5.00pm (second half)
8.30 -9.00 is Pre-opening this time you can set the stock and price you want to buy. 4.45 Is Pre-closing.
Buy stocks
The units that buy the least shares in Malaysia are 1 Lot at 100unit (previously 1000unit for 1Lot), while the minimum number of U.S. stocks can buy 1unit.
Example: Add in the stock you want to buy Genting, his price is RM2.5 per share, that is RM2.5X 100 per Lot is RM250 plus Fee.
Do your homework before you buy, and buy at the margin of safety to maximize your bottom line.
mentality
The most important thing to buy stocks is the mentality, and the cold-eyed generation in his book “30 Years of Stock Investment Experience” constantly reminds novice investors.
Want to invest in stocks the first lesson is to learn the heart method, the mentality of the long-term investment can go on, at first the road is crooked, the road behind is not good to go.
When investors across the market have the right mentality to invest, horse stocks can become a mature investment market like U.S. stocks, not speculative markets.
Take action, if you can read here to prove that you are serious about planning for your future, open an account now and see how it works.
Remember to wear a condom (cover) during the outbreak
Original link: Valuecontains