Monday, July 25, 2016

PBC & PZC saw their share prices decline leading market to fall

The GSE-Composite Index closed trading at 1,779.31 points, 1.14 points lower than the previous session. The downward movement was as a result of negative returns on two stocks. The year-to-date return on the stock market is -10.81%.

The GSE financial stock index stayed flat at 1,665.93 points.

A turnover of GHS0.73 million was recorded following the exchange of 0.13 million shares. The traded volume and value declined by 53.04% and 98.36% respectively. SIC emerged as the dominant equity, accounting for more than 70% of the trade volume and value.

PBC and PZC saw their share prices decline. No gains were recorded.

Wednesday, July 20, 2016

Young means Equity &The Fallacy of time diversification

From my earlier post against diversification, let me take time to address the flawed logic people have about diversification which is captured well in Jordan, Miller and Dolvin book on Valuation and Management.
Has anyone ever told you “ You’re young, so you should have a large amount of equity in your portfolio?  I know some of the people I coached during my early days of the Investment Coaching would say, Yes Patrick, you told me that. Well, while this advice could be true, the argument frequently used to support the strategy is generally incorrect. People say, although stocks are more volatile in any given year, over time this volatility cancels itself out. Investment professionals say this is a flawed argument. And they refer to the phenomenon as time diversification fallacy.
Jordan, Miller and Dolvin helped with this line of reasoning. You might remember from your statistics class that we can add  variances together. The fact means that annual variance grows each year by multiplying annual variance by the number of years. Standard deviations (SD) cannot be added together because the SD is the square root of the variance, however, an annual SD grows each year by the square roots of the number of years.  This feature is very handy when we are describing the returns and risk of an investment.  For example, If  we take a randomly selected portfolio of large –cap stocks of standard deviation of about 20%, and hold this portfolio for 16 years, the SD would be about 80%, which is 20% multiplied by the square root of 16.

Bottom line: Volatility increases over time – Volatility does not “cancel out” over time.  Whiles investing in equity gives you a large chance of having a portfolio with extremely large value, it also increases the probability of ending with a really low value.
So, should younger investors put more money into equity?  Probably YES, but for a more logical reason other than the reasoning underlying the fallacy of time diversification.

It is advised by professionals that, if you are young and your portfolio suffers a steep decline in a particular year, you should make up for this loss by changing your work habits / job / source of income or getting a second source of income.  People approaching retirement have little future earning power hence a major loss will have larger impact on their wealth no wonder the young should rather consider more equity.

Monday, July 18, 2016

Why you should put all your eggs in one basket

Today I was reviewing my Investment Coaching notes and preparing for my next session and then I came across a quote from Will Rogers that says; 
“Don’t gamble! Take all your savings and buy some good stock and hold it till it goes up. If it won’t go up, don’t buy it.” 
 I think it is a very deep quote that will get you  to do more work on finding a good stock than you will expect. It seems as a good Investment policy to adopt but the questions that will follow are; how do you know it will go up? How do you get rid of some risk though diversification?

After thinking this through over and over again, I strongly agree that when the right work is done in finding the right and good stock / company, putting everything you’ve got in it is simple a smart move allowing yourself to achieve high long term growth even if that means accepting some significant short term swings in value.  I am very much aware of the squad at the other side of the room with the view that, it is unwise to put all your eggs in one basket.  My question to them is what if the basket is well protected and the eggs are so safe that nothing can go wrong?  
I see that form of investment as a way of building your wont small cap company and enjoying the returns. With you putting in more and more, you may even get to enjoy some degree of management control.  According to Rich Dad, Kiyosaki, this will require the Three E’s- Excessive cash, Education and Experience. He called it the Insider Investor.

Bottom Line: Spreading investment across a number of assets will eliminate risk but not all of the risk and hence you should rather Take all your savings and buy some good stock and hold it till it goes up. If it won’t go up, don’t buy it.

Wednesday, July 13, 2016

Appreciation in GCB share price drives index upwards

The GSE-Composite Index rose by 0.47 points to close the midweek's trading at 1,786.88 points, from 1,786.41 points. The change brings the market return to -10.43%, year-to-date.

The GSE-Financial Stock Index moved up 0.67 points to 1,674.44 points from 1,673.77 points.

A total volume of 0.19 million shares were traded at a value of about GHS 0.20 million. The trade value decreased by 44.79% and the turnover, 18.71% less than the previous session. GOIL led the market with 52.94% of the volume traded and 70.13% of the traded value.

GCB returned 0.32% today to close at GHS 3.10. No losses were recorded.
Courtesy -CBL

Monday, July 11, 2016

EGL, ETI & TOTAL slipped by a pesewa each whiles ALW gained 2 on GSE

The stock market was down on Monday after losses on three stocks. The GSE Composite Index closed at 1,787.94 points, down 7.79 points from 1,795.73 points. The yield on the bourse is -10.38%.

The GSE financial stock index also lost ground, shedding 10.57 points to 1,675.23 points.

EGL traded the most shares, accounting for 40.96% of the 0.15 million shares traded and 45.55% of the GHS0.32 million realized from trading. The traded value on the bourse declined by 37.61% from the previous closing whereas the turnover went up by 15.17%.

EGL, ETI and TOTAL slipped by a pesewa each to close trading at GHS2.41, GHS0.19 and GHS3.95 respectively. ALW was up by GHS0.02 to close at GHS0.13.

Courtesy- CBL

Thursday, July 7, 2016

How do you find a great investment

I was listening to an audio by Robert Kiyosaki on this topic, "How to find great Investments" and I'll like to share with you some lessons.
Some people see saving with the banks as an investment, others refer to mutual fund investments as great investment but to Robert Kiyosaki they are not great. And I kind of side with him a little, knowing where he is coming from. With regards to the Ghanaian economy, gaining 20% to 30% on an investment like a mutual fund could be a great investment considering the effort and time put in it.
The best investments are the ones you can control, according to Robert. And education is what gives you control. The more you know about an investment being it Stocks, Businesses, Real Estate, Options or forex trading etc, the more you have control and the more you stand the chance of succeeding.
In order to be a successful investor, you need to look for VALUE. Yes, where is the value, and then you project the value into the future. How much will this be worth 5 years from today when I fix this or that or make this or that changes?

Real wealth builders should look at starting a business or real estate according to Kiyosaki.

Principles for Investment into Businesses:
1. Know how to read and interpret the numbers. The numbers tell a story and you have to be able to understand the numbers to understand the story. You need to have control over financial statements.
2. Learn the vocabularies involve in running a business.
3. Start small.
4. Note that it is your education that makes you money and not the amount you invessted.
5. Cash flow is key to growing a business. Look for cash flow. It is the amount of money that comes in and goes out.
6. Watch the trend. Know the trend because they impact your business. Some trends could be technology related. Understand the trend and the industry.
7. Look for great partners.

Principles for Real Estate Investments:
1. Invest first for cash flow and then for capital gains.
2. Use leverage when investing.
3. See investments with your mind.
4. Train your mind to see what your eyes cannot see.
5. Invest some time in your education.
6. Make the necessary links.
7. Dont risk your money investing in mutual funds.
8. Pit in the time and the effort.
9. Find a property that is losing money or not making money and make it into one that makes money.
10. The Income of your properties are affected by Your Rent, Vacancy Rate, (look for properties that are being mismanaged. High Vacancy is an opportunity) and finally Other Income (renting out parking space etc)
11. In finding a good investment, one of the first thing to ask yourself is, what's my experience, what are you good at.

Investing is a fun game to play. Start it and enjoy playing.


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