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ref:5 terms you must know when analyzing stocks:
1) Intrinsic valueThis is the actual value of a stock as opposed to its current market price. The intrinsic value is arrived at taking into account current cash flows, estimated future cash flow, growth potential, and competitive positioning that accounts for variables such as brand, trademarks, patents and copyrights.
2) Margin of safetya margin of safety--paying only Rs 60 for a stock you think is worth Rs 80, for example--you provide for errors in your forecasts and unforeseeable events that may alter the business landscape. By purchasing the stock at Rs 60, it allows you to be wrong by 25% but still achieve a satisfactory result. The Rs 20 difference between estimated fair value and purchase price is what Graham called the margin of safety. Warren Buffett considers this margin-of-safety principle to be the cornerstone of investment success.
3) MoatAn economic moat is a structural business characteristic that allows a firm to generate high returns on capital for an extended period. It acts as a barrier that protects a company from competition.
4) Moat trendEconomic moats aren’t stagnant over time. Rather, competitive dynamics are constantly shifting as technology develops, regulations change, competitors exit or enter a market, companies gain scale, and so on. This is where our moat trend ratings come in.
5) Circle of competenceInvestors should stick to what they know, the temptation to step outside one's circle of competence can be strong. Investors who get outside their circle of competence can easily find themselves in big trouble. Within it, a given investor has expertise and knowledge that gives him or her significant advantage over the market in evaluating an investment.
You might be in a quandary about how to invest, when to invest, with whom to invest and even question why to invest. You might invest hours of time researching managers, mutual funds, stocks or alternative opportunities, interviewing advisers, and calculating the impact of return on your wealth. These are all worthy endeavors; meaningful and important. These activities absorb a great deal of energy and focus, but the fact is, you might be looking in the wrong direction. What matters is your Cashflow ; As without proper CashFlow management, you are going to face liquidity crisis !
What is cash flow? It's basically the movement of funds in and out of your business. You should be tracking this either weekly, monthly or quarterly. There are essentially two kinds of cash flows:- Positive cash flow: This occurs when the cash funneling into your business from sales, accounts receivable, etc. is more than the amount of the cash leaving your businesses through accounts payable, monthly expenses, salaries, etc.
- Negative cash flow: This occurs when your outflow of cash is greater than your incoming cash. This generally spells trouble for a business, but there are steps you can take to remedy the situation and generate or collect more cash while maintaining or cutting expenses.
The flow in cash flow refers to the in and out motion of money. Those who simply earn income and pay bills are not engaged in the process of cash flow management, that’s survival. Real cash flow management involves understanding the components that make up where the money comes from, where it goes, and what choices are appropriate in creating a life of greater satisfaction. It is an active process.
Some of these components include:Components of IncomeFixed ExpensesDiscretionary ExpensesTaxesSavings
This is mainly to do with the inflow and the outflow of money. To put simply, inflows refers to the money that’s earned while outflows refer to the expenses. To list a few examples:
Inflows:Salary/Business IncomeRental incomeInterest/Dividend Income
Outflows:Regular living expensesRental payouts – if anyOther Discretionary expensesAnnual tax and insurance payments
Below are some aspects that need to be kept in mind to manage cashflows:
Budgeting: It allows estimating the quantum of surplus that gets generated periodically which could be monthly or annually as the case may be. In case of reduced surplus generation, cashflow may be managed by either reducing expenses or increasing income. To reduce expenses, first identify and classify the expenses as fixed or discretionary. Expenses that are typically made by choice are discretionary expenses that include vacationing, weekly outing, etc. These expenses are easier to cut down and do not call for any structural lifestyle changes to see a positive impact. For example, a holiday in India would work out more cost effective than spending on an international holiday. This category of expense has a higher potential of displaying positive impact on cashflows without having to make any major changes in lifestyle as compared to essential expenses.
Build Corpus: It’s good to maintain an emergency corpus that provides immediate liquidity as required. There is no strict rule on how much the corpus should be but ideally it should be maintained to meet your 4 to 6 months of expenses. If you like to shop and tend to make unplanned purchases, it’s a good idea to either step up your corpus or have a separate fund for that.
Equated Monthly Installments: While purchasing a property, the first priority is always to accumulate for the lumpsum down payments. While most forget that the regular EMI outflow that gets paid each month has an impact on cashflow either today or in future. It’s very important to treat these committed expenses in a holistic manner to ensure that reduced savings today do not have an impact on other critical goals planned for the future.
Investment Planning: Once the goals are chalked out and the monthly savings identified; the next important aspect is to identify the right investment avenues. Apart from strategizing the investments based on asset allocations another important aspect that needs to be considered is the required investment duration to ensure the required amount is available as needed. Certain investments define a fixed timeline as in case of a PPF a/c where as there is no such lock in period for equity investments. However to be able to generate most from this class of investment, it is best to consider these from a long term perspective. Investment timeline should ideally be looked at in conjunction with goals to match the liquidity requirements. Some people may not have saved as much as they would have wished. This is not because they did not intent to save but because they did not manage their cashflow well. It is important to set a system keeping the above in mind. A good investment plan is always preceded by good cashflow management.
ref:
http://www.investopedia.com/exam-guide/cfp/financial-statements/cfp5.asp
http://www.inc.com/encyclopedia/cashflow.html
http://www.accenture.com/Microsites/vaahini/potpourri/moneywise/Pages/your-cash-flow.aspx
http://www.forbes.com/sites/moneybuilder/2010/12/13/how-to-manage-your-personal-cash-flow
ref:
1. Consider your job in the right light No matter what kind of job you have, make sure you consider it as a blessing, not a curse. It isn’t holding you back, it’s keeping you afloat.
2. Plan your days well It’s the little, consistent daily things you do that add up to make or break a startup. Stop the busywork, get rid of distractions and give both your job and your venture the laser focused attention they deserve.
3. Maximize your time You have the same hours as the PrimeMinister of India. Maybe you already know your job takes up 40 hours of your time each week, so account for it and figure out how to maximize all those other remaining hours. Sleep should still be a priority, as should some daily exercise. Still, there are 72 hours(40hours left in workdays and 32hours in the weekend) in a week to do with as you wish beyond your 40 hours of work, so spend them smartly. Successful entrepreneurs manage their time, they don’t wish for more of it.
4. Make sure this is really what you want Is this going to make me happier? Before leaving your job for uncharted territory, make sure this is really what you want – not just what you think you want or a way to escape your current job.“Too many people suffer silently in their job, but before you go out to be your own boss, you have to believe you're going to be happier. If you can't say that you believe it will make you happier, don't do it.”
5. Practice your dream Test the waters without giving up my current job. 'Beta Test' their dream job before leaving a stable situation to pursue it full-time. You might find you don't like the new career as much as you thought you would. “Before you quit your accounting job to open a coffee shop, it might be good to work at a Starbucks part-time for six months to see if you hate coffee and humans,” ..
6. Get a second opinion. Even the most level-headed entrepreneurs should ask for a second opinion before moving forward. You might also tap a trusted colleague or friend for an opinion. Have someone(a devil's advocate) who you trust take a look at your financial projections to ensure you're not being overly optimistic.
7. Outsource, outsource, outsource You know what your time is worth (if you don’t, calculate it!). Could you hire someone to do it better, faster and, ultimately, break even or make more money during that time? If so, do it.
- Mantra to stay current and get ahead - Learn, Unlearn and Relearn
- Focus on Career goals(you do not have a way know what is your destination (or) measure success without SMART goals)
- Being in your comfort zone will never take you in a nonlinear path; so move out of your comfort zone and make a difference. Plan & Execute ..
- Do not explain to the people what you are planning to do; It's sheer waste of time; Just do it as everybody is interested in results not plans.
- Stretch yourself and build new skills as you go along; Continuous learning is the key for great future.
- Have someone(a devil's advocate) who can make you accountable and ask questions all the time -
- What, When, How & Why ???
- What is your personal goal in next 10 years ?
- What is your professional goal in next 10 years ?
- What is your financial goal in next 10 years ?
- Why did you take that decision 5 years back ? Any specific reason ?
- What you should have done better if given a chance to go back to the past ? Any constructive learnings ?
- What did you do wrong ?
- What you will do if you loose job tomorrow ? Do you have any other money generating ideas/business ?
- What is the worst that can happen to you financially and what's the action plan when that happens ?
- What will you do if you are bankrupted tomorrow ?
- How is your life balance-sheet looking like ? success vs failures? energetic vs dull ? exciting vs monotonous ?
- How is your financial balance-sheet looking like ? assets vs liabilities ?
- Are you ready for drastic changes in life-style if something unexpected happens soon enough ?
- Learn something out of your comfort zone (example: a techie learning sales/marketing which helps in influencing people)
- Choose your priorities carefully; Deep vs broad knowledge
- Focus on skills you need to differentiate yourself from others
- Think of jobs that are interesting to you where you can make a difference ..
- How can you add more value and maximize impact with whatever the resources you possess ?
- Get biggest and ugliest job and get the job done and show the difference ..
- Take temporary/short_time jobs out of your Comfort Zone and check how you are able to add value
- Volunteer more work in your comfort-zone to create a brand for yourself
- Talk to your manager about your aspirations and see where you can improve on and ask for help to prepare for future – positive collaborative work ; Make him an advocate for your work in your future endeavors.
- Prepare for your next interview; Preparation is the key. You got to know your strengths and weakness and emphasize/focus on your strengths.
- Step back and see what's your brand excluding your professional job; Find out the core work you did during specific job execution; Look at the big picture not specific area of work. example: You built a whole new team in the project which when you generalize is equivalent to running a start-up company.
- Get to know all your stakeholders and spend sometime with them and create bridges.
- Find the people who can challenge you to stretch yourself which means coming out of your comfort zone and try something new that you are magically connected to. This personal should be a devil’s advocate and kill you with his questions which means Explore more of yourself meaning growth.
- How to grow in your career -
- Perform in your current job and there is no replacement for this ..
- Have a Mentor (or) group of mentors
- Your technical mentor
- Your marketing/sales mentor
- Your career mentor
- Join Professional networks
- Join volunteer networks
- Keep in touch with people & build relationships and maintain them ..
- Professional networks & Personal networks
- If you want to make a change in career (or) shift job -
- Build right support system around you; It’s essential
- Get a person who can make you accountable
- Get a person who can ask all the difficult questions (like How you differentiate you from other ? what value you can add ?)
- Is it your comfort zone ? (or) out of comfort zone ?
- Is it helping in your broader skills of your future role/goal
- You are never 100% ready but wherever there are more learning opportunities then go for it
- Be ready for stretching more and steep learning curve and stressful times but that’s how we learn new stuff .. challenging ourselves.
Critical skills to success while climbing corporate ladder:- Influencing right people
- Focus on your strengths not weakness
- Communication and get noticed by those who matter
- Network, network, network
- Articulate stories(context, problem, solution) well backed by facts
- Self development/improvement
