What are the differences between investments, speculations and gambling in the stock market?
In my opinion....
Investment:
"I buy into that stock because I believe in its fundamentals. The price is also oversold."
"The technical indicators showed that the price has consolidated, and will be on a upward trend soon."
"I based my purchase on the price to earnings ratio and intrinsic value of the stock."
Speculation:
"I invest in that stock because I think the price will go up. It's intuition."
"Everyone tells me it will go up."
"I have a hunch I will be able to earn within a short time."
Gambling:
"I'm betting that it will go up."
"I don't understand why I'm buying, but I will sell it as soon as it goes up to make a profit."
"I watch the price everyday, hoping it will go up and let me make a quick profit."
An investor knows why he's buying, when he/she made a mistake in purchasing, and learned from the mistakes. Strategies are followed, and rules are set. There's no feelings or emotion for any stock. The company/stock does well, and the investor take it that his/her judgement is correct. But if the company/stock goes bad, the investor will learn from the bad decision, tweak his/her strategies for the better, and use the new strategies for the next investment. Investors thus improve over time.
A speculator or gambler knows little or nuts about what he/she is buying. When a mistake is made, he/she will think: "damn, should have bought at this price, and I would have earned." There are many what-ifs scenarios. The company/stock does well, and the speculator/gambler will give himself/herself a pat on the back and congratulates himself/herself for being "smart". But if the company/stock goes bad, the speculator/gambler will start blaming people he/she believes in, believe that it was just a stroke of bad luck, thinks that it will recover soon. He/she does not have any strategies to tweak, and would most likely not learn any lessons. The cycle usually continues on and on for them.
Stocks, Personal Finance, Personal Development,
Wealth, Income, Trading, Investing, Business
test4
Sunday, December 14, 2008
Friday, December 5, 2008
My thoughts on Passive Income
Why create passive income?
Creating a passive income source helps us leverage our earnings per unit time better. It also contributes an additional stream of income for us.
Passive income is generated when you are earning an income without having to do much work for it. There are a few types of passive income.
1) Private Business
If you own a business that you have setup to run completely on its own, or perhaps a piece of real estate that generates capital or rental returns, it is a good source of passive income.
2) Investments
Shares of companies that pay annual dividends (like Singapore Press Holdings), or shares of REITS, are sources of passive income.
Capital appreciation can also be considered a form of passive income, but until you sell the stocks and lock in your profits, the money is still not yours.
3) Fixed Deposits / Money Market Fund
Guaranteed zero risks low rates way to grow the numerical value of your money. You lose out to inflation.
4) Blogs
Placing advertisements or affliate marketing is a great way for blogs or websites to generate passive income. Wonderful examples include Yaro Starak and John Chow.
5) Intellectual Property
Write a book or an ebook. Everytime it is sold, you get paid. Great source of income that recurs even though you had only spent the time to write it just once.
For me, I have applied 2), 3), and 4) in my quest for financial freedom. An example would be my dividends coming from SPH (total of $760) this december, and looking at a possible 6~7% yearly dividend rate for my average purchase price in 2009.
I have quite an amount in Fixed Deposits and MMFs. Blogs wise, I have ExamWorld and WealthBuch, with ExamWorld earning a few bucks monthly at the moment.
I would love to have 5) in my portfolio as well, but what I would really really really want to have is number 1). Guess it's time to whip myself up further to generate some new ideas to startup for 1).
Creating a passive income source helps us leverage our earnings per unit time better. It also contributes an additional stream of income for us.
Passive income is generated when you are earning an income without having to do much work for it. There are a few types of passive income.
1) Private Business
If you own a business that you have setup to run completely on its own, or perhaps a piece of real estate that generates capital or rental returns, it is a good source of passive income.
2) Investments
Shares of companies that pay annual dividends (like Singapore Press Holdings), or shares of REITS, are sources of passive income.
Capital appreciation can also be considered a form of passive income, but until you sell the stocks and lock in your profits, the money is still not yours.
3) Fixed Deposits / Money Market Fund
Guaranteed zero risks low rates way to grow the numerical value of your money. You lose out to inflation.
4) Blogs
Placing advertisements or affliate marketing is a great way for blogs or websites to generate passive income. Wonderful examples include Yaro Starak and John Chow.
5) Intellectual Property
Write a book or an ebook. Everytime it is sold, you get paid. Great source of income that recurs even though you had only spent the time to write it just once.
For me, I have applied 2), 3), and 4) in my quest for financial freedom. An example would be my dividends coming from SPH (total of $760) this december, and looking at a possible 6~7% yearly dividend rate for my average purchase price in 2009.
I have quite an amount in Fixed Deposits and MMFs. Blogs wise, I have ExamWorld and WealthBuch, with ExamWorld earning a few bucks monthly at the moment.
I would love to have 5) in my portfolio as well, but what I would really really really want to have is number 1). Guess it's time to whip myself up further to generate some new ideas to startup for 1).
Monday, December 1, 2008
The diamond dust story
Got this story from here: http://www.sgforums.com/forums/2092/topics/338804
I find this story interesting, and hence share it here.
There was a story that happened back in the late 1990s, depicts of a young man who got hired as a maintenance worker (cleaner in short) in a diamond refinery factory in Japan. His daily job scope was to make sure, the factory was clean and free of dust before and after the factory closes.
Diamond refinery operations back in those days were still somewhat medieval; there were no machines, no proper cutting tools, everything from the unloading of raw diamond rocks to the crafting of diamonds where done by hand.
Because the factory was huge, everyday the young man would sweep for hours upon hours and carry tons of plastic black bags, filled with dirt and dust to throw into the nearby dumping container. But there was one evening he noticed that one of the bags he was about to throw into the container, had a small cut underneath and shinning dust was flowing out, in small gentle amounts on the ground.
Sensing an opportunity, the young man took one of the bag of dirt, home and started sifting through the dirt , painstakingly separating dirt from diamond dust. Eventually after 68 days of doing so, he managed to come out with a bag of diamond dust, that was eventually sold to a underground dealer. This resulted in a huge inflow of cash for him that was enough to get him through his university education.
So, what can we learn from this story?
(1) Opportunities are always present. We need to open our eyes to see it and take it. Do not let opportunities slip away when they come to you.
(2) Even when opportunities are present, hard work and discipline are still required.
I find this story interesting, and hence share it here.
There was a story that happened back in the late 1990s, depicts of a young man who got hired as a maintenance worker (cleaner in short) in a diamond refinery factory in Japan. His daily job scope was to make sure, the factory was clean and free of dust before and after the factory closes.
Diamond refinery operations back in those days were still somewhat medieval; there were no machines, no proper cutting tools, everything from the unloading of raw diamond rocks to the crafting of diamonds where done by hand.
Because the factory was huge, everyday the young man would sweep for hours upon hours and carry tons of plastic black bags, filled with dirt and dust to throw into the nearby dumping container. But there was one evening he noticed that one of the bags he was about to throw into the container, had a small cut underneath and shinning dust was flowing out, in small gentle amounts on the ground.
Sensing an opportunity, the young man took one of the bag of dirt, home and started sifting through the dirt , painstakingly separating dirt from diamond dust. Eventually after 68 days of doing so, he managed to come out with a bag of diamond dust, that was eventually sold to a underground dealer. This resulted in a huge inflow of cash for him that was enough to get him through his university education.
So, what can we learn from this story?
(1) Opportunities are always present. We need to open our eyes to see it and take it. Do not let opportunities slip away when they come to you.
(2) Even when opportunities are present, hard work and discipline are still required.
Tuesday, November 25, 2008
How to be fit, lose weight, and keep it off -- Part 2
This is the part 2 of a series of my thoughts and knowledge on fat loss.
[Part 1, Part 2]
Diet
Diet plays the main role in any fitness program. The main belief is:
"A calorie is a calorie"
Which means no matter what you take, be it fats, carbohydrates or proteins, they will eventually be the same.
Well, it is both right and wrong. A calorie, by its simplest definition, is a unit of energy and is equivalent to 4.184 absolute J.
Our body metabolise fats, carbohydrates and proteins differently. The energy yield from a gram of fatty acids is approximately 9 kcal (39 kJ), compared to 4 kcal/g (17 kJ/g) for proteins and carbohydrates.
The composition of meals we eat is important:
An example of French Fries
French Fries are considered "poison" because they consists of mainly carbs and fats. Let us not consider the unhealthy trans-fat in French Fries yet.
When the carbs enter your body, insulin is released. However, a major effect of insulin on fat is it prevents you from burning it. Imagine eating french fries: the carbs enter your body -> insulin levels rise -> fats from french fries is prevented from burning and stored. Essentially, this is going to add lots of energy into your body without you realising it!
Adding protein into meal
Amino acids are the building blocks of muscles in our body. Without it, we cannot function. There are a few advantages of ensuring there are some protein in your everyday meal.
1. It helps you to recover from workouts.
2. The body uses more energy to digest protein.
3. Protein supposedly helps to slow down the rate of digestion of carbs, lowering the insulin spike after meals.
However, it is important to note that too much protein is also harmful. Urea is produced when excess protein is broken down into usable energy, giving more stress to the liver and kidneys. How much protein to take will depend on how much you have exercise, the nature, and the intensity of it.
Effects of fibre in meal
Roughage helps you in the following way:
1. Easier bowel movement.
2. Makes you feel fuller during meals.
3. Actually slows down your digestion, ensuring a more even release of energy from food
4. I have heard that it helps to reduce the amount of fats being absorbed by the body... Not so sure about it though.
The easiest way to get fibre is from vegetables, fruits and wholemeal bread.
Glycemic index
Not all carbohydrate foods are created equal, in fact they behave quite differently in our bodies. The glycemic index or GI describes this difference by ranking carbohydrates according to their effect on our blood glucose levels. Choosing low GI carbs - the ones that produce only small fluctuations in our blood glucose and insulin levels - is the secret to long-term health reducing your risk of heart disease and diabetes and is the key to sustainable weight loss.
What are the benefits of a low GI diet?
1. Low GI diets help people lose and control weight
2. Low GI diets increase the body's sensitivity to insulin
3. Low GI carbs improve diabetes control
4. Low GI carbs reduce the risk of heart disease
5. Low GI carbs reduce blood cholesterol levels
6. Low GI carbs can help you manage the symptoms of PCOS
7. Low GI carbs reduce hunger and keep you fuller for longer
8. Low GI carbs prolong physical endurance
Eating too much high GI food helps can be detrimental to the body, and this is especially so for obese or sedentary people. However, it is still worth to note that high GI carbs help re-fuel carbohydrate stores after an intensive exercise.
Fats
As we know, there are four types of fat: saturated fat, monounsaturated fat, polyunsaturated fat and trans fat. It is however unnecessary to go too deep into details.
Do we need fats in our diet?
Yes! Fats have many important roles to play in the body:
1. Fat is the main energy store in the body.
2. Fat deposits act as a cushion for vital organs and help to insulate the body.
3. Fat is a carrier for the fat-soluble vitamins A, D, E and K, and helps in their absorption by the body.
4. Fat is a source of essential fatty acids, such as omega-3, which cannot be made in the body and must be obtained through food sources.
Essential Fatty Acids
Essential fatty acids, or EFAs, are fatty acids that cannot be constructed within an organism from other components (generally all references are to humans) by any known chemical pathways; and therefore must be obtained from the diet. EFAs play a part in many metabolic processes, and there are evidences to suggest that low levels of essential fatty acids, or the wrong balance of types among the essential fatty acids, may be a factor in a number of illnesses.
They are classified into omega-3 (ω-3) and omega-6 (ω-6). Some of the food sources of ω-3 and ω-6 fatty acids are fish and shellfish, flaxseed (linseed), hemp oil, soya oil, canola (rapeseed) oil, chia seeds, pumpkin seeds, sunflower seeds, leafy vegetables, and walnuts.
Trans Fats
Trans fat raises LDL-cholesterol ("bad" cholesterol) and reduces HDL-cholesterol ("good" cholesterol) in the body. As a result, trans fat increases the risk of developing heart disease.
Our body does not require trans fat, so we should try to keep trans fat intake to a minimum.
The main sources of trans fat in our diet are pastries, cakes, cookies, biscuits, commercially deep-fried foods as well as products containing vegetable shortening and hydrogenated or partially hydrogenated oils. Do take note to consume less when indulging.
[Part 1, Part 2]
Diet
Diet plays the main role in any fitness program. The main belief is:
"A calorie is a calorie"
Which means no matter what you take, be it fats, carbohydrates or proteins, they will eventually be the same.
Well, it is both right and wrong. A calorie, by its simplest definition, is a unit of energy and is equivalent to 4.184 absolute J.
Our body metabolise fats, carbohydrates and proteins differently. The energy yield from a gram of fatty acids is approximately 9 kcal (39 kJ), compared to 4 kcal/g (17 kJ/g) for proteins and carbohydrates.
The composition of meals we eat is important:
An example of French Fries
French Fries are considered "poison" because they consists of mainly carbs and fats. Let us not consider the unhealthy trans-fat in French Fries yet.
When the carbs enter your body, insulin is released. However, a major effect of insulin on fat is it prevents you from burning it. Imagine eating french fries: the carbs enter your body -> insulin levels rise -> fats from french fries is prevented from burning and stored. Essentially, this is going to add lots of energy into your body without you realising it!
Adding protein into meal
Amino acids are the building blocks of muscles in our body. Without it, we cannot function. There are a few advantages of ensuring there are some protein in your everyday meal.
1. It helps you to recover from workouts.
2. The body uses more energy to digest protein.
3. Protein supposedly helps to slow down the rate of digestion of carbs, lowering the insulin spike after meals.
However, it is important to note that too much protein is also harmful. Urea is produced when excess protein is broken down into usable energy, giving more stress to the liver and kidneys. How much protein to take will depend on how much you have exercise, the nature, and the intensity of it.
Effects of fibre in meal
Roughage helps you in the following way:
1. Easier bowel movement.
2. Makes you feel fuller during meals.
3. Actually slows down your digestion, ensuring a more even release of energy from food
4. I have heard that it helps to reduce the amount of fats being absorbed by the body... Not so sure about it though.
The easiest way to get fibre is from vegetables, fruits and wholemeal bread.
Glycemic index
Not all carbohydrate foods are created equal, in fact they behave quite differently in our bodies. The glycemic index or GI describes this difference by ranking carbohydrates according to their effect on our blood glucose levels. Choosing low GI carbs - the ones that produce only small fluctuations in our blood glucose and insulin levels - is the secret to long-term health reducing your risk of heart disease and diabetes and is the key to sustainable weight loss.
What are the benefits of a low GI diet?
1. Low GI diets help people lose and control weight
2. Low GI diets increase the body's sensitivity to insulin
3. Low GI carbs improve diabetes control
4. Low GI carbs reduce the risk of heart disease
5. Low GI carbs reduce blood cholesterol levels
6. Low GI carbs can help you manage the symptoms of PCOS
7. Low GI carbs reduce hunger and keep you fuller for longer
8. Low GI carbs prolong physical endurance
Eating too much high GI food helps can be detrimental to the body, and this is especially so for obese or sedentary people. However, it is still worth to note that high GI carbs help re-fuel carbohydrate stores after an intensive exercise.
Fats
As we know, there are four types of fat: saturated fat, monounsaturated fat, polyunsaturated fat and trans fat. It is however unnecessary to go too deep into details.
Do we need fats in our diet?
Yes! Fats have many important roles to play in the body:
1. Fat is the main energy store in the body.
2. Fat deposits act as a cushion for vital organs and help to insulate the body.
3. Fat is a carrier for the fat-soluble vitamins A, D, E and K, and helps in their absorption by the body.
4. Fat is a source of essential fatty acids, such as omega-3, which cannot be made in the body and must be obtained through food sources.
Essential Fatty Acids
Essential fatty acids, or EFAs, are fatty acids that cannot be constructed within an organism from other components (generally all references are to humans) by any known chemical pathways; and therefore must be obtained from the diet. EFAs play a part in many metabolic processes, and there are evidences to suggest that low levels of essential fatty acids, or the wrong balance of types among the essential fatty acids, may be a factor in a number of illnesses.
They are classified into omega-3 (ω-3) and omega-6 (ω-6). Some of the food sources of ω-3 and ω-6 fatty acids are fish and shellfish, flaxseed (linseed), hemp oil, soya oil, canola (rapeseed) oil, chia seeds, pumpkin seeds, sunflower seeds, leafy vegetables, and walnuts.
Trans Fats
Trans fat raises LDL-cholesterol ("bad" cholesterol) and reduces HDL-cholesterol ("good" cholesterol) in the body. As a result, trans fat increases the risk of developing heart disease.
Our body does not require trans fat, so we should try to keep trans fat intake to a minimum.
The main sources of trans fat in our diet are pastries, cakes, cookies, biscuits, commercially deep-fried foods as well as products containing vegetable shortening and hydrogenated or partially hydrogenated oils. Do take note to consume less when indulging.
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