Tag Archives: Stocks

Google’s “Owner’s Manual for Shareholders.”

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“Our goal is to develop services that significantly improve the lives of as many people as possible. In pursuing this goal, we may do things that we believe have a positive impact on the world, even if the near term financial returns are not obvious.” ~ Google founders  Sergey Brin and Larry Page

The founders, Sergey Brin, 31, and Larry Page, 32, launched Google in September 1998 in a friend’s garage in Menlo Park, Calif., naming the company after the mathematical term “googol,” which stands for a 1 followed by 100 zeros. They met in 1995 when they were doctoral students in computer science at Stanford. Both were enthralled with information retrieval and artificial intelligence. The two collaborated in 1996 on a search engine called BackRub, Google’s precursor, which gained notoriety on campus for its ability to analyze the “back links” pointing to a given Web site.

In 2004, Google generated 95 percent of its revenue from advertising. Advertisers buy keywords that launch tiny text ads alongside search results each time someone types those words into Google’s search box and clicks “Google Search.” Advertisers pay the amount they bid for the terms, but only if someone clicks their ads.

In 2004, Google founders  Sergey Brin and Larry Page issued a letter to investors called an “Owner’s Manual for Shareholders.” The seven-page letter was an organizational manifesto crafted by the co-founders to map out Google’s credo as a public company.The letter outlines the company’s goals, warning investors that as a public company, Google will not follow the usual path.

The letter outlines everything from the triumvirate leadership between the co-founders and CEO Eric Schmidt to its promise not to be “evil” by sacrificing its ideals for short-term financial gains. It promises more spending on employee perks such as free meals, a separate voting structure for executives, and avoidance of making financial predictions for Wall Street. Instead, the company will focus on long-term priorities that do not have an immediate effect on earnings.

“If opportunities arise that might cause us to sacrifice short-term results but are in the best long-term interest of our shareholders, we will take those opportunities,” the letter read. “We will have the fortitude to do this. We would request that our shareholders take the long-term view.”

The pair have created a corporate environment that fosters individual creative pursuits while pampering employees with free meals and regular beer bashes.

Here are several Google’s promises and processes as outlined in the owner’s manual:

Managing Wall Street: “Many companies are under pressure to keep their earnings in line with analysts’ forecasts. Therefore, they often accept smaller, but predictable, earnings rather than larger and more unpredictable returns. Sergey and I feel this is harmful, and we intend to steer in the opposite direction.”

Risk vs. reward: “As the ratio of reward to risk increases, we will accept projects further outside our normal areas, especially when the initial investment is small. We encourage our employees, in addition to their regular projects, to spend 20 percent of their time working on what they think will most benefit Google. Most risky projects fizzle, often teaching us something. Others succeed and become attractive businesses.”

Executive decision-making: “To facilitate timely decisions, Eric, Sergey and I meet daily to update each other on the business and to focus our collaborative thinking on the most important and immediate issues. Decisions are often made by one of us, with the others being briefed later. This works because we have tremendous trust and respect for each other and we generally think alike.”

Dual class voting: “While this structure is unusual for technology companies, it is common in the media business and has had a profound importance there. The New York Times Company, the Washington Post Company and Dow Jones, the publisher of The Wall Street Journal, all have similar dual class ownership structures. Media observers frequently point out that dual class ownership has allowed these companies to concentrate on their core, long-term interest in serious news coverage, despite fluctuations in quarterly results.

Googlers: “We provide many unusual benefits for our employees, including meals free of charge, doctors and washing machines. We are careful to consider the long-term advantages to the company of these benefits. Expect us to add benefits rather than pare them down over time.”

Kumbaya: “We aspire to make Google an institution that makes the world a better place. And now, we are in the process of establishing the Google Foundation. We intend to contribute significant resources to the foundation, including employee time and approximately 1 percent of Google’s equity and profits in some form.”

“As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same,” the letter states.

“In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations. Sometimes, this pressure has caused companies to manipulate financial results in order to ‘make their quarter.’ In Warren Buffett’s words, ‘We won’t smooth quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.'”

References:

  1. https://abc.xyz/investor/founders-letters/ipo-letter/
  2. https://www.cnet.com/tech/tech-industry/google-files-for-unusual-2-7-billion-ipo/
  3. https://www.cnet.com/tech/tech-industry/co-founders-release-google-owners-manual/
  4. https://blog.google/

Microsoft’s Stock Market Value Higher Than Apple’s

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Microsoft’s stock market value closed higher than Apple’s for the first time since 2021, making it the world’s most valuable company based on market capitalization.

While both technology companies were part of the so-called Magnificent 7’s powerful rally in 2023, their fortunes have diverged year. Microsoft has risen 3.3%, while Apple has dropped 3.4%.

Microsoft has incorporated OpenAI’s technology across its suite of productivity software, a move that helped spark a rebound in its cloud-computing business.

Apple, meanwhile, has been grappling with tepid demand, including for the iPhone, its cash cow. Demand in China, a major market, has slumped as the country’s economy makes a slow recovery from the COVID-19 pandemic and a resurgent Huawei erodes its market share.

Both tech stocks look relatively expensive in terms of price to their expected earnings, a common method of valuing publicly listed companies.

Apple is trading at a forward PE of 28, well above its average of 19 over the past 10 years. Microsoft is trading around 32 times forward earnings, above its 10-year average of 24.

Source: Noel Randewich,  Microsoft edges out Apple as world’s most valuable company, Reuters, January 12, 2024. https://www.yahoo.com/tech/microsoft-edges-apple-worlds-most-232740340.html

Stocks Beat Bonds as Inflation Hedge

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“Stocks are great long-term inflation hedges if you are still worried about inflationary risks.” ~ Jeremy Siegel, Wharton School Economist

“If you are worried about the inflationary impacts, stocks are far better hedges than bonds — as companies can pass along their own input cost spikes to consumers,”Jeremy Siegel, Wharton School Economist, wrote in his weekly commentary published Monday for WisdomTree, where he is senior economist.

“If you bought the inflation-hedged bonds at 2% yields, it would take 36 years to double your purchasing power,” wrote Siegel, an emeritus professor at The Wharton School. “The S&P 500, however, is priced around 18 times next year’s earnings, giving a 5.5% earnings yield. This takes just 13 years to double purchasing power.”

“Stocks at the present time—with earnings of just under $250 for the S&P 500,” are preferred states Siegel. “This giving just under an 18x earnings per share valued market. I think that is a favorable multiple for the market. I believe stocks are great long-term inflation hedges if you are still worried about inflationary risks. I think stocks can handle another quarter point rise by the Fed if they deem it necessary.”

References:

  1. https://www.thinkadvisor.com/2023/09/28/jeremy-siegel-stocks-beating-bonds-as-inflation-hedge/
  2. https://www.wisdomtree.eu/-/media/us-media-files/documents/resource-library/weekly-commentary/siegel-weekly-commentary.pdf

Assessing Small Capital Companies

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Historically, small-cap stocks have been shown to outperform the rest of the market because of greater growth opportunities. A massive company is limited by its existing size. ~ U.S. News and World Report

Small cap company pundits recommend that investors review several key financial metrics and ratios to properly evaluate small cap companies. Following these metrics and ratios, you will be well on your way to finding a few hidden gems in the small cap market.

Each small cap company should be evaluated on fundamental factors to identify which ones can exhibit durable long-term growth.

  • Growth measures include revenue growth rate;
  • Profitability measures include operating profit and earnings per-share; and
  • Capital efficiency measures include return on invested capital.

In short, investors should seek to invest in the top-tier of eligible small cap companies .

Here are seven key metrics that should be reviewed before buying any stock. These indicators should help you get most of the way in understanding a company, its operations, and its underlying business.

1. Institutional activity. Pension funds, mutual funds, hedge funds, insurance companies and corporations that buy and sell huge blocks of shares can create tremendous volatility in prices. To lessen this risk in your investments, try to buy shares in companies where institutions own less than 40% of their shares.

2. Analyst coverage . Another indication of future share volatility is the number of Wall Street analysts covering a stock. Analysts – like the big institutions – have a herd mentality. When one sells, so do the rest, resulting in great numbers of shares changing hands, and usually leading to price declines. It’s best to avoid companies with more than 10, or fewer than 2 analysts following them. (You need some analyst interest or you may be waiting a long time for price appreciation, even in the strongest and most undervalued company) .

3. Price-earnings ratio (P/E) . The price of one share of a company’s stock divided by four quarters of its earnings per share, the P/E ratio is of utmost importance in determining if a company’s shares are over- or under-valued. For the best perspective, go to Reuters , then select Ratios and compare the current P/E of the company to its average P/E for the last 3-5 years, to its estimated future P/E and to the average P/E of its industry or sector. One note: If a company’s P/E is more than 35, it might be too pricy. You may want to stick with companies that are trading at lower P/Es, particularly if you are fairly new to investing.

4. Cash flow. One of the most important parts of a financial report is its Statement of Cash Flows, which is a summary of how the company made and spent its money. The Total Cash Flow From Operating Activities represents the cash the company took in from its primary business operations.

It’s important that this number be positive, or at least trending positive over the course of a year. After all, if the business isn’t making money from its primary product – not from investing in real estate or the stock market – then you probably want to pass it by.

5. Debt/equity. This ratio is how much debt per dollar of ownership the business has incurred. Compare the firm’s historic debt/equity ratios, so you can find out if its debt level over the past few years has been rising too rapidly. Debt isn’t bad, as long as it is used as a springboard to grow sales and earnings. Next, contrast the company’s ratio with its competitors and its industry so you can further determine if your company’s debt position is reasonable.

6. Growing sales and income. One rule of thumb is to buy shares in companies whose sales and net income are growing at double-digit rates. I cannot emphasize this enough, as, appreciation in stock prices is generally precipitated by growth in earnings (which usually follows expansion of sales) . It’s certainly possible to buy stock in a company that has no earnings growth (a new business, or a tech company in the late 90’s, for example) and still make money on the shares – short-term – but it’s not a formula for serious, successful long-term investing.

7. Insider activity. Investors will also want to review the buying and selling activities of a company’s insiders – its top officers and directors. A sudden rush to sell large quantities of the firm’s shares may be a good indicator that the business is falling on rough times. Likewise, a large increase in purchases may mean good news is on the way.

No single financial metric or ratio will determine the validity or potential of your investment. It is of utmost importance that you take a complete look at a company’s financial strength and its future growth prospects, by conducting a thorough analysis – over time – usually a 3-5 year track-record.

Many small caps stay small because they have structural problems, management lacks the capability to grow the business, or their niche simply isn’t large enough to support a bigger enterprise.

In contrast, many small cap companies can graduate to greater things, earning shareholders tremendous returns along the way.

References:

  1. https://www.nasdaq.com/articles/seven-critical-factors-evaluating-small-cap-stocks-2011-06-28
  2. https://money.usnews.com/investing/slideshows/9-of-the-best-small-cap-stocks-to-buy-for-2023

Small Cap Investing

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A focus on finding small cap companies with great fundamentals and big growth prospects.

A small-cap stock is a stock of a publicly-traded company whose market capitalization ranges from $300 million to approximately $2 billion, explains Corporate Finance Institute. The word “cap” in this term refers to a company’s market capitalization.

Savvy investors cannot afford to overlook small-cap growth companies. Although, there are several pros and cons of investing in small-cap stocks that must be considered.

Small-cap companies, in general, tend not to get the same kind of publicity as their large-cap siblings. They aren’t going to lead a segment on CNBC or the home page of the Wall Street Journal on a daily basis.

With smaller market capitalizations, small-cap companies tend to fly under the radar.

The Rise of Small-Cap Stocks

Reasons that people may invest in small-cap companies are capital appreciation — they think the stock price will go up and dividends — where the company pays you to hold it.

But some of these are solid companies and excellent small-cap stocks to buy.

Small-cap equities are more sensitive to the economy (inflation, rising interest rates and dollar strength), so a robust economic rebound would favor them.

Small-cap stocks are popular among investors because of their potential for providing better returns in the long term relative to their large-cap peers.

The advantages of investing in small-cap stocks are:

1. Growth potential – Relative to bigger companies, small-cap companies show significantly higher growth potential. For small-cap companies, it is easier to grow significantly their operational and financial base than is the case for most large-cap stocks.

Picking the right small-cap stock can turn into a profitable investment.

2. High probability of inefficiencies in the market – Information about the small-cap stocks is harder to find compared to large and mid-cap companies. Analysts typically give little attention to these companies; thus, there is a high probability of improper pricing of small-cap stocks. This situation creates vast opportunities for investors to leverage the inefficiencies in market pricing and earn a great return on their investments.

3. Financial institutions do not push prices up – Financial institutions, including mutual and hedge funds, should comply with certain regulations that do not allow them to invest heavily in small-cap stocks. For this reason, it is unlikely that the stock price will be artificially pushed up because of large investments from major financial institutions.

Nevertheless, there are some disadvantages of investing in small-cap stocks:

1. High risk – Investing in small-cap stocks involves higher risk. First, small-cap companies may have an unreliable and faulty business model which can result in company’s management not being able to adjust the business model, and can result in poor operational and financial results. And, small-cap companies usually have less access to new capital and new sources of financing. Due to this reason, it is more likely that the company will not be able to bridge gaps in its cash flows or expand the business because of the inability to undertake the necessary investments.

2. Low liquidity – Small-cap stocks are less liquid than their large counterparts. Low liquidity results in the potential unavailability of the stock at a good price to purchase or it may be difficult to sell the stocks at a favorable price. Low liquidity also adds to the overall risk of the stock.

3. Time-consuming – Investing in small-cap stocks can be a time-consuming activity. Due to the under-coverage of small-cap stocks by financial media, institutions and analysts, the amount of available research on small-cap companies is usually limited.

Moreover, small cap technology and all small cap stocks are discounted to a great degree by investors in a rising interest rate environment, purely due to the fact that they have the bulk of potential earnings and cash flow far out into the future. The higher long-term rates are, the less those future earnings and cash flow are worth. This goes for virtually all unprofitable growth tech stocks.

Essentially, small-cap stocks may provide investors with an opportunity to earn a substantial return on their investments. However, this type of investing should be approached with caution as small-cap stocks are often risky and volatile.

References:

  1. https://investorplace.com/2022/11/7-excellent-small-cap-stocks-to-buy-before-this-year-ends/
  2. https://corporatefinanceinstitute.com/resources/wealth-management/small-cap-stock/
  3. https://news.yahoo.com/10-best-small-cap-stocks-140302020.html

Dividend Growth

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“One common trap that dividend investors can fall into is chasing stocks with high yields when they should be buying dividend growth stocks that can promise years of steady income raises.” ~ Dan Burrows, Senior Investing Writer, Kiplinger.com

Over the last few years when non-dividend paying growth stocks were delivering significant double-digit gains in the span of months, it was easy to ignore the benefits of equity income, writes Stephen Dover, CFA, Chief Market Strategist, Franklin Templeton Institute. Today, given rising interest rates, slowing growth and heightened volatility, the role of dividends is changing amid a more challenging environment for multiple expansion.

Over the long-term, dividends have proven to be a significant driver of total return. Over the last 31 years, spanning January 1990 through December 2021, the receipt and reinvestment of dividends accounted for about 50% of the cumulative total return of the S&P 500 Index, according to Franklin Templeton. In addition, dividend growers, proxied by the S&P 500 Quality High Dividend Index, have outperformed their value and growth counterparts over the more than two decades since 1995.

Dividend payouts can act as a useful quality barometer. A solid track record of growing dividends consistently and sustainably over an extended period of time is typically seen as a signal of healthy company fundamentals, astute and efficient capital allocation and a firm commitment to shareholder value.

Dividend payouts are often cut during periods of grave economic stress, particularly in the most vulnerable companies.

  • Dividends offer evidence of financial strength. Historically companies that initiated or increased their dividend have significantly outperformed those that cut or don’t pay a dividend.
  • Often, stocks with the highest dividend yields come from companies whose market prices have fallen, indicating stress.

In the U.S., 242 companies cut or suspended dividends, according to Capital Group. This number of dividend cuts and suspension nearly match the total for the previous 11 years combined.

After historic cuts, some U.S. companies are restoring dividends

Source: Wolfe Research, LLC. Copyright © Wolfe Research, LLC 2021. All rights reserved. Only companies with market cap of at least $250 million included. Reinstated dividends statistic is through 5/31/21.

But the picture is improving. With the rollout of COVID-19 vaccines and the reopening of economies, many U.S. companies have begun to resume payments.

Many investors, when they search for dividend paying stocks, tend to start with companies that pay the highest dividend yields. These companies can be sound investments, but the high yield can also be a warning sign. “Companies that have very high dividends to start may not be able to sustain them,” Joyce Gordon, Capital Group equity portfolio manager, notes. “The high yield may indicate a company is a melting ice cube, and their business is in decline and they’re not reinvesting.”

Gordon says that dividend growing stocks represent a compelling value for investors. “I look for companies that are yielding around 2.5% to 3.0%, and that are growing their dividends and earnings around 10% or 12% a year. Today I am finding a number of companies that meet that criteria across a wide range of sectors and global markets.”

The best dividend stocks – companies that raise their payouts like clockwork decade after decade – can produce superior total returns (price plus dividends) over the long run, even if they sport apparently ho-hum yields to begin with.

Dividend growers are strong companies that are likely to be even stronger in five or 10 years. “I look for a company that can demonstrate the capacity and commitment to raise its dividends over time,” Gordon says. “I look for dividend growth that matches the underlying earnings growth of the company.”

Dividend growers historically have tended to generate greater returns than other dividend strategies, while also keeping up relatively well with the broader market. People assume that growth companies far outpaced dividend paying stocks over the past decade, and that’s true when you look at the highest yielding stocks. But dividend growers did nearly as well as the overall market.

By providing a growing stream of income, dividend growth can be a sign of company executive management’s more rigorous capital allocation process. “Because they are committed to setting aside some proportion of their earnings for investors, they tend to have better discipline and may be less likely to make some ill-advised acquisition,” Gordon says.

Because it is reflective of growing earnings, dividend growth can also offer a measure of resilience against interest rate hikes, Gordon adds.

Reinvested dividends. The power of reinvested dividends

One company that has consistently grown its dividends is McDonald’s. To get a sense of how regularly reinvesting dividend payments can compound over time, consider a hypothetical $100,000 investment in the company for the 20 years from December 31, 2000, through December 31, 2020, with all dividends reinvested.

Sources: Capital Group, FactSet. Growth rate calculations for value of shares from reinvested dividends and dividends paid use the first year’s dividends payment ($676) as a starting value.

Reinvested dividends tend to provide a downside cushion for total returns during periods of modest capital gains. The 2000s—the “lost decade” for stocks—is a crucial case-in-point. While the S&P 500 delivered annualized total returns of -0.95% in the 10 years from January 2000 through December 2009, the figure would have been worse had dividends been removed from the calculation. Annualized price return for the index in the 2000s averaged -2.72% versus dividends, which provided 1.77% annualized return over the 10-year period.

Using the power of the compounding of re-invested dividends is a good way to build real wealth, simply. Albert Einstein has called compound interest the “Eighth Wonder of the World,” since the power of compounding can be a wonder to behold. The magic of compounding, as Ben Franklin famously said, “Money makes money. And the money that money makes, makes money.”

“Compound interest is the Eighth Wonder of the World. He who understands it, earns it. He who doesn’t pays it” ~ Albert Einstein

Compound interest or “interest on interest” is effectively what compound interest is for investors. “Interest on Interest” or “dividends on dividends” is why the compounding effect on dividend reinvestment creates wealth. The longer you reinvest the dividends, the more dividends you receive because you own more shares. And the cycle continues as long as the investor stay invested in the market and reinvests his/her dividends.

S&P 500 Dividend Aristocrats.

The objective is to find companies that are growing their dividends faster than the market average over time. The Dividend Aristocrats are companies in the S&P 500 Index that have raised their payouts for at least 25 consecutive years. This list of the S&P 500’s best dividend stocks is a mix of household names and more obscure firms, but they all play key roles in the American economy. And although they’re scattered across pretty much every sector of the market, they do all share one thing in common: a commitment to reliable and long-term dividend growth.

References:

  1. https://www.capitalgroup.com/advisor/insights/articles/dividend-growth-special-sauce-long-term-investing.html
  2. https://www.franklintempleton.com/articles/strategist-views/the-case-for-dividends
  3. https://www.kiplinger.com/investing/stocks/dividend-stocks/604131/best-dividend-stocks-you-can-count-on-in-2022
  4. https://www.wealthplicity.com/investing-strategy/stocks-and-equities/the-power-of-compounding-dividend/

All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested.

Intro to Stock Options

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“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” ~ Warren Buffett

Options are financial contracts whose values are tied to another underlying asset.

Options trading can be an appealing way to build wealth or manage risk, especially if you’re looking beyond just investing in stocks, bonds, and other assets in your portfolio.

But options trading can be a complex and challenging endeavor. The key to success in options trading is understanding the basics, including knowing what options are and the risks and rewards involved.

Options Basics

Options are contracts giving the purchaser the right to buy or sell a security, like a company stock or exchange-traded fund (ETF), at a fixed price within a specific period of time.

Options holders can buy or sell by a certain date at a set price, while sellers have to deliver the underlying asset. Investors can use options if they think an asset’s price will go up or down or to offset risk elsewhere in their portfolio.

Options are financial derivatives because they’re tied to an underlying asset. Other types of derivatives include futures, swaps, and forwards. Options that exist for futures contracts, such as S&P 500 or oil futures, are also popular among traders and investors.

A stock option typically represents 100 shares of the underlying stock. Stock options are common examples and are tied to shares of a single company. Meanwhile, ETF options give the right to buy or sell shares of an exchange-traded fund.

An option is a contract between the holder and the writer. The holder (buyer of the contract) pays the writer (seller of the contract) a price – the premium – for the right to buy or sell the underlying asset.

Option holders can buy or sell the underlying security by a specific date (called expiration date) at a set price (called the strike price). If the option holder exercises the contract on or before the expiration date, the option writers must deliver the underlying asset.

Many investors get interested in options trading because it can be a way to generate income, speculate on the price movements of securities, as well as a way to hedge against losses. However, with these possibilities, they are downsides to options trading too.

Before diving into the world of options contracts and options trading, it’s essential to understand the benefits and risks of this investment strategy.

Some of the main advantages of options trading are:

  • Options give you the chance to make money whether the market is going up, down, or sideways.
  • Options may be an inexpensive way to participate in the market without tying up as many funds as stock or bond trading requires.
  • Options provide investors with leverage, which can help magnify returns.

Some of the main drawbacks of options are:

  • Options trading is a complex and risky strategy and one that requires a great deal of knowledge and experience to succeed.
  • Options involve a great deal of leverage, which can amplify losses if the trade goes against the trader.
  • Options contracts are not always as liquid as other securities, making them harder to buy and sell.

Options are a complex, risky market and may not be suitable for everyone.

“Successful trading depends on the 3M`s – Mind, Method and Money. Beginners focus on analysis, but professionals operate in a three dimensional space. They are aware of trading psychology their own feelings and the mass psychology of the markets. Each trader needs to have a method for choosing specific stocks, options or futures as well as firm rules for pulling the trigger – deciding when to buy and sell. Money refers to how you manage your trading capital.” ~ Alexander Elder

References:

  1. https://www.sofi.com/options-trading-101/
  2. https://www.sofi.com/learn/content/how-to-trade-options/

Healthy Aging

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Attitude, habit and daily life choices can make a difference in your health and longevity.

Dr. Michael Roizen, M.D., founder of the Reboot Your Age program, writes in the new book The Great Age Reboot: Cracking the Longevity Code for a Younger Tomorow, 40 percent of premature deaths (premature meaning before you turn 75) are related to lifestyle choices.

According to Dr. Roizen, not enough people realize that their attitude, habits and daily life choices can make a difference in their long-term health and longevity. “The largest error is thinking that your choices do not make a difference, but making healthy choices early and consistently allows you to enjoy good health and a longer life,” says Roizen.

By the time you turn 60 years old, “75 percent of your health outcomes are determined by your habits (healthy or unhealthy) and choices”, submits Dr. Roizen.

Focus on 6 + 2

Roizen’s barometer for health success and healthy aging is “6 Normals + 2”. Here are the “Normals” and “Plus 2”, writes Jeff Haden, in Inc. Magazine.

  1. Regain and maintain normal blood pressure. The target is 110/75.
  2. Regain and maintain a healthy level of LDL cholesterol. The target is 100 mg per deciliter.
  3. Regain and maintain a healthy fasting blood glucose level. The target is 100 mg/dL or below.
  4. Maintain a healthy weight for your height. Here’s where it gets tricky. Most people use body mass index (BMI) to determine a “healthy” weight. But muscle, or lack of, matters. A 6′ tall NFL cornerback who weighs 215 pounds has a BMI of 29.2. That puts him at the high end of the “overweight” category, even though by any objective measure he’s incredibly fit. Your body fat percentage is probably a better indication of whether you’re maintaining a healthy weight.
  5. Practice ongoing stress management. Roizen’s target is to “sleep well and feel at ease in your own skin.” But don’t just think of sleep in terms of longevity; a 2018 study found that lack of sleep correlates with tension, anxiety, and lower overall mood. Sleep is good for you later, and good for you now. Aim to get 7 to 9 hours a night. For the best rest, do it on schedule — turning in and waking up at about the same times every day.
  6. Have no primary, secondary or tertiary smoke from tobacco in your body. If you aren’t familiar, tertiary smoke involves pollutants that settle indoors when tobacco is smoked. Think couches, curtains, bedspreads, etc. Your body repairs itself quickly once you quit smoking. As soon as 20 minutes after your last cigarette, your heart rate and blood pressure drop. In other words, don’t smoke. And, if feasible, try to avoid being around people who smoke.

Now for the “Plus 2.”

  1. Get a full body check up. You are what you measure, and you can’t know your numbers — and if necessary work to improve them — until you get your numbers.
  2. Keep your vaccinations up to date. Roizen recommends that everyone get an annual flu shot since it can decrease flu and lung problems as well as reduce the risk of heart attack and stroke. He also recommends people aged 50-plus get the shingles vaccine, and those 65 and over get the pneumonia vaccine.

The key is to consistently make healthy choices that help prevent chronic disease and set you up for a long life.

  • Don’t smoke, and if you do smoke, quit today.
  • Don’t drink alcohol beverages to excess, but drink plenty of water.
  • Get a good night’s sleep and practice mindfulness.
  • Eat a healthy, low refined carbohydrates, no processed food, high fiber diet.
  • Exercise 150 minutes a week.

References:

  1. https://www.inc.com/jeff-haden/a-noted-physician-says-better-health-greater-longevity-comes-down-to-rule-of-6-plus-2.html
  2. https://www.webmd.com/balance/ss/slideshow-binge-watch-risks

Stop focusing on how stressed you are and remember how blessed you are.

Peter Lynch’s five rules to investing

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“If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favorable publicity, the one that every investor hears about in the car pool or on the commuter train—and succumbing to the social pressure, often buys.” Peter Lynch

Legendary American investor Peter Lynch shared five rules everyone can follow when investing in the stock market.

Within his 13-year tenure, Lynch drove the Fidelity Magellan Fund to a 2,800% gain – averaging a 29.2% annual return. It is the best 20-year return of any mutual fund in history. He is considered the greatest money manager of all time, and he beat the market for so long through buying the right stocks.

No one can promise you Lynch’s record, but you can learn a lot from him, and you don’t need a billion-dollar portfolio to follow his rules.

https://youtu.be/6oYc3RbLO3Q

Lynch’s five rules for any investor in the stock market are listed below.

1. Know what you own

The most important rule for Lynch is that investors should know and understand the company they own.

“I’m amazed at how many people that own stocks can’t tell you, in a minute or less, why they own that particular stock,” said Lynch.

Investors need to understand the company’s operations and what they offer well enough to explain it to a 10-year-old in two minutes or less. If you can’t, you will never make money.

Lynch believes that If the company is too complicated to understand and how it adds value, then don’t buy it. “I made 10 to 15 times my money in Dunkin Donuts because I could understand it,” he said.

2. Don’t invest purely on other’s opinions

People do research in all aspects of their lives, but for some reason, they fail to do the same when deciding on what stock to buy.

People research the best car to buy, look at reviews and compare specs when buying electronics, and get travel guides when travelling to new places – But they don’t do the same due diligence when buying a stock.

“So many investors get a tip on a stock travelling on the bus, and they’ll put half of their life savings in it before sunset, and they wonder why they lose money in the stock market,” Lynch said.

He added that investors should never just buy a stock because someone says it is a great buy. Do your research.

3. Focus on the company behind the stock

There is a method to the stock market, and the company behind the stock will determine where that stock goes.

“Stocks aren’t lottery tickets, there’s no luck involved. There’s a company behind every stock; if a company does well, the stock will do well – It’s not complicated,” Lynch said.

He advises that investors look at companies that have good growth prospects and is trading at a reasonable price using financial data such as:

• Balance Sheet – No story is complete without a balance sheet check. The balance sheet will tell you about the company’s financial structure, how much debt and cash it has, and how much equity its shareholders have. A company with a lot of cash is great, as it can buy more stock, make acquisitions or pay off its debt.

  • Year-by-year earnings growth
  • Price-to-earnings ratio (P/E) – relative to historical and industry averages.
  • Debt-equity ratio
  • Dividends and payout ratios
  • Price-to-free cash flow ratio
  • Return on invested capital

4. Don’t try to predict the market

Trying to time the market is a losing battle. One thing to keep in mind is that you aren’t going to invest at the bottom. Buy stocks because you want to own the business long-term, even if the share price decreases slightly after you buy.

Instead of trying to time the bottom and throwing all your money in at once, a better strategy is gradually building your stock positions over time.

This approach spreads out your investments and allows you to buy into the market at different times at varying prices that ideally balance each other out versus investing one lump sum all at once.

This way, if you’re wrong and the stock continues to fall, you’ll be able to take advantage of the new lower prices without missing out.

“Trying to time or predict the stock market is a total waste of time because no one can do it,” Lynch said.

Corollary: Buy with a Margin of Safety: No matter how careful an investor is in valuing a company, she can never eliminate the risk of being wrong. Margin of Safety is a tool for minimizing the odds of error in an investor’s favor. Margin of Safety means never overpaying for a stock, however attractive the investment opportunity may seem. It means purchasing a company at a market price 30% or more below its intrinsic value.

5. Market crashes are great opportunities

Knowing the stock market’s history is a must if you want to be successful.

What you learn from history is that the market goes down, and it goes down a lot. In 93 years, the market has had 50 declines; once every two years, the market declines by 10%. of those 50 declines, 15 have declined by 25% or more – otherwise known as a bear market – roughly every six years.

“All you need to know is that the market is going to go down sometimes, and it’s good when it happens,” Lynch said.

“For example, if you like a stock at $14 and it drops to $6 per share, that’s great. If you understand a company, look at its balance sheet, and it’s doing well, and you’re hoping to get to $22 a share with it, $14 to $22 is terrific, but $6 to $22 is exceptional,” he added.

Declines in the stock market will always happen, and you can take advantage of them if you understand the company and know what you own.

References:

  1. https://dailyinvestor.com/finance/1921/peter-lynchs-five-rules-to-investing/