Investment fundamentals

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Once a company is declared as publicly operating company, we can buy or sell stocks to take part in the ownership of the company based on the number of shares you hold in the total number.

The price of a share usually depends on the demand for that share. Less supply, more demand, high price. More supply, less demand, low price.

Earnings per share: This gives you the information about the profits on each share.

P/E-Price/Earnings per share ratio can be considered as right quantity to value a share. Lesser the ratio, better.

Market capital or the total value of a company = price per share * a total number of shares.

Usually, total shares remain constant, but companies can increase shares and dilute your ownership. This results in a reduction of stock price.

Sometimes this reduction in stock price can be followed by an increase in profits because of the huge initiative coming from the cash raised by new stocks.

Market cap represents the public perception of the outstanding value of a company.

Even though you analyze thoroughly and decide to buy stocks of a particular company, you need to have a seller to buy them.

Do you know what does the point stock price moves to in next instance represent? How is it determined?

The price of a stock at any given time is merely the point of equilibrium at which the number of buyers willing to buy at that price is equal to the number of sellers willing to sell at that price.

Simply put, it is just a snapshot of the last price at which a stock price was traded at.

Factors that could affect a stock price:

1. Source of earnings of a company.

2. Public perception of the value of a company which creates demand, this could happen by quarterly and annual reports on profits of a company.

3. Announcements and news related to that company which will invoke certain emotions and reactions about buying or selling at what price.
The ideal situation for profits is identifying how many people want to buy these stocks in future but not now. You want to identify stocks which have poor demand now but will likely have lots of demand in the future.

So if you are a newbie entering the market and convey your willingness to buy a stock, it will add value to that stock price and you help all other guys holding those stocks potentially earn more if they choose to sell it.

I believe earnings in investing happens when one person having a stock predicts that a stock price goes down in future and is willing to sell it and another person who predicts the opposite and willing to buy it. Obviously, only one thing happens in a particular time frame and the guy who predicted right will be happy as long as he keeps predicting to sell it at right time.

What are the investments against inflation?

The value of money decreases as time goes by. The amount of money it required to buy a car a few years back could be far less than what it would cost now. Are there any investments that secure the value of your money against inflation?

Invest in something that is scalable in terms of both money and time.

Identify and invest in automated systems because automated systems generate passive income and more reliable.

Real estate business is mostly determined by decisions of government and corporate monopolies. If the government decides to construct a particular infrastructure in a particular place, then the land around it gains value.

Factors to be considered while analyzing stocks:

  1. Company p/e to sector p/e ratio.
  2. Who is running the company? How much of his wealth is related to his own company?
  3. Charts of previous dividends and other financial histories of the company.
  4. Whether it is a monopoly or not? Monopolies are good for long term.
  5. Income sources of the company and their stability.

While gathering data, check whether stocks have been split or not.


Are the company resources under optimal utility?

Dhandho investing :

  1. Identify low-risk high return investments.

Calculating the intrinsic value of a business:

  1. Extrapolate the free cash flow of future years(how long you want to hold the business) of the business based on the history of it.
  2. Discount the cash flow for the inflation of future years and add the discounted cash flow of all of them.
  3. Predict and add the future sale price of the business.
  4. This gives us an approximate estimate of the intrinsic value of the business.

Some other things to look for during investing:

Moat: How hard is it for a newcomer to start and compete with this business?

Best investments can be two types:

Value investments: If the Market cap of the company is way lower than the intrinsic value/ net worth of the company, if the book value is more than the Current Market price, then you are getting it for cheap and probably a good investment. But before betting on these kinds of stocks, check for durability of the business and possibility of liquidating your investment in future.

Growth investments: Though the Market has rightly valued the stock, the company is steadily growing at a reasonably good growth rate in terms of ROCE/ revenue/ PAT etc. then you have a steady investment.


Philosophical mumblings on life

Life is filled with lots of domains to figure out and pursue all of them. Think of life as a tree whose branches go down to different domains and then subdomains etc. If you are a computer science student, you must be knowing the breadth first and depth first search algorithms to explore through the tree. It is this choice of your exploration that determines the course of your life.

  1. People who opt to explore in breadth-first strategy, look out for all the options, judge them by the standards of their interests, aptitude and most importantly benefits it can provide to us. They are pretty much confused at this stage itself because it is not always binary that you like it or not, rather it is a gray scale somewhere in between. They will be jumping from one thing to another quite often, takes a lot of time go deep and settle on the next level of any domain. Life is too short for this kind of people to succeed. However, they tend to be very knowledgeable and opinionated on very diverse courses of life.
  2. If you look at depth first kind, who are more focused, they go deeper and deeper through mere perseverance for success or unmatchable motivation or whatever it is that drives them. This is the success group or most famously called outliers. They will be very highly skilled in a very narrow domain which will thrill the whole humanity and attracts everyone to notice them and is very marketable. But this is restricted to his narrow domain and remains pretty much dumb in many other aspects or domains of life. This wouldn’t be a problem because of the financial success or celebrity status they enjoy, they can hire or find other people to manage those things and they love to remain in the aura of the tall kingdom they have built for themselves. This narrow domain is mostly decided by the culture of his environment or the aptitude and practices of his family etc.


Irrespective of love, people always try to marry or date the most worthy person available in their vicinity. In this view, marriage can be considered as a self-imposed disciplinary action against falling prey for instant gratification.

What you don’t use you lose. If you stop practising something, you will eventually lose it. Skill is like a bicycle, Easy to balance at the fast pace. However, slow, patient and persistent riders are essential to unravel deeply hidden secrets of science.

Confidence, happiness and worth attract women to a man. During my first love, she approached me looking at above qualities of mine. As relationship went for few months, I became dependent on her love. Then, she found a guy who is relatively more confident and happy than me, she moved on when I am mentally weak, vulnerable and craving for a sense of belongingness. As someone said, women look out for the mental state of a person through different omens. The practice of killing sadness at yourself and spreading happy moments around will bring you more friends and happiness into your life.

Which tool to use when is one of the most important skills you should learn. In academy and other institutions, often you will be taught about how to use a tool or technique to counter a problem. The questions of which tool or technique we need to pick at what problem setting is something you have to learn yourself through experience and practice most of the times.

Ability to come up with a right measure for quantifying things is a very valuable skill in science and technology.

We are biologically evolved to feel and culturally evolved to think.

Computer science is great because it has developed analytic methods(complexity analysis) to evaluate any algorithmic ideas in their domain. Most other domains like Entrepreneurship, Moral philosophy etc. don’t have these kinds of rigorous analytic methods for their ideas. This makes most of their ideas debatable for longer periods of time if not forever.

Passivity leads to boredom.

Focused education is the best kind of investment in the early stage of your life.

If you are worried about something, just step back and ask yourself whether that something is really necessary for the long term. This might resolve lots of your worries.

Spend for comfort not luxury.

In my early days, with lots of youthful arrogance, when there are two problems to tackle, I used to always choose the hard one. Naturally, that decision of mine made me fail many times and killed my confidence to darkest depths. When I started to tackle smaller and easier problems in my vicinity, they is some progress I could measure from time to time which gave me confidence and also tackling these small problems looked like stepping stones to harder ones. So, start small to make it big rather to start big and fail forever.

Limits and hierarchical nature of understanding

Do you know what is anamoranistion?

I guess you don’t know, ok let me explain.

anamoranistion is a danjiar formed by joining jukione and serkolit back to back.

Do you have any idea what it is now?

No, until and unless I come down to define anamoranistion in terms of words you know, you can’t understand it.

From this, we can probably deduce empirically that part of learning a new concept is looking at it from the level of already available faculties in the mind.

Many times relational structures are used to explain new concept analogically, for example, c is to d, like what a is to b. Even here, you need to know the relation between a and b to understand the relation between c and d.

This is why learning a subject is not passive but an active endeavor where you need to investigate the new concept until you get to define it using the concepts already available in your mind. You shouldn’t expect the teacher to guess the highest stupidity in the classroom and teach from that perspective.

Sorry for the words at the beginning, they are just made up to convey my point.:)

The simplest and costly idea of prediction

Think of mind as a system that adds a new dimension to its space everytime it encounters a new variable in life.

Every time a variable changes from one value to another value, it tries to justify the change by the changes in other existing variables in its space and/or takes note of any plausible new variable that might be responsible for the change.

This way it also finds the relevant variables in different situations and contexts through experience and eventually learns to look for patterns in these relevant variables for predicting the target variable.