How to make my first Million

How to make my first million?

For a mid-class regular person, it may seem impossible but it’s not!

It is difficult because it requires self discipline and sacrifice, but if you don’t get of the track, it is reachable.

Please be aware that there are no short cut for wealth and it takes time to build it. Otherwise, you might just go to a casino and play!

Rule n.º 1

Decide and Start – You have to commit yourself with a goal and then start acting accordingly with your target. The earlier the better!

Rule n.º 2

SAVE – You have to control your expenses and save. Set a saving target, like 30 to 40% of your income. Let’s imagine that the reader has a monthly average wage of 4800 USD and saves 35% – 1680 USD.

Rule n.º 3

Invest – Make a well diversified portfolio that suits your risk profile and invest.

Quoting Albert Einstein

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

In my opinion, the best way to achieve the “eighth wonder of the world” is using a long term buy and hold strategy, making an efficient portfolio by maximizing return at the minimum risk.

Let’s imagine that you make a portfolio that has an anual rate of return of 10%.

I suggest the reader to check the Intelligent Investor Portfolio.

Rule n.º 4

Follow your plan and reinvest your portfolio returns.

Rule n.º 5

Control your emotions, be self disciplined and be aware of news traps.

Results:

Considering the previous hypotheses, at the end of  20 years you will have 1.154.663,99 USD.

You can download for free a simple excel model so you can adjust it to your goals as you wish.

Personal finance – first million

Keep calm and invest.

António Ramos

Financial Analyst

(CEFA holder)

Share This:

Make a stock analysis and evaluation

Make an easy-to-follow analysis to a publicly traded stock and estimate it’s worth using a dividend and earnings model.

For more information click here.

Share This:

Update – 17th November – Intelligent Investor Portfolio Performance

Portfolio’s perfomance update – 17th November 2017

The Intelligent Investor Portfolio – American Version (USD) – presents an impressive 12,00% return (taxes and broker commissions not included) since inception (10th March 2017), standard deviation of 16,91% and a sharpe ratio of 0,8822.

For more information, check Intelligent Investor Portfolio Report (USD).

The Intelligent Investor Portfolio – European Version (EUR) – presents an impressive 28,39% return (taxes and broker commissions not included) since inception (29th February 2016), standard deviation of 18,49% and a sharpe ratio of 0,7767.

For more information, check Intelligent Investor Portfolio Report (EUR)

 

Keep calm and invest.

Share if you like

António Ramos

Financial Analyst

(CEFA holder)

 

Share This:

Intelligent Investor Portfolio model – USA version

The Intelligent Investor portfolio is a custom-made portfolio, accounting for my risk tolerance and my financial goals.

The overall strategy is simple, I search for the market’s return, using Exchange traded funds (ETF’s) that replicate market index (like the S&P 500). It is my believe that, in average, an in-depth research will is only useful if you are investing billions, otherwise you will spend much more on research than you receive extra from the market. Since an Index is already diversified by sectors & industries, I also look for ETF’s from other regions to diversify my portfolio more.

Please note that for Intelligent Investor portfolio domestic currency is USD.

Portfolio inception date is March 10th 2017 and I use a passive management strategy (Buy and hold), applying the modern portfolio theory (mean-variance analysis) to achieve the proportion-weighted combination of the constituent asset’s.

Portfolio is rebalanced once a year, with dividends reinvested.

Since inception until November 17th 2017, the Intelligent Investor Portfolio presents a 12,00% return (excludes taxes and commissions and includes dividends).

The Intelligent Investor Portfolio report has an overview chapter, description, composition and risk analysis.

For more information, check Intelligent Investor Portfolio Report.

Keep calm and invest.

Share if you like

António Ramos

Financial Analyst

(CEFA holder)

Share This:

What to expect when interest rates changes

Being an international investor with a well diversified portfolio, you should be aware of interest rate variations.  

Before you analyze the effects in your portfolio, it is important to understand who changes the reference interest rates and why. 

The interest rate, as one of the instruments of the monetary policy, may be amended by the central banks. I am talking about the FED and ECB and other bank regulators. 

An increase of the interest rate suggests a contractionary policy, and a reduction of the interest rate suggests an expansionary policy. 

But the initial question remains to answer, what happens to my portfolio? 

To answer that question we will have to analyze the question from various perspectives: 

-What’s the new return required by the investor to invest in a particular stock (risk premium)? 

One of the ways used to calculate the required return for a stock is the CAPM method.

A change in the reference interest rate will produce a change in the investor’s required return. 

When we change the value of the expected income, a rational investor will evaluate if the market presents other investments, more attractive and profitable. It can also motivate a change in the portfolio’s proportion between stocks and bonds. 

What’s the effect on bond’s investments? 

For an investor who already holds a bond investment, and knowing that the price equals the sum of all cash flows discounted at a given rate (yield to maturity), a change in the reference rate will also change the discount rate and affect the bond’s price. Therefore, a rise in interest rates will cause the bond price to go down and vice versa. 

However, if the investor holds the bond until maturity, the bond’s price will be 100% (called a “pull to par” effect). 

-What is the currency effect when reference interest rate changes? 

Having foreign investment, a change in the reference interest rate will affect the value of the quotation, as for example, EUR/USD par, and have positive or negative effects on your investments. 

The income of a foreign financial asset can be calculated using the following formula (1 + asset Income) * (1 + currency Income) -1. 

According to the international Fisher effect (and keeping everything else constant) if interest rates changes 1%, exchange rates will vary the same amount but in reverse. In other words, if I am an European investor and have an USD investment, when the American interest rate rises, the dollar will appreciate against the euro, having a positive effect in my portfolio. 

You can now understand that a change in the interest rate will have an effect on your portfolio and it requires monitoring.

I also present you with my own portfolio model that you can access here.

The Intelligent Investor portfolio is a custom-made portfolio, accounting for my risk tolerance and my financial goals.

I use the Modern Portfolio Theory and Investment Analysis (mean-variance analysis) to achieve the proportion-weighted combination of the constituent asset’s, but with the condition to go long only (no short sales).

To learn more, check The Intelligent Investor Portfolio report.

 

The Financial Analyst 

António Ramos, CEFA

Share This:

Make A Business Valuation

You can use business valuation whenever you need to know what a business is worth.

Valuation is a way to measure your business value. And this measure depends on the business’ ability to produce economic benefits for its owners.

It also depends on the risk of owning the business.

You may need valuation to set an asking price for a business sale, construct an offer to buy a business, get a bank loan, write a buy-sell agreement or to settle a disagreement with a partner.

It is one thing to determine the value of a business that you expect to continue operating or not.

The business worth picture will look quite different if the business is to be closed and its assets sold.

Therefore, it is very important to know the exact scope and situation of the valuation to be prepared.

If you need a business valuation, please don’t hesitate to contact us.

 

António Ramos

Financial Analyst

(CEFA holder)

Share This:

Want to be a blogger? Domain + WordPress – Get your special offer now

Have you ever thought about sharing your ideas on-line and at the same time monetizing your blog? Having a store online? Selling ebooks and other products

I have negotiated a special offer with BLUEHOST (international domain + wordpress).

Get your promotional rate on the Basic Plan!

Get it now!

Share This:

Want to invest but don’t understand about the stock market

 

My blog is dedicated to investors, providing some insights about investing in the stock market.

I also present you with my own portfolio model that you can access here.

The Intelligent Investor portfolio is a custom-made portfolio, accounting for my risk tolerance and my financial goals.

Since I started my portfolio, The Intellingent Investor Portfolio, I never had a negative performance.

I use the Modern Portfolio Theory and Investment Analysis (mean-variance analysis) to achieve the proportion-weighted combination of the constituent asset’s, but with the condition to go long only (no short sales).

Currently and since inception date (February 29th 2016) my portfolio’s performance is 26,65%, with a standard deviation of 13,26% and a Sharpe ratio of 1,383.

Here are some of my portfolio’s component’s performance:

To learn more, check The Intelligent Investor Portfolio report.

Keep calm and invest.

Share if you like

António Ramos

Financial Analyst

(CEFA holder)

 

Share This:

Intelligent Investor Portfolio model – EUR

In my previous post, I mention I would make available a portfolio model, for information purpose (not investment advice).

I will assume that you have read my “10 rules before investing” post and that you are ready to invest long term.

I called this model the “Intelligent Investor Portfolio – European version”, and I refer as European because the domestic currency is EUR.

Later in time, I will make available an American Version (USD as domestic currency).

Currency is relevant because you must consider it in your portfolio asset, estimate it’s return and the overall standard deviation with foreign currency before you apply the modern portfolio theory (mean-variance analysis) to achieve the proportion-weighted combination of the constituent asset’s.

Inception date is February 29th 2016 and I use a passive management strategy (Buy and hold). Portfolio is rebalanced once a year, with dividends reinvested.

I use ACWI ETF as my benchmark proxy, which is an ETF that seeks to track the investment results of an index composed of large and mid-capitalization developed and emerging market equities.

Since inception, Intelligent Investor Portfolio presents a 28,39% return (excludes taxes and commissions and includes dividends) and a standard deviation of 18,49%.

The Intelligent Investor Portfolio report has an overview chapter, description, composition & performance and risk analysis.

For more information, check Intelligent Investor Portfolio Report.

Keep calm and invest.

Share if you like

António Ramos

Financial Analyst

(CEFA holder)

Share This:

How to invest in the stock market – screen for stocks

In my last post, I wrote about the investment basics and what to do before investing in the stock market.

Now you must select the stocks you intend to invest, to make a well diversified portfolio, minimizing the risk and maximizing your return.

No matter if your strategy is trading or investing long term, you will always need to select your stocks to invest in (or trade).

And there is no way for an inestor to avoid a market research, you must study the companies publicly traded well and look at the financial ratios. They can help you invest wisely and making much more money!

When you are investing in the stock market, you should look at companies financial strength ratios, profitability ratios and valuation ratios.

Some strength ratios:

  • Current Ratio: creditors often compare a firm’s current assets and current liabilities to assess whether the firm has sufficient working capital to meet its short-term needs

 Current Ratio = Current Assets / Current Liabilities

  • Debt-Equity Ratio: used to assess a firm’s leverage

Debt-Equity Ratio = Total Debt / Total Equity

  • Interest Coverage Ratio: assess a firm’s ability to meet its interest obligations by comparing its earnings with its interest expenses

Interest Coverage Ratio = EBIT / Interest Expense

Some profitability ratios:

  • Operating Margin: reveals how much a company earns before interest and taxes from each dollar of sales

Operating Margin = Operating Income / Sales

  • Net Profit Margin: shows the fraction of each dollar in revenues that is available to equity holders after the firm pays interest and taxes

Net Profit Margin = Net Income / Sales

  • Return on Equity: provides a measure of the return that the firm has earned on its past investments

Return on Equity = Net Income / Book Value of Equity

Valuation Ratios (use it to compare with competition and industry)

  • Price-Earnings Ratio: measure that is used to assess whether a stock is over- or undervalued based

P/E Ratio = Market Capitalization / Net Income = Share Price / Earnings per Share

I mention above just a few ratios, but there are much more available.

I recommend you learn more about it. A good book that explains in depth all these financial ratios and much more, and for sure will help you know more about how to invest in the stock market is Corporate Finance (3rd Edition) (Pearson Series in Finance), a must read for an intelligent investor.

If you wish to compare your financial ratios with competitors and the industry, you have available a lot of free information like Damodaran, yahoo finance, google finance and so on.

You can also check finviz to scan for stocks adding your filters.

For education and ilustration purposes, soon I will make available my model of an efficient portfolio using the modern portfolio theory as written in Modern Portfolio Theory and Investment Analysis, available in kindle version Modern Portfolio Theory and Investment Analysis, 9th Edition.

Keep calm and invest.

Share if you like

António Ramos

Financial Analyst

(CEFA holder)

Share This: