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* Compounding-Money made from an investment that will then be reinvested into the same or another investment to generate its own earnings.

* Bonds-Money that is loaned to a company or the government at a specified interest rate.

For those who have never given their financial future a second thought, the term "Financial Planning" could be a scary one. Investments can be a smart way to invest money for your future, but it can be confusing for those who have no experience in the financial business. already you consult a financial planner it is wise to do over familiar with some of the terminology that you are likely to hear from him or her.

* Mutual Fund-An investment made with money that is balanced by individuals with an investment goal in mind. The mutual fund is handled primarily buy a person known as the fund manager. Mutual funds are easy and cost efficient, since you are not responsible for making the decision as to where to invest the money.

* effects locating Fund-A mutual fund that incorporates several types of investments such as stocks, bonds, real estate, and foreign stocks. These are typically for the small investors who want to invest in a variety of funds in order to maintain a constant return.

* Risk-Return Trade-Off-This is the parcel of money that you can stand to lose versus the batch of money you are willing to invest. Investments that are low-risk often have low payoffs, while investments that are high risk usually have higher payoffs. When investing money you must determine the pack of money you can lose previous to determining how much money you will invest and where you will invest it.

* Compounding-Money made from an investment that will then be reinvested into the same or something else again investment to generate its own earnings.

* Bonds-Money that is loaned to a train or the government at a specified interest rate. The caller will usually give some kind of document that states the aggregate loaned and the stipulated upon interest rate and the total sense that will be repaid at a specific time or "maturity date".

* Stocks-Pieces of a shop that are for sale. One would buy stocks from a faction at a given price in hopes that the corps would gain a significant hint of money and that they would be able to sell the stocks at a higher price.

* Money Market Funds-Money invested in debt by a mutual fund. The goal is to obtain money from interest to the debt. The worth of the Money Market summation is that they offer very low investments of less than $1.00.

Someone who reads the blog wrote me this email:

In your recent article you wrote:

"Intrinsic value is a guess. Buying is the belief. You don’t need to
use a lot of math to prove exactly what something is worth. You just
need to present a convincing case for buying it."

Interesting observation. I've seen a few YouTube vids with Bill Ackman
in them. The interviewers have sometimes pressed him for what he
thinks a stock is worth. He never gives a numerical answer. I get the
distinct impression that he never has a definite intrinsic value X
when he buys a stock; only that a stock is "clearly undervalued" at a
current price. As Ben Graham would say: you don't have to know a man's
weight to know that he is fat.

All the best,
Mark

I think there are really 4 questions you answer before buying any stock:

1. Is it safe?
2. Is it a great business?
3. Am I getting a great price?
4. Can I hold this stock for as long as it takes?

The ideal stock would get 4 “yes” answers.

The 5 Japanese net-nets I own do not get 4 “yes” answers. But I made sure they passed questions #1, #3, and #4.

A lot of differences in style come down to how you answer these 4 questions. Someone emailed me saying he thought Mohnish Pabrai was more of a Ben Graham investor than a Warren Buffett investor.

Not really. Graham was obsessed with question #1. He wanted to know a stock was safe. Pabrai cares less about #1 and more about #3. Pabrai’s overwhelming focus is on getting a great price.

Graham wanted a great price. But safety always came first.

There are stocks Pabrai has owned that Graham wouldn’t. Nothing wrong with that. Different people invest differently.

We all rank these 4 questions a little differently. We obsess about one. And our standards are a little too loose on one of the others.

But I think most stock decisions come down to these four questions.

If you can answer those questions – you don’t need an exact estimate of intrinsic value.

Talk to Geoff About The 4 Questions to Ask Before Buying a Stock

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