A Brief Biography of Benjamin Graham

Benjamin Graham BiographyBenjamin Graham is one of the most influential investors in history. He is called the “dean of Wall Street”, the “father of Value Investing”, and was a very important  mentor to Warren Buffett.

He is also the author of two books, Security Analysis and The Intelligent Investor, both of which are considered must-reads among the investing community. Security Analysis had such an impact on me that it was featured as one of Three Books That Shaped My Investment Philosophy.

I’m a big fan of studying the experts to hopefully learn a thing or two. For investing, one of the experts is definitely Ben Graham. So let’s dig in and figure out what made this genius tick!

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Implement Valuation Metrics While Investing

Implement Valuation Metrics While InvestingAnyone that has read my recent post The Importance of Having Your Own Investment Strategy will know that I self-identify as part value investor, part dividend growth investor. 

This post is going to concentrate on the value investor side of my approach. I’ll go into more detail later, but the fundamental concept is that value investors seek to buy assets (stocks or otherwise) at a price less than their perception of fair value.

The main tool of value investors are valuation metrics, numbers we use to judge the fairness of a company’s market value. The better the valuation metrics appear, the more attractive the investment is.

This post serves as an introduction on how to implement valuation metrics while investing.

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Why I Wish I Invested In Apple

screen-shot-2016-09-10-at-5-08-45-pmWith the release of the iPhone 7 earlier this week, there has been lots of buzz about Apple from both investors and customers. I’ve been entertained by all the commentary and it’s been really interesting to read different investment standpoints, both bullish and bearish.

Apple is one of those quintessential companies that has all the things that an investor should want – strong cash flows, a fantastic balance sheet, consumer loyalty, and a wide economic moat. That has driven their incredible stock price performance, making them the most valuable company in the US with a market cap of ~$550 billion.

With all this in mind, I wanted to write a post covering the reasons (financial and otherwise) why I wish I invested in Apple.

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Creating a Truly Diversified Portfolio Using Correlations: Part 2

Create a Truly Diversified Portfolio Using CorrelationsIn an earlier post, I presented a walkthrough of how to use correlations to effectively diversify a portfolio of stocks, using the Big 5 Canadian Banks as an example. Then in a second post, I outlined how to select stocks from different industries to create a real-world portfolio with minimal volatility and satisfactory return. In that second post, I presented two hypothetical portfolios – one similar to my own, and another made from the ten largest companies in Canada by market cap. Both had low volatility and great returns, which leads to a fantastic Sharpe Ratio.

This post is the third in my series on correlations statistics. Here I will present two more stock portfolios, both made from US stocks. As such, these portfolios will be benchmarked against the S&P 500 Index rather than the S&P/TSX Composite Index (which is a measure of the Canadian stock market).

The first portfolio is stock-only, as before; the second portfolio will be made from multiple asset classes by using ETFs as proxys. So without further ado, let’s dive in!

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Create a Truly Diversified Portfolio Using Correlations

Using Correlation Statistics in Investing In an earlier post titled Using Correlations to Diversify Your Portfolio, I presented a walkthrough on how to use correlations to minimize the volatility of your portfolio. I used the Big 5 Canadian Banks as an example, but since the banks are subject to the same external forces that effect their businesses, their stock prices tend to move in tandem. So I was unable to reduce volatility in any meaningful way.

In this post, I wanted to follow up and show you how you can use correlation statistics to create a portfolio with truly low volatility. I’m going to present a few portfolios with low volatility, and show how I was able to create a truly diversified portfolio using correlations.

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Using Correlations to Diversify Your Portfolio

Using Correlations to Diversify Your PortfolioIn investing, one of the most important principles is that of diversification. By investing in a wide variety of stocks, you reduce overall risk. That’s why maintain a moderately diversified portfolio is one of my Ten Guiding Principles of Personal Finance.

Ideally, the best kind of portfolio diversification comes from investing in stocks whose prices do not move in tandem. To identify stocks that move independently, we use correlation –  a statistical concept used to measure the relationship between two variables. It ranges from -1 to 1, with 1 meaning they move in complete tandem and -1 meaning they move in completely opposite directions. 

This post will serve as a crash course in using correlations to diversify your portfolio. For illustrative purposes, the stocks I will be using are the Big 5 Canadian Banks. Let’s see if we can meaningfully use correlation statistics in our investing!

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Lessons Learned After 50 Blog Posts

Lessons Learned After 50 Blog PostsIn April, I started this blog with one goal – to educate people about the world of personal finance. And 50 posts in, it’s been one of the best decisions that I’ve ever made.

That being said, this website has been a tremendous time sink. My posts are typically around 1500 words, with some (for example, my interview with the CEO of SeamlessMD) being above 5000. 50 posts at 1500 words makes 75,000 words, which is a staggering number. Don’t get me wrong – the blog has been really fulfilling and I’ve enjoyed every minute, but it’s surprising how much content I’ve actually created.

I say this to give you a sense of the time commitment I have had with this website. Along the road to 50 blog posts, I’ve learned so much that extends beyond the world of finance and blogging. So, in the true spirit of the Financial Canadian website, it’s time for me to share lessons learned after 50 blog posts.

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Will Apple Ever Bring Their Cash Hoard Home?

apple-256263_1920Apple is currently the largest company in the world by market cap, and is known to have the granddaddy of all balance sheets. For instance, Google Finance tells me that Apple had $62 billion of cash and short term investments, and $170 billion of long term investments as of June 25, 2016. This totals $232 billion…enough to buy all the shares of TD and RBC combined. Wow!

On the surface, this seems great – “cash is king” after all. But there is an issue. Most of Apple’s cash hoard is held overseas, and in order to transfer it back into the United States, the funds would be subject to the US corporate tax rate of 35%. This process of bringing foreign income back into the US is called “repatriation,” and this post will explore Apple’s stance on repatriation and potential events that might cause them to repatriate these funds.

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The Future Prospects of Tesla

car-1209912_1920Tesla is an exciting company that will change the world if they are successful in their mission. Climate change, fossil fuels, and renewable energy are hot topics that we simply can’t afford to ignore anymore.

They also have world class management. Elon Musk is a true business magnate, deeply involved with three world-changing companies: Tesla, SpaceX, and SolarCity.

However, the company has yet to realize true financial success. They are cash-flow-negative, so a discounted cash flow model makes their stock worthless. This begs the question – where does their value come from?

This post seeks to answer that question. Let’s start exploring the future prospects of Tesla.

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