Chapter One, Part Two: A Walk to Wealth
This is a serialized version of an internet book entitled:
“The Brink’s Truck Burst Open On Wall Street! A Holistic Approach to Finding The Easy Money In Common Stocks”
This is Serialization 4. To find Serialization 3, please go here, Link, while Serialization 5 is posted here, Link.
This book will be serialized over a several month period. It will interest people who want to know whether the price of a stock is fair, or priced too high. It will aid you in outperforming the general stock market, by helping you understand what the value is of the company that underlies its stock, and by then relating that to its stock price. However, while many of these types of books are difficult to understand, this one is written in terms that most lay people should be able to understand, rather than using obscure language and difficult to understand terminology.
Insofar as the people go, this is a work of fiction. All names in this publication are fictitious and any resemblance to any person living or dead is coincidental. Copyright 1998 and 2004 by Jay Walker. All rights reserved.
Note that this book is available in its entirety via a pdf file. A comprehensive Excel spreadsheet, beta version, is also available, which performs many of the tedious, but necessary, calculations required to analyze a company and its stock price. This spreadsheet is designed to accompany the book.
The cost is $8 for the book, and $12 for the spreadsheet (USD). Please email me at remarkablesuccess@hotmail.com to order yours.
Chapter One - Part Two
(Continued from Serialization Three)
A Walk to Wealth
“So did you get lucky too, and ‘hit a big one’, Jamie?”
“Actually, Kim, I waited over a year before I invested any money into the stock market. Before then, I didn’t know very much, so I spent most of that time reading, learning new skills and putting them into practice. Initially, I read the financial newspapers religiously, but after a while I realized that they weren’t giving me the information needed to actually outperform the stock market. They were simply providing me with tidbits of information and useful leads on various companies.
“So then I went to see a financial advisor, who told me to put it all in a certain mutual fund. When I pointed out that the particular fund he was suggesting I invest in had actually underperformed the market over the past few years, he said that “no one can outperform the stock market over the long-term”.
“Kim, this was when I really began to get serious about educating myself. His comment rankled somehow – the implication that skill exists everywhere else in life, but as far as the stock market goes, you might as well throw up your hands and leave everything to dumb luck! It just didn’t make any sense to me. But then, I couldn’t really argue with him, since I had no way to refute what he was saying.
“So, I started going down to the public library and getting out books on stocks, and the stock market, and on how to value companies. I sent away for annual reports of various companies, read them, and practiced the new skills I learned. Most of all, Kim, what I did was to pay attention to what wealthy investors say about investing, what are the true ‘keys’ to being successful are.
“This was because I felt certain that most of these leading investors didn’t get wealthy by dumb luck. And the funny thing was, Kim, that a lot of them were consistently saying to concentrate on the same things, in order to be successful stock market investors. So I followed their advice, and ultimately ended up as a millionaire.”
“Can you teach me what you learned, Jamie?”
“So you’re really serious about wanting to learn how to invest in common stocks then, Kim? While it’s not complicated, it does require some work and effort. Still, I firmly believe that most people with a grade ten or higher education could successfully use the same method I did to get rich.”
“Yes, Jamie, I’d really like to learn how to find good common stocks. Will it take years and years?”
“No, Kim. As a matter of fact, I can actually teach you a lot of the keys to investing in common stocks during our walks over the next month or so. Okay?”
“That sounds great, Jamie!”
“Anyway, Kim, I’ve got to go for today. Tomorrow, we’ll start right at the basics I learned, in order to see how to produce market outperformance, at reduced risk. I call it ‘A Holistic Approach to Finding the Easy Money in Common Stocks’.”
“Before you go, Jamie, can you tell me why you call it that?”
“Well, I call it a ‘Holistic’ approach because it is based upon a ‘whole’ approach. The more components you keep together of what I’ll be teaching you, the more likely you are to be successful. By that, I mean successful in outperforming the ‘indices’. Secondly, I am targeting the ‘Easy Money’ because, while there are a lot of ways to make money in the stock market, some are complicated and full of risk, the ‘Easy Money’ lies in concentrating on the best companies, and accurately analyzing their underlying fundamental situations. But we’ll get more into that later, okay, Kim?”
“Okay, Jamie. But I have one last question before you go today. What do you mean by ‘indices’?”
“In this case, Kim, these ‘indices’ are meant to measure the advance or decline in the stock market over a period of time. This time period could range from mere minutes, to hours, days, weeks, months, years and so on. Now, the usual way to measure this change is to pick a so-called ‘basket’ of stocks and to track their price changes, in the aggregate, over various time periods.
“You’ve probably heard of the most popularly-quoted index, the ‘Dow Jones Industrial Average’ which is also referred to as the ‘Dow Jones’ and sometimes simply ‘The Dow’. That index consists of 30 stocks of the largest and most important companies in the U.S. So when someone tells you that ‘The Dow’ is up to 9,000, from 8,000 at the start of the year, what they are telling you is that the aggregate prices are up for those stocks. In fact, you can quickly calculate how much they have risen, on average, by dividing the 9,000 figure by the 8,000 figure.
“Some other often quoted indices include the Standard and Poors 500, commonly called the S&P 500. This index consists of the stocks of the 500 largest companies in America. Another popular one is the ‘NASDAQ composite’, which considers the price changes of the stocks of some of the largest technology companies. These indices provide a benchmark against which individual investors can measure their success at ‘beating the index’, or, in other words, at getting a higher rate of return than the index. We can also compare ‘mutual funds’ to these indices to see how well they have done over various time frames. Okay, Kim?”
“Okay, Jamie.”
“Tomorrow, Kim, we’re going to talk about ‘The Miracle of Time’.”
“What’s that?”
“Time, Kim, time. I’ll explain it all tomorrow, along with one other important thing. Anyway, I’ve got to go now – I’m helping a friend do a bit of research. See you tomorrow, Kim?”
“Okay, Jamie – see you tomorrow. And thanks for the interesting walk!”
“Right-o, Kim. See you tomorrow.”
----------------- Continued in Serialization Five -------------------------------