Warren Buffett & Coca Cola

For Coca Cola to drop from $40 to $19 after it has been listed in 1919 and you might think it's some kind of disaster: You might think sugar price increase and can price increses. You can always find reasons why that is not the ideal moment to buy. And years later you see World War II, Great Depression,.... but in the end if you bought one share for $40 bucks and reinvested your dividends you would have gotten 5 million dollars. I don't get worry any given of that if I've got a wonderful business.

7 Habits of Highly Frugal People

The book 7 Habits of Highly Effective People has sold over 15 million copies since it was first published in 1989, teaching people all over the world how to live happier, more successful, and more satisfying lives. One of the prevailing themes of the book is that to change your life, you need to change your attitude.

No one else is responsible for what happens to you but you, so you can either complain about the things you don’t like in your life or you can set about changing them. Not surprisingly, this directly relates to the state of your finances. This post is a financial application of the concepts presented in the book.

If you’re tired of living paycheck to paycheck, having your phone regularly cut off, or making excuses to skip dinners with your friends, then you can use these seven habits to take control of your money situation and live a happier and more frugal lifestyle.

Habit One: Be Proactive

The first habit of highly effective people is that they take responsibility for their own lives; if they fail, they have no one to blame but themselves. Regardless of how you were raised or how you were treated at school, you can choose your behavior now. Being proactive means understanding that YOU are in control of your day-to-day interactions, and thereby, the direction your life takes. This is in stark comparison to a reactive person, who is often affected by their environment and will find external sources to blame for their behavior. For example, if the weather is good, they’re in a good mood, but if the weather is bad, it affects them and they blame the weather for their bad mood.

What most people forget is that though you can’t control the stimulus, you can control your response. One of your most important choices is your words; the language you use is an effective indication of how you see yourself. If you use proactive language, such as “I can” or “I will,” you’re starting with a more positive attitude than someone who uses language like “I can’t” or “I have to” or “If only.”

How to be proactive for effective frugality:

Take the first step. You cannot take control of your finances until you make the commitment to do so; the more you ignore the situation, the worse it will get. Instead, take a long hard look at your finances — your budget, debts, income, and expenses, and try to understand where your money is going and where you can budget better. 

Tell people. Using proactive language to vocalize your hope of being more financially responsible not only helps you crystallize your goal, but it can also help you avoid the peer pressure that makes budgeting and frugality hard. If you explain to your friends and family that you’re trying to live a more frugal lifestyle, they’ll be less likely to pressure you into one more round of drinks or another dinner out.

Listen. Listen to yourself and to the reasons you give each time you make a purchase outside of your budget or decide not to put spare money into your savings account. Taking the time to stop and listen to the reasons you give yourself for spending more than you earn will give you the opportunity to hear just how shallow many of those reasons are. This can stop you from making purchases that impede your goal of effective frugality.

Habit Two: Begin with the End in Mind

Those who are effective in achieving their goals are able to envisage their desired end result in spite of the obstacles. Highly effective people adhere to this habit based on the principle that all things are created twice; there is first the mental creation, then the physical creation. The physical creation follows the mental creation the same way that a building follows its blueprints.

If you don’t visualize what you want, then you’re at risk of other people and external circumstances influencing your life – because you’re not influencing it yourself. Instead, begin every day and every task with a clear vision of where you want to go and how you’re going to get there. Make that vision a reality with your proactive skills from habit one.

How to visualize effective frugality:

Define your goal. There are many ways to live a frugal lifestyle, and you need to decide how frugal you want to be. Do you want to be debt free, build a savings account of a certain value, or live on one income in a two-income household?

Decide how you’re going to get there. This will again draw on your budget, but you need to be aware of the obstacles that are standing in your way. These may be literal obstacles, such as credit card debts, or they may be obstacles you’ve identified in your behavior. An example of a behavioral obstacle would be spending $10 every day on junk food on your way home from work, because you’re starving. Instead, you could be packing an inexpensive granola bar to keep you going until dinner. Or, do you find that when you go shopping with your sister, she always helps you justify a frivolous purchase, when you could leave your credit card at home?

Habit Three: Put First Things First

Knowing WHY you’re doing something is an effective motivator in helping you transform a mental creation into an actual physical creation of your goal. Ask yourself what the things are that you find most valuable and worthy to you. When you put these things first, you’ll be organizing and managing your time around your personal priorities to make them a reality.

For many people, it’s hard to say no, but this is exactly the skill you have to learn to keep your goals as your first priority. While we are constantly told we can have it all, in reality, having it all is really about prioritizing what is most important to YOU to have, and then focusing on that.

How to put effective frugality first:

Recognize the effects of your finances. You may not dedicate as much time as you should to managing your finances and practicing frugal principles because you feel there’s always something more important to be doing — whether it’s work, taking the kids to soccer practice, or getting ready for dinner with the girls. If your finances aren’t under control, however, and you’re regularly spending more than you earn, then they’re having a negative impact on every other aspect of your life, from your work to your family and friends. You need to recognize that being frugal is your first priority.

Just say no. It’s easy to spend more than your budgeted amount each month when you’re worried about missing out on a dinner with friends, feel as though you have to cater a birthday party for your son and 50 of his closest friends, or don’t want to wear the same suit to a work conference two years in a row. If you recognize that you don’t have to take on everything and that it’s okay to say no, then you’ll find you’re more in control of your spending and your budget.

Habit Four: Think Win-Win

Most of us are taught to base our self-worth on comparisons to others and competition against our peers. We think we can only succeed if someone else has failed. We’re also taught that there’s only so much pie to go around, so if you get a big piece, then someone else is missing out. When you think like this, you’re going to feel like nothing is ever fair. As a result, many of us retaliate and take the pie before someone else can take it from us.

Thinking in a win-win mindset allows you to see mutual benefits from all of your interactions. By doing this, you’ll see that the pie tastes even better when it’s shared. If you can approach conflicts and problems with a win-win attitude, you’ll be able to express your ideas and feelings with courage, while still maintaining consideration for the feelings and ideas of others. When you have an abundance mentality, you’re able to see that there is enough for everyone, and that by balancing your confidence with empathy, you can achieve your goals while helping others achieve theirs.

How to create frugal win-win situations:

Recognize that you don’t always know the full story. As you aim to implement frugal principles and stick to a budget, you may often find yourself thinking “it’s not fair.” It’s not fair that they get to go out to dinner. It’s not fair that they get a new car. It’s not fair that they get to go on vacation, and I don’t. Take the time to realize, however, that you’re only seeing a small part of the finances of your friends and family who seem to “have it all.” And though it’s hard to watch your best friend take a dream European holiday, or your brother buy the car you covet, you’ll get there, too — if you manage your finances frugally. And the best part? There will still be plenty of holiday destinations and fast cars when that time rolls around.

Understand the difference between possessions and net worth. While your friends and family may seem to have a fuller lifestyle because their house is bigger or their car is newer, you need to consider that it could just be a facade covering their mountains of debt. True wealth is not measured in possessions, but in assets. When the value of your assets is greater than the amount you owe on mortgages, car loans, and credit card debts, then you have a strong net worth and are truly wealthy. By trying to live a more effectively frugal lifestyle, you’ll be able to achieve true wealth, rather than just a life full of stuff.

Habit Five: Communication

At its base, communication is the desire to be heard and understood. Most people will listen with the intention to reply to what you’re saying, rather than to understand what you’ve said. To effectively communicate, you need to first understand. If you communicate with the sole intention of being understood, you may ignore what others are saying and miss their meaning entirely. Don’t just wait for your turn to talk; pay attention to what people are trying to tell you.

How listening can help you be effectively frugal:

You are not the only person in your life. Chances are you’re married or in a relationship, have friends or children, or all of the above. As a result, you’re not the only person being affected by your decision to live a more frugal lifestyle. To be effective in your goal of frugality, you need to be able to listen to and understand the goals and behaviors of the other people in your life, too. Consider how effective your frugality would be if you were taking packed lunches to work and avoiding the afternoon coffee run, while your partner was going on shopping sprees during their lunch break. Instead of living a more frugal lifestyle, you’d really be saving on one end and spending on the other.

Understand the goals and needs of others. While it’s important to explain your desire to live more frugally, it’s also important that you understand the goals and needs of those around you. This way, you can find a way to be more frugal without them having to give up all of the things that are most important to them.You can’t know what those things are unless you listen.

Habit Six: Synergize

Interactions and teamwork are some of the most important ways you can learn new skills and more effective behaviors. Synergizing is the habit of creative cooperation — working as a team to find new solutions to existing problems. Synergy is not something that just happens. It’s a process where you bring all of your personal experience and expertise to the table, enabling more effective results than those you would have been able to achieve individually. The whole is greater than the sum of its parts.

When you have genuine interactions with people, you’re able to gain new insights and see new approaches to your problems — ones you might not have thought of before.

How to synergize for effective frugality:

Look for new ways. In a society that excels at consumerism, you’ve probably already realized that you need to find new ways of doing just about everything to be frugal. It’s easy to buy your lunch every day, but it’s more frugal to pack it. It’s easy to drive to work, but it’s more frugal to take the train. It’s easy to buy a new cocktail dress, but it’s more frugal to make one.

Surround yourself with other frugal people. To be successful in your quest for frugality, surround yourself with like-minded people. Find people who are where you want to be by joining online frugal-living forums, striking up a friendship with a fellow coupon-cutter, or starting a sewing club. When you’re around people with the same goals as you, you’ll be able to share ideas and learn from each other.

Habit Seven: Sharpen the Saw

You’re the greatest asset you have on your journey to achieving the lifestyle you want, so you need to look after yourself physically, emotionally, mentally, and spiritually. Taking the time to renew yourself in these areas of your life will give you strength to maintain the previous six habits, which are essential for your success.

How to frugally renew yourself:

Physically. By eating better, you’ll feel better. Take it another step further and start your own vegetable patch, which will save you money at the supermarket and be healthier for you. Exercising keeps you fit and healthy, and it doesn’t cost you anything to go for a walk, ride a bike, or skip rope in the backyard. To rest your body, you don’t need to go to a day spa; you can simply relax in the tub at home.

Emotionally. Interacting socially with others allows you to make meaningful connections, and it makes you feel good. This can be achieved by chatting with the woman at the coffee shop or by calling your mom once a week.

Mentally. Exercising and expanding your mind through learning, reading, writing, and teaching can be done frugally. Visit your local library, or volunteer at a school or retirement home to teach others a skill you may be taking for granted.

Spiritually. Spend time close to nature and expand your spiritual self through meditation, music, art, or prayer. Take a quiet moment to center yourself and empty your mind before going to bed. Or, go for a hike and be grateful for the beauty of nature surrounding you.

Frugality doesn’t mean having to give up all the luxuries and things which make you happy. Don’t get burned out by developing habits one through six without taking the time to renew yourself. Frugality is something you want to develop and maintain for the long-term. Follow these seven habits, and you’ll be on your way to becoming a highly frugal person.

Equity Valuation - 01

Introduction of Equity Valuation

The fundamental value (= intrinsic or fair value) of each investment is the present value of its expected, future cash flows discounted at an appropriate risk-adjusted rate. 

Virtually every sophisticated equity valuation model used by leading investment banks today is based on discounted cash flows (DCF). The structure and the names of the models might differ, but the underlying idea is always the same. They are all rooted in the present value framework for equity valuation pioneered by Merton Miller and Franco Modigliani in the early 1960s.

Economists use models to simplify the complexity of the real world. A good valuation model is simple and helps investors to make informed decisions. 

Many financial analysts today forget that a good model is simple, not complex!

Financial economists subjectively make simplifying assumptions to focus on specific valuation aspects while neglecting other aspects. As a result, a plethora of “different” discounted cash flow approaches exists today, each with its own acronym: dividend discount models (DDM), free cash flow to the firm (FCFF) and Economic Value Added (EVA), to name just the most popular models discussed in academic literature.

Financial analysts at leading investment banks have added proprietary discounted cash flow models and new acronyms. The most sophisticated DCF models used by financial analysts today are, in our opinion, 

• Credit Suisse’s Cash Flow Return on Investment (CFROI) model
• Morgan Stanley’s ModelWare
• UBS’s Value Creation Analysis Model (VCAM). 

潇洒晚年靠投资

将退休年龄，由55岁提高到60岁，已势在必行。提高退休年龄，是世界潮流，经济上轨道的国家早已实行，大马现在才跟上，实际上已嫌略迟。

紧跟着退休年龄的提高，提取全部公积金的年龄亦相应提高到60岁。工薪阶级的薪金，通常在55岁时已到顶薪，公积金的缴交额达到最高，加上累积公积金所赚的利息也最大，故由55至60岁的5年，公积金可增加20%，使上班族的黄金岁月过得较宽裕。

但只是“较宽裕”而已，还是不足以保障晚年生活。调查显示，公积金会员在55岁时提完公积金，有72%在3年内花光。其馀28%不是不花光，只是在3年后才花光而已。现代医药发达，除非患上绝症，要活到80岁并不难。

退休人士钱不够用

由55岁到80岁的25年，属黄金岁月。而最少有72%的乐龄人，要在钱不够用的窘境中，度过他们人生最后的22年。这是多么残酷的事实，多么痛苦的人生。大部分退休人士还是要靠儿女，或别人的资助，才能度过晚年。

换句话说，大部分退休人士，都无法做到财务自主，都面对钱不够用的窘境。没有财务自主的晚年，不可能是潇洒的晚年。黄金岁月也不可能是金光闪闪的岁月。有财务自主潇洒晚年，才有可能好梦成真。

退休后财务自主，潇洒地度晚年应成为每一个上班族终身奋斗的目标。从众多工薪阶级退休后，都得依靠亲人过活，说明了单靠薪金，无论如何节衣缩食，都无法达到财务自主。要财务自主须学投资

要达到财务自主，必须学习投资。投资就是以钱生钱，就是让别人为你赚钱。作为受薪人士，你已经把你的时间卖给雇主，你再也无权支配你的时间，所以你不能兼职。你只能靠“不劳而获”赚钱，那就是“投资”。

投资是让时间替你挣钱，或让别人为你赚钱，你在将“资金”“投”出去之后，什么都不必做，财富却与日俱增，使你在退休时财务自主，潇潇洒洒的度过你的黄金岁月。

工薪阶级最适合买产业

买产业是工薪阶级的最佳选择，除非买错地点、买错价格，投资产业失败者少之又少。交20%的头期，买一间屋子，只要涨价20%，就取得100%的回酬。借贷越高，回酬越高，一间50万令吉的屋子，如果头期只需5万令吉 (10%)，20年供完，如果每月租金足够摊还每月供款的话，20年后即使产业没有涨价，你也有了50万的财产了。所以，买屋应成为职场新鲜人的第一项投资。

股票简单易行须有智慧

股票是最简单易行的投资，但必须要有智慧。买股票就是参股做生意，你的成败决定于生意的成败，不是决定于股市的起落。只要你参股的公司，钱越赚越多，你的股票就一定会增值，又何必担心股价不起呢？

整天盯住股价，不理公司业务是否有进展，是舍本逐末。舍本逐末，使你的投资走向末日。所以，股票投资要成功，首先是要具备正确的投资概念－－投资于业务。有前途的企业，其股份（票）才有可能增值。投资者最常犯的错误，是以为“价值”可以无中生有，殊不知被吹胀的泡沫，破灭只是时间问题而已。

企业必须脚踏实地去经营，才能创造价值。股票要有价值，才能增值。惟有投资于能增值的股份，才能致富。能致富，才能财务自主，有财务自主晚年才能过得潇洒。投资增值，需要时间，所以投资越早开始越好。现在就开始投资吧！

投资赚钱靠“增值”。投资赚钱靠“增值”，增值需要时间。投资回酬与风险往往成正比，通常时间越长，风险越低，时间越短，风险越高。股票投资，每天抢进杀出，长期结算，赚钱的少之又少，非累积财富之道。

一个小心挑选的股票投资组合，持握10年，没有人会亏本。因此靠投资累积财富，长期是最佳途径。要长期，必须要有耐性。耐性是纪律的表现。许多人投资失败，是因为不守纪律，不守纪律是因为你的“情商”(EQ) 高过你的“智商”(IQ)－受情绪控制，而不是受理智控制。受情绪控制，你就无法克制你把金钱化在消费品上的冲动。

消费品只会贬值，不会增值。把钱化在只会贬值的消费品上，你就很难储蓄。而储蓄是累积资本的原始手段。没有储蓄就不会有资本，没有资本，就无法投资。无法投资就无法达到财务自主。

长期投资减低风险

投资必须长期的，一个最重要理由，除了减低风险，就是按照“复利”理论，较后期的回酬率比初期的回酬率高不知多少倍。后期3年所赚，可能高过前期的10年。故短期套利，是牺牲了后期庞大的回酬。

致富靠后期的庞大回酬，并非靠初期的低微回酬。投资一定要有先苦后甜的精神，“先苦”而不半途而废，靠耐性，耐性靠纪律，纪律靠控制情绪，控制情绪靠你自己的意志力。自救多福，此之谓也。投资的途径很多，买产业和股票是最普通，最易行的途径。最普通、最易行，却不保证所有人都成功。

成功靠增值。定期存款之所以不是好投资，是因为母金不会增值。增值是投资成功之钥。

有纪律储蓄才能增值

千里之行，起于跬步，财务自主是马拉松，要达到财务自主的终点，需由本身做起。第一步是克制你的消费欲，有纪律地储蓄－－每个月领到薪金后，先抽出20%，存入银行，其余的才花用。不要等到月尾才储蓄，因为不是每一个人都有守纪律的精神，花到月尾时可能已所剩无几，甚至出现负数。

你的公积金数目可观，是因为强迫缴纳。你如果要储蓄成功，最好的方法是强迫自己储蓄。先存后花就是强迫储蓄。

勿把钱留银行太久

强迫储蓄可以培养纪律，纪律可养成耐性，有耐性，投资才能长期坚持，长期坚持才能增值，增值是达到财务自主之钥。

不要把钱留在银行中太久，因为银行给你3.5%的利息，而通货膨胀率为6%，你每存一年，就亏了2.5%， 存得越久，亏得越多。

投资致富的人，多不胜数，却从来没见过靠利息收入而发达的人。你的金钱必须为你赚取高过通胀率的回酬，就好像投资回酬必须高过投资成本（借钱投资，利息就是成本）一样。

Commentary On Chapter 1

All of human unhappiness comes from one single thing: not knowing how to remain at rest in a room.   —Blaise Pascal

Graham’s definition of investing could not be clearer: “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.” Note that investing, according to Graham, consists equally of three elements:

• you must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock;

• you must deliberately protect yourself against serious losses;

• you must aspire to “adequate,” not extraordinary, performance.

An investor calculates what a stock is worth, based on the value of its businesses. A speculator gambles that a stock will go up in price because somebody else will pay even more for it. 

As Graham once put it, investors judge “the market price by established standards of value,” while speculators “base [their] standards of value upon the market price.” For a speculator, the incessant stream of stock quotes is like oxygen; cut it off and he dies. For an investor, what Graham called “quotational” values matter much less. Graham urges you to invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.

Like casino gambling or betting on the horses, speculating in the market can be exciting or even rewarding (if you happen to get lucky). But it’s the worst imaginable way to build your wealth. That’s because Wall Street, like Las Vegas or the racetrack, has calibrated the odds so that the house always prevails, in the end, against everyone who tries to beat the house at its own speculative game. On the other hand, investing is a unique kind of casino—one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor. People who invest make money for themselves; people who speculate make money for their brokers. And that, in turn, is why Wall Street perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation.

People began believing that the test of an investment technique was simply whether it “worked.” If they beat the market over any period, no matter how dangerous or dumb their tactics, people boasted that they were “right.” But the intelligent investor has no interest in being temporarily right. To reach your long-term financial goals, you must be sustainably and reliably right. 

To see why temporarily high returns don’t prove anything, imagine that two places are 130 miles apart. If I observe the 65-mph speed limit, I can drive that distance in two hours. But if I drive 130 mph, I can get there in one hour. If I try this and survive, am I “right”? Should you be tempted to try it, too, because you hear me bragging that it “worked”? Flashy gimmicks for beating the market are much the same: In short streaks, so long as your luck holds out, they work. Over time, they will get you killed.

Commentary On the Introduction

If you have built castles in the air, your work need not be lost; that is where they should be. 

Now put the foundations under them.      —Henry David Thoreau, Walden

Notice that Graham announces from the start that this book will not tell you how to beat the market. No truthful book can. Instead, this book will teach you three powerful lessons:

• how you can minimize the odds of suffering irreversible losses;

• how you can maximize the chances of achieving sustainable gains;

• how you can control the self-defeating behavior that keeps most investors from reaching their full potential.

But no matter how careful you are, the price of your investments will go down from time to time. While no one can eliminate that risk, Graham will show you how to manage it—and how to get your fears under control.

ARE YOU INTELLIGENT INVESTOR? 

Now let’s answer a vitally important question. What exactly does Graham mean by an “intelligent” investor?  

Graham defines the term—and he makes it clear that this kind of intelligence has nothing to do with IQ or SAT scores. It simply means being patient, disciplined, and eager to learn; you must also be able to harness your emotions and think for yourself. This kind of intelligence, explains Graham, “is a trait more of the character than of the brain“.

In short, if you’ve failed at investing so far, it’s not because you’re stupid. It’s because, like Sir Isaac Newton, you haven’t developed the emotional discipline that successful investing requires. In Chapter 8, Graham describes how to enhance your intelligence by harnessing your emotions and refusing to stoop to the market’s level of irrationality. There you can master his lesson that being an intelligent investor is more a matter of “character” than “brain.”

As Graham shows so brilliantly in Chapter 8, this is exactly backwards. The intelligent investor realizes that stocks become more risky, not less, as their prices rise—and less risky, not more, as their prices fall. The intelligent investor dreads a bull market, since it makes stocks more costly to buy. And conversely (so long as you keep enough cash on hand to meet your spending needs), you should welcome a bear market, since it puts stocks back on sale. 

So take heart: The death of the bull market is not the bad news everyone believes it to be. 

Thanks to the decline in stock prices, now is a considerably safer—and saner—time to be building wealth. Read on, and let Graham show you how.

PEOPLE ARE FUNNY

Sometimes, I have to hide a smile when I look at the antics of some people. Certain things they do or say, well, do not quite add up. Check out the following examples:

Some people say, “My life has changed 360 degrees” – to imply that they have undergone a total transformation and are totally different person now. Actually, a 360 degrees change in direction will bring them right back to their starting place.What they should have said is, “My life has changed 180 degrees”.

Some people say, “Aim for the moon. If you miss, you may still wind up in the stars.” I don’t know where they learnt their astronomy but aren’t the stars a lot further away than the moon? So, even if you missed the moon, there is no way you’ll wind up in the stars. You’re more likely to wind up back on earth!

Some people believe that an investment adviser is an expert in investments. They think he knows all there is to know about investments, and then some. They believe the investment adviser has their best interests at heart. Actually, the reason they are called “investment adviser” is that “speculation advisers” do not sell as many products!

Some people believe that a successful formula will bring in excellent results forever. They repeat the formula over and over again because it has been making money. So, even though the world and regulations have changed, they will continue to use the same formula. This partly explains why some people become ex-millionaires! They are stuck in a rut.

Some people rush to buys properties because the CEO of the housing developer told them that prices will soon rise. Don’t they realise that it is the CEO’s job to say that? After all, he is hired to sell as many properties as he can.

Some people think they can make money from options and futures and currencies when they already have a hard time making money from properties, which is actually the easiest, simplest and time-tested way to make money in Malaysia. Isn’t that a little like trying to beat a grandmaster at chess when you cannot even win at checkers?

Some people spend much time, effort and money to research a particular investment. The good news is all that research tells them, yes, the time is right for the investment. Unfortunately, for a variety of reasons, instead of investing ameaningful amount into the investment, they put in just a small amount of money – RM10,000, RM5,000 or perhaps even less. The problem with this is thatthe money is too little to be of any significance. For example, if they managed to get a 100% return on investment, which is superb and out-of-this-world return, their RM5,000 becomes RM10,000. While it is certainly a newsworthy performance, the extra RM5,000 will hardly change their financial situation. Had they invested RM100,000 or, even better, RM500,000, in return would have made a huge difference to their situation. This explains why some people never get rich even though they chose the right investment – their investment is too little.
Some people want to become rich but do not want to do anything different. Instead, they want to continue doing what they are currently doing, even though it is not bringing them the desired results. That’s like wanting to see the sunset but heading east to catch it! It just cannot happen!