Investing is not about having some short-cut way to amassing riches. It is the discipline of training oneself to put in hard work to be a good steward of whatever financial resources one is given. With greater financial resources being managed as one grows the financial resources under one's charge through sound investing, one should also put the financial resources to good use. As a christian, putting financial resources to good use means using my financial resources wisely according to God's way whatever amount of financial resources He has provided for me by His grace.
Since investing to me is a disciplined journey of putting in hard work to see the results, I will be careful not to avoid the needed discipline and hard work in this investing journey. There is no short-cuts, just a disciplined focus and hard work to make sure one is doing sound investing, slowly building up good cashflow generating assets that can continue to generate sustainable cashflows over time. One should also consider carefully how to put the cashflows generated to good use which by itself is also a mark of sound investing.
I shall leave you my reader with a quote from Thomas Alva Edison, the famous inventor and businessman, and also a video clip which I believe can be applied to the journey of investing. Do consider carefully also how one's financial resources can be put to good use even as one is successful in this journey of investing for what is the use of having financial resources if one does not consider how to put the financial resources to good use. In all things, I believe God is watching.
The first requisite for success is to develop the ability to focus and apply your mental and physical energies to the problem at hand - without growing weary. Because such thinking is often difficult, there seems to be no limit to which some people will go to avoid the effort and labor that is associated with it.... - Thomas Alva Edison
The Amazing Pipe Line Story - Pablo & Bruno
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2 comments:
Hi, I read your post on determining the intrinsic value of a stock (Oct 2009).
Could you provide me the formula to calculate the compounded annual growth rate (cashflow) of a stock? Once I can figure the % out, I can crack through the rest of the formulas and determine the intrinsic value. Many thanks.
Hi,
This compounded interest formula is commonly found in maths textbooks and financial textbooks. It goes like this:-
A = P X (1 + r/100)^n
A is the final free cashflow amount. P is the initial free cashflow amount. r is the compounded annual growth rate (CAGR) of the free cashflows. n is the number of years the free cashflows are compounded.
For illustration:-
Company ABC has the following free cashflows over 4 years period.
First year = $1000
Second year = $1200
Third year = $1500
Fourth year = $1800
Using the compounded interest formula for company ABC:-
$1800 = $1000 X (1 + r/100)^3
Solving the equation, r = 21.6 %
Thus, the CAGR for company ABC's free cashflows is approximately 21.6%.
The higher the CAGR is, the better the company is at compounding the growth of it's free cashflows. Free cashflows are really the important bloodline and backbone of a company. The more the amount of free cashflows that can be generated over time, the better the company is at making more money and controlling expenses.
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