Rich dad series

Rich dad series are books series that present how to become millionaire no matter how much money you have today.

Golden goose investment

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Value Investing Performance

Performance, value strategies
Value investing has proven to be a successful investment strategy. There are several ways to evaluate its success. One way is to examine the performance of simple value strategies, such as buying low PE ratio stocks, low price-to-cash-flow ratio stocks, or low price-to-book ratio stocks. Numerous academics have published studies investigating the effects of buying value stocks. These studies have consistently found that value stocks outperform growth stocks and the market as a whole.

Performance, value investors
Another way to examine the performance of value investing strategies is to examine the investing performance of well-known value investors. Simply examining the performance of the best known value investors would not be instructive, because investors do not become well known unless they are successful. This introduces a selection bias. A better way to investigate the performance of a group of value investors was suggested by Warren Buffett, in his May 17, 1984 speech that was published as The Superinvestors of Graham-and-Doddsville. In this speech, Buffett examined the performance of those investors who worked at Graham-Newman Corporation and were thus most influenced by Benjamin Graham. Buffett's conclusion is identical to that of the academic research on simple value investing strategies--value investing is, on average, successful in the long run.
During about a 25-year period (1965-90), published research and articles in leading journals of the value ilk were few. Warren Buffett once commented, "You couldn't advance in a finance department in this country unless you thought that the world was flat.

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Value investment

Value investing is an investment paradigm that derives from the ideas on investment and speculation that Ben Graham & David Dodd began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis. Although value investing has taken many forms since its inception, it generally involves buying securities whose shares appear underpriced by some form(s) of fundamental analysis.
As examples, such securities may be stock in public companies that trade at discounts to book value or tangible book value, have high dividend yields, have low price-to-earning multiples or have low price-to-book ratios.
High profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the "margin of safety". The intrinsic value is the discounted value of all future distributions.

However, the future distributions and the appropriate discount rate can only be assumptions. Warren Buffett has taken the value investing concept even further as his thinking has evolved to where for the last 25 years or so his focus has been on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price.

Time value of money

Investments generate cash flow to the investor to compensate the investor for the time value of money.
Except for rare periods of deflation where the opposite is true, a dollar in cash is worth less today than it was yesterday, and worth more today than it will be worth tomorrow. The main factors that are used by investors to determine the rate of return at which they are willing to invest money include:
- estimates of future inflation rates
- stimates regarding the risk of the investment (e.g. how likely it is that investors will receive regular interest/dividend payments and the return of their full capital)
whether or not the investors want the money available (“liquid”) for other uses.

The time value of money is reflected in the interest rates that banks offer for deposits, and also in the interest rates that banks charge for loans such as home mortgages. The “risk-free” rate is the rate on U.S. Treasury Bills, because this is the highest rate available without risking capital.
The rate of return which an investor expects from an investment is called the Discount Rate. Each investment has a different discount rate, based on the cash flow expected in future from the investment. The higher the risk, the higher the discount rate (rate of return) the investor will demand from the investment.

From Wikipedia

Rate of return

Rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of money gained or lost (realized or unrealized) on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment. ROI is usually expressed as a percentage rather than decimal value.

ROI does not indicate how long an investment is held. However, ROI is most often stated as an annual or annualized rate of return, and it is most often stated for a calendar or fiscal year. In this article, "ROI" indicates an annual or annualized rate of return, unless otherwise noted.
ROI is used to compare returns on investments where the money gained or lost — or the money invested — are not easily compared using monetary values.
For instance, a $1,000 investment that earns $50 in interest generates more cash than a $100 investment that earns $20 in interest, but the $100 investment earns a higher return on investment.
$50/$1,000 = 5% ROI
$20/$100 = 20% ROI

When considering a continuous process of gaining or losing money with a constant rate of return, the annual rate of return is any value greater than -100%; a positive percentage corresponds to exponential growth of the capital, a value between -100% and 0% exponential decay.

Interest rates

The real interest rate is the rate after tax is deducted less the rate of inflation. In some instances the real rate can be negative - this is known as inflation risk.

Saving in personal finance

Within personal finance the act of saving corresponds to nominal preservation of money for future use, although inflation can still erode its real value. A deposit account paying interest is typically used to hold money for future needs, i.e. an emergency fund, to make a capital purchase (car, house, vacation, etc.) or to give to someone else (children, tax bill etc.).

Savings within personal finance refers to the accumulated money put aside by saving.
Within personal finance, money used to purchase shares, put in a collective investment scheme or used to buy any asset where there is an element of capital risk is deemed an investment. This distinction is important as the investment risk can cause a capital loss when an investment is realised, unlike cash saving(s). Lower levels of risk normally apply to savings e.g. real value is lost when inflation exceeds interest rates, or in extreme cases loss can occur due to bank failure.

In many instances the term saving and investment are used interchangeably which confuses this distinction.

For example many deposit accounts are labeled as investment accounts by banks for marketing purposes. To help establish whether an asset is saving(s) or an investment you should ask yourself, "where is my money invested?" If the answer is cash then it is savings, if it is a type of asset which can fluctuate in nominal value then it is investment.

Saving topics from wikipedia

Saving

In common usage, saving generally means putting money aside, for example, by putting money in the bank or investing in a pension plan
In a broader sense, saving is typically used to refer to economizing, cutting costs, or to rescuing someone or something.

In terms of personal finance, saving refers to preserving money for future use - typically by putting it on deposit - this is distinct from investment where there is an element of risk.
Saving differs from savings in that the first refers to the act of putting aside money for future use, whereas the second refers to the money itself once saved.

For example: you may decide to start saving 10% of your income; because you aim for your savings to grow into an amount sufficient to buy a car.

Investment textbooks

Value investment
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Golden goose investment
http://astore.amazon.com/golden-goose-investment-20
MBA textbooks
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Rich dad series
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