Need your input - what fundamentals should be written up
I've decided to take some time to build deeper content on this site in the form of solid background articles on fundamental skills for investing. There is a start of some of this in the finance wonk classics section, but I am going to try to link from the front page directly to some lengthy writeups that people can use directly. These would not be shy about using math and charts.
Please offer your suggestions on topics you'd like to see covered in depth, some examples I'm planning:
Please offer your suggestions on topics you'd like to see covered in depth, some examples I'm planning:
- Portfolio design: Markowitz frontiers and variability calculations explained for the common man! Too many people think diversification just means "buy a little of everything." I plan to try to go through how efficient portfolios are designed and, eventually, gather and crunch data on sector correlation. I think we'll find that international stocks don't give much diversification anymore, for example. I want to help people design better portfolios because most people are leaving money lying on the ground by owning mostly a single asset type.
- Bonds and duration: A guide to understanding how much the price of a bond will change when the interest rates change, and why the interest rate on a bond changes over time (also known as "bond rollup").
- Options and the greeks: A simple reference guide to explain what goes into options and what those cryptic news articles are referring to. Not so much for trading (that would fill a book).
- Good investing books: I'd like to put together a reading list of books that people have found useful. I'll start with my favorites, but I want your input too.
- Present Value / Future cashflow analysis: thanks to Michael Brothers for pointing this one out in a response to this column. I forgot to include it even though it's one of my favorites.
That's a start, and clearly enough to keep me busy for a while, but I want everybody who visits to please leave a comment or drop me an email through my profile with topic suggestions or favorite books.
Please give feedback!
posted by FinanceWonk at 10:32 PM
1 Comments:
Typically when I check fundamentals one of the primary things I check (and probably most amateur investors) is the P/E and PEG ratios versus discounted cash flows, which is what it seems like many professionals tend to use. I wouldn't mind learning how to use discounted cash flow in my own analysis.
As an example, let me use your FedEx article.
"Speaking of future growth, what about that implied discount number I like to compute? My technique is to apply the analysts average growth rate for ten years, followed by 6% slow-growth at maturity afterward, figure out all the cash flow the enterprise produces, then apply a discount rate to each years income to figure out the current value of the stock as a cash-flow business. Ultimately when all is said and done and the market stops behaving randomly, the cash flow is the true value of the business. My very conservative investing style is that I like to see a discount rate of 15% or higher. FedEx scores a very nice 17%."
I would really enjoy learning how to use these methods myself.
Keep up the good work. Its been increadibly informative.
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