The Investing for Beginners Podcast - Your Path to Financial Freedom

By Andrew Sather, Stephen Morris, and Evan RaidtBusiness Investing

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The Investing for Beginners Podcast - Your Path to Financial Freedom episodes

July 28, 2017 IFB24: Examples of Everyday Investors who became Millionaire Investors
Welcome to session 24 of the Investing for Beginners podcast. In today's show, we discuss some real life examples of people investing in the stock market and making it big.

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30 min
July 22, 2017 IFB23: Warren Buffett Investment Advice to the Average Investor

Welcome to session 23 of the Investing for Beginners podcast. I am Dave Ahern and I am joined by my co-host Andrew Sather. In today’s session we are going to discuss some quotes from the great Warren Buffett.
Buffett is arguably the greatest investor of our generation, possibly ever and he has been a fountain of wisdom and advice for years. Needless to say, he has created some great quotes through the years either from his shareholder letters or other writings. Additionally, he is a prolific speaker and has many memorable quotes from his fantastic speeches as well.

* Rule number one doesn’t lose money, Rule number two, don’t forget rule number one.
* Look for wonderful businesses at fair prices
* Reading is one of the keys to unlocking your greatness as an investor
* Value investing is a investing style that average people can easily adopt with great results

Dave: Warren Buffett is quite the quote master, and he has come up with some very witty quotes through the years. Andrew and I are going to take turns talking about some of the favorites and give you our two cents worth on what we think of these quotes and their meanings.
I am going to go first with my favorite quote from Warren.
“Rule number one, never lose money. Rule number two, don’t forget rule number one.”
That is so apropos when we are talking about investing, Andrew made a great point in his email letter that he sends out every day. He was talking about losses, and how you need to avoid them, this is something that Warren Buffett has done an amazing, masterful job at doing, not losing money.
Because when you lost money to make it back, it is very difficult to recover the money. Andrew was coming at it as a point of looking at growth stocks, and how they can be kind of risky.
Andrew and I have talked a lot about this about the margin of safety and looking for the safety part of it, that is our emphasis. And not being aggressive and going after risky stocks, this quote from Warren Buffett sums that up.
Don’t forget rule number one, don’t lose money. It doesn’t mean that the stock won’t go down from time to time, it will, but as a long-term investor, you are more focused on the long-term horizon of a stock when you are buying it.
What Warren Buffett is talking about is talking about a long-term horizon for any stock, regardless of religious denomination. He is looking at the long-term and is more worried about that as opposed to the short term volatility.
I have a personal experience with this. When I first got into investing, I bought a stock that I had read a little bit about, again I didn’t know much about the company and didn’t know what I was trying to do and didn’t have my rules in place yet.
I bought the stock and was super excited about it, and it went up from $9 to $13, and I thought this investing thing is easy! And then about two weeks later it went back down to $9 and then a couple of weeks later it was down to $7, then $5 and $3.
And now it is around $1.22; I lost my shirt on that investment. For me to get back to even at the $9 is going to have to grow around 722%, and that is just about impossible.
This is where the numbers can hurt you when you are looking at this, and that is why investing with a margin of safety is so critical to investing. Just not taking chances with something like that.
Andrew: Yeah, that whole mathematical reality is something that is not instinctual for anybody, but it’s something that when you understand that “wow, losing money from an investment standpoint does that forcing you to realize that worst you can do is lose all of your money.
42 min
July 21, 2017 IFB23: Warren Buffett Investment Advice to the Average Investor
Welcome to session 23 of the Investing for Beginners podcast. In today's show, we discuss some of our favorite Warren Buffett quotes and the impact they have had on us.

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46 min
July 12, 2017 IFB22: Finding Investment Ideas with a Reliable Stock Screener
Welcome to session 22 of the Investing for Beginners podcast. In today's session, we discuss stock screeners and how to use them to find great investment ideas.

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38 min
July 03, 2017 IFB21: The Benjamin Graham Formula for Finding a Margin of Safety

Welcome to session 21 of the Investing for Beginners podcast. In today’s session, we are continuing our discussion of the Intelligent Investor and working through chapter 20. Again, this is one of the chapters highlighted by Warren Buffett as one of the most influential for him.
This is the chapter that opened my eyes with the discussion of the margin of safety. As a conservative guy by nature, this strategy struck home with me. There is much more to the chapter than this simple idea, check out our show notes to learn more.

* Margin of Safety equals earnings yield minus bond yield
* Amount of margin of safety depends on the market pricing
* Using data over a period is critical
* “Heads I Win, Tails I don’t lose that much.”
* Roulette as an example of diversification
* 2/3 or less of value is an adequate margin of safety
* No good stocks, just bad prices.
* Arithmetic is greater than optimism
* “Have the courage of your knowledge and experience…..THEN ACT on it!”

Dave: These two chapters are Warren Buffett’s favorite of the Intelligent Investor, and they are chock full of all kinds of wisdom and great advice to help you invest better.
The first thing that he talks about is the margin of safety in this chapter, and Andrew I am going to let you chat about this for a second.
Andrew: So obviously Dave and I we love to talk about margin of safety, with an emphasis on safety. Benjamin Graham started that whole movement, which has been passed on through the generations. With many great investors put a big focus on margin of safety.
Everybody has their definition of what a margin of safety means to them; I know they certainly do. It can be valuation based, balance sheet based, and how Benjamin Graham defined it. I am surprised because I don’t hear it that much when other investors talk about it.
In the very beginning of the chapter, he talked about how he could find it as the earnings yield minus the bond rate. You think about the bond rate, and he’s talking about the interest rate that a bond will pay for that company. And the earnings yield is just the inverse of the price to earnings ratio.
With the price to earnings ratio, we like to see a lower price to earnings is better. Since the earnings yield is the same ratio just flipped, a higher earnings yield is better, and the higher the earnings yield, the more profitable you are.
How the applies to investors, theoretically and in practice. What essentially happens is represents the earnings of a company, and once the company receives its earnings it will pay it out in dividends, or they reinvest it into the company.
The two components of the earnings yield, if you take that earnings yield and subtract the bond rate you are left with this cushion that the company has of earnings. They either are going to use for dividends or reinvest in the company.
The higher that earnings yield is above the bond rate, the greater the margin of safety.
Because a bond is something that can be purchased through the market, it is that guarantee that the company is going to pay based on what their balance sheet is. You can think of it as a margin of safety, as a cushion because they have that many earnings over that kind of base rate.
22 min
July 03, 2017 IFB21: The Benjamin Graham for Finding a Margin of Safety
Welcome to session 21 of the Investors for Beginners podcast. In today's session, we continue our discussion of the seminal book, the Intelligent Investor.

In today's show, we talk about Chapter 20, which includes topics such as calculating a margin of safety. Which is arguably one of the most important subjects ever written.

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26 min
June 21, 2017 IFB20: the Intelligent Investor Summary of Chapter 8 and Mr. Market

Welcome to session 20 of the Investing for Beginners podcast. In today’s episode, we are going to discuss chapter 8 from Benjamin Graham’s Intelligent Investor. This is easily one of the best books on investing ever written and is a classic must read for any investor serious about learning how to invest and not speculate.
Written by Benjamin Graham in the early 1950s it has been a huge influence on many investors, including the great Warren Buffett. In fact, he credits this book enabling him to create large returns for his new shareholders and was a tremendous influence on him.

* Timing the market versus pricing
* Speculator versus investor
* Dow Theory
* Characteristics of a Bull Market
* Diversification
* Succesful Stock Paradox
* Mr. Market

This week we will discuss one the chapters that he says have had the biggest influence on him. Chapters 8 and 20 he credits with opening his eyes to the possibilities of making money with a margin of safety.
Andrew: This is one of Warren Buffett favorite chapters, and it explains kind of how the market works, and it gives an excellent overview of how to understand the stock market and how it can relate to investing strategy.
Dave: The first thing we are going to talk about tonight is timing versus pricing or investor versus speculator. One of the things that Graham talks about at the beginning of this chapter is that market timing is a fool’s game. There is not much that you can do about trying to time the market.
Investors are people that are going to be looking for the intrinsic value of a price and trying to make a decision based on when that intrinsic value is going to give them an advantage in the long run for buying that company. They are not necessarily worried about whether it could be purchased today or tomorrow. It could be a year from now, or a year and a half from now, or longer. It really depends on what the intrinsic value is of that company, and what the price is versus the market.
A speculator is someone who is going to be buying based on what the time is, so they are impatient. They are looking to try to purchase the company now and get out of it in the short term. With the goal to make money in that near future. That is what Graham considered a speculator.
Those are two the differences between those terms.
Andrew: The whole speculator being impatient. I like how in the entire chapter Graham brings up dividends. He doesn’t talk about dividends much in the rest of the book, but he talks about and relates it to this.
As a long term investor, you are going to be somebody who wants to hold a stock as possible because you’ll collect dividends along the way. Whereas a speculator, as you said is going to try to pick up quick profits, and sees a year with no profits as lost time.
There is a big gap there, and I think that there are some parallels that Graham makes here in the beginning and in this chapter about focusing on not only being a long-term investor but also being a long-term investor for yield or more specifically dividend yield. Just tracking those dividend payments that you receive into your portfolio.
And I think it’s something that might be missed by a lot of value investors, but I believe that dividends are obviously a huge factor in investing. I go on and on about them every single episode because of the importance I think they play.
Dave: they are, they are critical to making significant returns, and we do talk about them a lot, but that is because we like them, and they are our best friend in the investing world. #00:04:54-8#
The next subject that Graham tackles in this chapter are the Dow Theory,
38 min
June 15, 2017 IFB20: The Intelligent Investor Summary of Chapter 8 and Mr. Market
Welcome to the Investing for Beginners podcast. In today's session we discuss the Intelligent Investor and we are going to focus on one of Warren Buffett's favorite chapters.

This chapter discusses Mr. Market among other great topics, such as diversification, Dow Theory, and charactaristics of a bull market.

Join us to learn more about this amazing book and we will continue next week with Chapter 20.

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42 min
June 10, 2017 IFB19: Portfolio Management as it Relates to Dollar Cost Averaging

Welcome to session 19 of the Investing for Beginners podcast. In today’s session, we are going to have a little different format than we have been doing. We are going to answer some of our reader’s questions on air. Andrew and I are going to take turns answering these questions, and this should be a lot of fun.

* What kind of diversification do you use for your eLetter portfolio?
* The importance of dollar-cost averaging
* Can you find the intrinsic value of an ETF?
* The importance of portfolio management
* Learning is a constant, ongoing situation

The first question is from Jamison: I have just begun receiving your newsletter, so I have the May 31st and June 1st editions are the first that I have read and would like to follow along with your portfolio. That being said I am starting with $4,000 in my account, a traditional IRA. I would like to buy the latest dividend fortress that you recommended. How much or what percentage do your normally buy? Any insight would be much appreciated.
Andrew: Obviously, I can’t give any personalized advice, legally. Let’s just say if I was to put myself in Jamison’s shoes and what I would do with a kind of larger sum. The portfolio obviously follows a $150 a month, and that’s every single month, which is a dollar-cost averaging. What that means when buying a recommended stock from the eLetter is that you’re going to buy up to $150 worth of whatever stock that is. Sometimes a stock will trade at around $20, be able to pick-up six or seven shares. Sometimes the stock trades at $110 and is only able to pick-up one share. With that extra money, if I’m picking up one share of $100, then I have $50 to $45 after transaction fee, I just roll that over to the next month, so the next month I will have $200, and I can buy however the maximum amount shares I can and just keep going in that way. Obviously, you don’t get this sort of perfect position size where every position a perfect 5% or 7%, or 3% of the portfolio. That’s just the nature of the beast, and this is something that happens when you are running a real portfolio with lower amounts. In contrast to a fund manager who is managing millions or billions of dollars and then we have the average person who maybe listens to this podcast. They have different things that they need to worry about, and that is one of the ways the eLetter is structured the way it is because it helps put yourself into the shoes of actual people who are average with average incomes and putting their hard-earned money into the market.
I guess the second part of that question is when you start with a larger sum, say $4000 and do you put that all in at once, with the one recommendation or do you split it up. It is all a personal decision, the way I want to look at it and it’s again going to be different for everybody. The dollar amount doesn’t matter so much, what matters is how much are you going to be dollar-cost averaging in the future? If you are starting with $4000 and you are going to be putting $4000 a month every single month. It doesn’t make any sense to split that $4000 up because it represents one position size.
Then again if you are only doing a $150 a month as a dollar-cost averaging and you have $4000, well then you don’t want to put that all in the last recommendation because now your portfolio is going to be 95% the June recommendation. The next month your are going to have this tiny amount for the next recommendation. You want to find a nice balance, the thing I responded to Jamison as he was an eLetter subscriber. But I thought this would be a great opportunity because other people might have this kind of question and it’s a good thing to try to...
39 min
June 08, 2017 IFB19: Portfolio Management as it Relates to Dollar Cost Averaging
Welcome to session 19 of the Investing for Beginners podcast. In today's session, we discuss how to manage your portfolio as it relates to dollar cost averaging.

This very important strategy can help smooth out your returns and allow you to add smaller amounts to the market and increase your returns over time.

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43 min

About The Investing for Beginners Podcast - Your Path to Financial Freedom

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The Investing for Beginners Podcast teaches you how to buy your first stocks and build long-term wealth in the stock market— without the hype or confusing jargon.