Finance

One up on Wall Street by Peter Lynch is an impressive book about fundamental analysis for stock picking. Following is my terse summary of the same. Emphasis on Fundamental Analysis Look around for companies that are performing well and invest in them before Wall Street institutional investors pick them In the long run, common stocks give the best rate of returns Only basic math is needed to analyze and pick stocks “Don’t gamble, invest your savings to buy good stocks and hold them till they go up and then sell them....

A charity is when your customers capture value when you don’t. A scam is when you capture value but your customers don’t. A business is when you and your customers both capture value. - unknown

Car insurance in the United States is a system that more or less works well. You call up insurance agents representing different insurance companies with similar policies but varying quality of service. Then you buy it based on how much insurance premium they charge and how good/bad quality of service you are willing to accept. If you have an expensive car or you are a reckless driver, you end up paying more. The less you use your insurance, the lower your premium becomes over time.

The common belief is that in the case of perfect competition (“commoditized goods”), buyers will always buy the lowest priced item, and this will dwindle down profits to practically nothing, and that’s why it’s called red ocean in the first place. While this is true in general, there is at least one notable exception to it. Consider the example of toothpaste, in the US, a toothpaste is ~1-2$ a piece. Are buyers really going to buy a white Colgate for 10¢ lower price over a red Colgate?...

KBB is used in the US for estimating the value of a used car before buying/selling it. While helping friends buy used cars, I felt that it always overvalued the car. I feel there is an anchoring effect in play here. A car owner (seller) feels happier checking the value of their car since it is being reported higher than what they expect. This provides a nice room for providing a discount for converting the buyer....

The Intelligent Investor by Benjamin Graham is considered the bible of investing.

An economic activity has one more of the following impacts Wealth creation - for example, processes like extraction of oil, capturing solar energy and even repairing a broken device. Wealth transfer - for example, processes like selling a good, taxes and bribery/theft, though the last one is usually illegal. Wealth destruction - for example, processes like hurricanes, wars and riots. Most developing/underdeveloped countries usually lack sufficient wealth creation, but it does not stop there....

Since I wrote the initial set of posts, quite a few people have asked me about good credit cards. So, I decided to write one about the same.

(Since my previous posts, quite a few people asked me a basic plan which can be followed, here it is) The items are ordered from first thing to be done to the last thing which can be done (assuming money is still left). Emergency savings Put 6 months worth of expenses in a Series I-Bonds (sold by treasurydirect.gov) - they try to match inflation rates (but nothing more than that) and can be sold after holding them for at least a year....

(Based on what I have seen financial savvy people doing and makes sense to me. Disclaimer: These are my opinions.) Should a person contribute to pre-tax 401K? Only if the company has a matching policy, else wise, its money trapped till the person reaches retirement age. Should a person contribute to post-tax 401K? Only if the company has a matching policy, else wise, its money trapped till the person reaches retirement age....