2022-05-03

• ☀️Daily Log:
  • Buffet and Graham Investing Principles [[investment]]
    • 0. Don't try to make your money investing. Learn a skill and develop it to get paid
    • 1. Find an undervalued company. Calculate the value of the company using DCF and be conservative - buy at a high discount rate
    • 2. Dollar cost average into your value picks and index funds
    • 3. Don't try to time the market ever. All your holdings should have a large enough time horizon that even a 3-year bear market is a blip on your radar
    • "If you want three opinions, ask two economists looking at one set of data"
    • "Give me a one-handed economist! All my economists say 'on the one hand... and then on the other" - President Truman [[quotes]]
  • Discounted Cash Flow (DCF) Model
    • Valuation method to estimate the value of an investment based on expected future cash flows
      • Similar to net present value (NPV) except that it doesn't deduct the upfront cost of the investment
    • $DCF=\frac{CF_1}{1+r^1}+\frac{CF_2}{1+r^2}+...+\frac{CF_n}{1+r^n}$
    • Where $r$ is the discount rate and $CF$ is the cash flow for the given year
    • Assumptions on the future cash flow is where the art of prediction comes in
    • The dividend discount model such as Gordon Growth Model is using CDF to value stocks
    • Procedure
      • 1. Forecast the expected cash flow
      • 2. Select a discount rate - based on the cost of financing the project or the opportunity cost presented by alternative investments
      • 3. Discount the forecasted cash flow back to present day to compare against initial investment
• Retrospective::
  • One week ago: [[April 26th, 2022]]
  • One month ago: [[April 3rd, 2022]]
  • One quarter ago: [[February 3rd, 2022]]
  • One year ago: [[May 3rd, 2021]]