Concepts for Beginning Investors
Posted on | October 7, 2009 | No Comments
Since this blog is geared toward the beginning investor and people without a lot of capital to invest, I thought I would start a series that discusses concepts that all investors should understand, even, if they don’t subscribe to them. So, moving forward I will try to introduce a new investing concept in the middle of week. Usually Wednesday, but this is a blog that is FREE, so if it slips to Thursday take your complaints to the person you are paying.
I will try to borrow heavily from the now, unfortunately out of print book, Magic Numbers, which defines many important financial concepts and ratios that many if not most investors will need to understand, even if it is just to ignore them, because they have a better strategy. The book does not try to determine was is essential from what is spurious, but it does explain the concepts, with a precision that is often lacking in the internet age.
For example the term EBIT is a term that is often used by people in the media. I am not sure why, since to me it is a very limited concept. What EBIT stands for is Earnings before Interest and Tax. So if you are staying up late and looking at some financial reports you would at hte most basic level, need to look at Pre-tax profits plus interest. If you don’t understand, join the revolution. Most people investing don’t understand it either, so when you do understand it you will have an avantage. Remember one of the most important things is to figure out what your advantage is and exploit it.
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