! —_____ How does Investing and i Differ? ; ns | Time period ¢ INVESTORS * TRADERS ¢ Invest for the long * Capture short-term term price trends with long and short trades When to buy and sell — ¢ INVESTORS ¢ TRADERS © Buy low, sell high e Buy high, sell higher © Sell high, buy low Trading actively e¢ INVESTORS ¢ TRADERS * Don'tovertrade—it © Trade whenever only racks up there’s opportunity the more you trade, commission costs. the more you makeCost averaging (cutting losses) INVESTORS © TRADERS © Buy more ofagood When the position stock when it is retraces - exit the cheap. trade. Always! | Know your stock © INVESTORS ¢ TRADERS Only invest in * Ifthe chart looks companies you good — trade it. understand. Where’s the action? et INVESTORS ¢ TRADERS * Avoid hot sectors ¢ Search out hot with ‘hot' valuations. sectors with ‘hot’ volatility, =~ Diversification * INVESTORS © TRADERS Focus on one or two © Spread risk through © sectors at a time. diversification.——=— Omparison Chart TIME PERIOD. When to buy and sell TRADING ACTIVITY Cost averaging (cutting losses) Know your Stock Where's the action? Diversification Invest for the long term Buy low, sell high Don't overtrade - it only racks up commission costs. Buy more of a good stock when itis cheap. Only invest in companies you understand. Avoid hot sectors with ‘hot’ valuations ‘Spread risk through diversification a ee ‘Capture short-term price trends with tong and short trades + Buy higher, sell higher + Sell high, buy low ‘Trade whenever there's ‘opportunity: the more you trade, the more you make When the position retraces - exit the trade, Always! - Ifthe chart looks good ~ trade it. Search out hot sectors with ‘hot’ volatility. Focus on one or two sectors at a time. 7 ) Your Financial Independence Plan - Set the GOAL First! What is it really going to take?| Lets get MOVING...It all START’s with Mindset! Your mind is constantly evaluating with everything you do: “Is this going to be good for me?” or “Is this going to be bad for me?” You are driven by 2 controls... what you see as ‘good’ experiences and what you see as ‘bad’ experiences. It is your ‘perception’ of the experience that defines whether you actually do it or not. This part of your mind is called the SUBCONSCIOUS ee 4 People Really DO what they FEEL & For Example...Take Chocolate... 142Psychology - Belief Systems POSITIVE Belief Orientation Poe Group ® The quality of most people’s lives are a direct reflection of the expectations of their peer group ® Love your Family — Choose your Friends ¢ Choose your friends — WISELY| | Why learn to Invest? The Non-Iinvestor (Worker) You GIVE your TIME for MONEY | You SPEND your MONEY on your LIFESTYLE | Your LIFESTYLE is then SACRIFICED to y make more MONEYWhy learn to Invest? THE INVE$TOR (VALUES LIFE) —e—vr— yo Rule#1 — Set a Meaningful Goal Rule#2 — Plan it Exactly Rule#3 — Schedule it and lock the door Rule#4 — Get around the path walkersSetup Yourself for Success - Practical oal for you? What is a meaningful trading g 5 \ Why is this a meaningful goal? Setup Yourself for Success - Practical How can you schedule this — so it happens — and doesn’t become ‘another goal’ or ‘dream’ you miss out on? Use the PAIN! TH 4 Ue | Setup Yourself for Success - Practical Identify the Path Walkers! Who can | get around to ensure that my belief is built and take the appropriate actions?Trading Psychology — Avoiding the Pitfalls © Over-confidence e Researchers have found that people consistently overrate their abilities, knowledge, and skill— especially in areas outside of their expertise. ¢ Solution ¢ Investors must seek and weigh quality feedback and stay within their circle of competence, until their results prove different ® Ask your coach if they think you understand the concepts © Solicit Feedback from your peer group Earnings: A company’s ultimate goal is to maximise profitability, © inereasing sales and efficiently managing internal processes, management can increase arguably the most important metric of all - the earnings per share (EPS). As earnings increase, a company’s popularity is likely to rise as well. Asa result of more investors buying into the company, the price to earnings ratio (P/E), measuring the relative cheapness or dearness of the firm, is fr) likely to be pushed higher, to so-called overvalued levels.Return efficiency neaPltal Employed (ROCE) is « powerful measure of manage tatu é ‘8 another tool to find th he Companies able to produce superior share ROCE expiair Other erEl2ins a fim's probity in elation to investors’ capital ivestment in Ti Comparing profits with the ital used in percentage 19 pr Capital used in making the profit as a IN other words the ROCE is an indicator of how well a company as utilising gapital to generate revenu ROCE levels of over 15% are likely to be significantly above any cost of borrowing that money or the return that shareholders could get elsewhere for the level of risk associated with holding the shares, Value is the concept not the calculations. It is the actual be of a company, different from the market price which is subject to deviate away from a fair, reflective valuation: i . i i it measure, is Price / Earnings: The most widely used investment calculated as the previous day's closing share price divided by the earnings per share-basic (EPS-basic). PE ratio is used to appraise a company's profit performance.t a | Where a company’s prospects are considered by the stock market | . to be good, then it is likely that the company's share Price will rise, producing a higher PE ratio. Price / Earnings Growth: The PEG ratio is a tool that can help investors find undervalued stocks. When used in Conjunction with other ratios, and the sector, it gives investors a Perspective of how the market views a firm's growth potential in relation to EPS growth. Analyst Forecasts: These ‘target values’ that professionals set for the future prospects of listed companies give us the forecasts for profits, | earnings (EPS) and dividends for up to the next three years. Consensus forecasts offer the aggregate figures predicted for companies with one or more covering analysts. u 4 e \ Broker Recommendations: Made by investment firms, whilst not outright recommendations to buy or sell a stock do give an indication of how the professional market rates a stock, Broker picks are relative! ‘Strong Buy’, for example, indicates that the broker recommends a particular company over other companies in the sector. However, it is not a recommendation that you buy stocks in the company if you are otherwise not interested in the sector.* Brokers have an annoying tendency to speak in code, but we have the universal financial dictionary to understand the meanings behind the recommendations. Strong Buy, Overweight +20% gain in stock price for next 42 months, Buy, Add +10% to 20% gain in stock price for next 12 months, Hold, Neutral, Equal Weight 0% to +10% gain in stock price for next 12 months Sell, Reduce 0% to -10% falll in stock price for next 12 months Strong Sell, Underweight ~10% to -20% fall in stock price for next 12 monthsmake-up and © Gearing: Helps investors to evaluate a company’s financial defaultrisk, It looks ata firm's level of debt as a proportion of total equity Gearing of 50% mean half a firm's equity capital is borrowed, {f debt levels exceed that of equity, the company is generally considered as over-geared and is hence, a risky investment. Directors typically «, reduce levels of debt in a firm. ee The lower the gearing level, the less pressure their will be or f N profits ar cash growth from being restricted and tied up in interest rensymhente a How we balance our portfolio Normal Portfolio Aggressive Portfolio @ Stocks # Index @Stocks mBonds