Dive into Part 2 of Severin’s Long-Term Stock Market Strategy, where he discusses the importance of crafting a robust long-term stock market portfolio and gives us an inside look at Dollar-Cost-Averaging and Fundamental Analysis. Stay informed, trade well!
TIMESTAMPS
00:00 – INTRO
00:41 – UTILITY
Part 2: Crafting a robust long-term stock market strategy
Asset allocation
Effectiveness of dollar-cost-averaging in investing
Key elements of fundamental analysis
Asset allocation describes portfolio diversification and aims to maximize risk-adjusted returns to customize growth potential and risk exposure to meet individual investor needs and goals.
Allocating investments among different asset classes
Minimizes risk and potentially increases gains
Stocks, ETF, and cash reserves
It is crucial to consider your own investor profile: are you inclined towards risk or more averse to risk?
Understanding the risk-return characteristics of various asset classes
Know your investment objectives, time horizon and available money to invest
🔎 02:49 Risk-Profile Spectrum
🔎 04:56 Stock Categories
🔎 05:41 Severin’s Stock Market Allocation
60% ETFs
20% Stocks
20% Cash Reserves
07:59 – IMPLEMENTATION
Dollar Cost Averaging (DCA) is the practice of investing a fixed amount of money on a regular basis, regardless of the asset price.
Develop an investment habit
Might lower your average cost per share over time
Less likely to miss out on buying opportunities
There is a psychological benefit by investing small amounts over time
🔎 09:13 Example of DCA
🔎 12:15 Example: DCA with Alphabet Inc. (Google)
Fundamental analysis (FA) measures a security’s intrinsic value by examining related economic and financial factors.
Value of an investment based on the financial situation of the company and current market conditions.
Determines if a security is over or undervalued
Helps determine the “Fair Market” value
Public financial data: a stock’s current price often does not reflect its intrinsic value.
Quantitative: information that can be shown in numbers, figures, ratios or formulas.
Qualitative: the quality, standard, nature, new announcement, new product, etc.
Common Fundamental Analysis metrics:
Earnings per share (EPS)
🔎 15:12 EPS calculation
Price-to-Earnings (P/E) ratio
🔎 16:14 P/E Calculation
Price-to-Book (P/B) ratio
🔎 17:04 P/B ratio calculation
Debt-to-Equity (DE) ratio
🔎 17:41 DE ratio calculation
Return on Equity (RoE)
🔎 18:20 RoE calculation
Dividend Yield
🔎 18:44 Dividend Yield calculation
Free Cash Flow (FCF)
🔎 19:22 FCF calculation
Growth Rate
🔎 20:11 Growth rate calculation
21:13 – TIPS & TRICKS
★ When your portfolio is up and running, conduct periodic reviews.
★ Practice using Fundamental Analysis.
★ There is no perfect investment portfolio.
22:15 – FINAL THOUGHTS