Cash Flow From Projects For A Company Is Computed As Book Review of Stock Market Cash Flow

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Book Review of Stock Market Cash Flow

I still wanted to learn more winning trade options to add to my arsenal. When I was at the MPH bookstore, I saw a rich dad advisor book called “Money Flow in the Stock Market” by Andy Tanner. I remembered how Robert Kiyosaki always emphasized cash flow in any investment compared to capital gains. I decided to flip through the book to find the gems. I only bought the book after a second look through it after I found that I could learn and practice some of the concepts taught.

To be a great investor, we must first be a great learner to learn everything about investing to be an expert. This is the first time I am familiar with two learning measurement systems; 1) The educational continuum helps us measure how well we have learned and applied the concepts of our financial education. The levels are ignorance, awareness, competence and expertise. 2) The Learning Cone, developed by Edgar Dale, shows how much we retain through different ways of learning, be it active or passive learning. With these two measurement systems, we can measure how good students were in investing.

Andy introduces us to the four primary asset classes. These are business, real estate, goods and paper assets. It provided a good comparison of the different asset classes to enable each individual to assess which asset would best suit their circumstances. Since this book deals with paper assets, Andy has outlined several reasons why an investor should consider owning paper assets in their investment portfolio.

Then Andy presents his 4 pillars of investing. The next 4 chapters dive deep into each pillar. I personally think that the 4 pillars are very useful and guide the investor, no matter what level he is at, to make better decisions. The 4 pillars are:

· Pillar 1 – fundamental analysis

· Column 2 – Technical analysis

· Pillar 3 – Cash flow

· Pillar 4 – Risk management

Fundamental analysis allows an investor to determine the strength and value of an entity (government, corporate, personal) by understanding its financial statements. Basically, the way the financial statement will look for each entity depends on the applied policies. Policies must change to change the fundamentals. One of the best investors of our time, Warren Buffet, is a guru in determining the fundamentals of any company. Gurus like him have a set of important fundamental ratios they can rely on to determine whether a company is worth investing in. His company, Berkshire Hathaway, implemented excellent policies that led to tremendous growth and an exponential increase in his company’s stock prices. Andy provided similar ratios (and definitions) for investors to compare stocks. I find them very useful and have used them in inventory analysis.

Technical analysis helps investors determine market strength based on the supply and demand of price movements. A stock chart is used by investors to see if there is a trend created by historical price movements. This trend or pattern identified by the investor will tell him the likely movement of the stock. Andy gave a pretty good introduction to technical analysis, explaining essential basics such as trend types, support and resistance, and a few commonly used chart patterns. I have found that this is all that any investor needs if they really become skilled at them.

Cash flow helps the investor to better position himself in the market. Andy uses the concept of options to illustrate this point and highlights the opportunity this instrument provides for an investor to profit in any market direction. Andy explains the many properties of an option contract. Understanding the basics of Call/Put and the combination of both options allows the investor many ways to position himself in the market.

Risk management teaches us three ways to deal with risk, 1) Avoid risk 2) Take risk 3) Manage risk. Risk is associated with control. An investor with more control in his investment will have less risk. The same is true when an investor has less control over his investment, he will have a higher risk. Those who are not in control are gamblers. It is also wise to know what the maximum investment risk is.

How we end up in the future depends on the choices we make today and who we surround ourselves with. How good students are today will determine our financial future.

I thoroughly enjoyed this book as Andy is an excellent teacher, explaining concepts in very simple language. This allows me to better understand and remember what I taught. I hope you will get a copy of his book and be enlightened.

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