Tag: companies

investment, Stock Market

The Simplest Way to Invest #1

by Enes Öner2 Comments on The Simplest Way to Invest #1

People think investing is dangerous, risky or scary. But the only thing to do is to learn how to invest without worrying. Investing cannot be learned overnight. Still, it is something you can move forward quickly. It is possible to create the right portfolio by looking at very simple indicators and making very simple analyzes.

You need to create a portfolio for risk sharing. Professional investors say “don’t put all your eggs in one basket”. Because if all your eggs are in one basket, you may lose all your eggs when something happens to your basket. In this case, you have nothing else to compensate for your loss. Novice investors often make this mistake. However, when things go wrong, you should be able to balance the loss from one investment with another. If you have many baskets, it won’t be a big problem if one of your baskets falls. That’s why we must diversify our investments and create a portfolio.

As the first step in creating a portfolio, we should look at the P/B ratio of the companies we will buy shares. This ratio helps us to have an idea about whether the lot we will buy from that company is cheap or not. If the ratio of Market Value (P) and Book Value (B) is less than 1, the share is cheap. When it is higher than 1, we say the share is expensive. But of course this is not always the case. Sometimes, even if a company’s P/B ratio is 4, we consider that company’s stock cheap. Because the industry of the company may have started to improve. As a result of this, all profit rates and market values of companies in that sector increase. While the ratio of the company we are looking at is 4, the P/ B ratios of other companies in the sector may have reached values such as 8, 10, 15. Then we can think that the share of this company is cheaper than other companies for now and will be valued. However, the reason why a company’s stock is cheap is important. Is this company not yet valued in the industry or does this company have a problem? Did the company borrow money but couldn’t pay its debts? Was there a negative news in the media? Does the company have foreclosed assets? Is the owner / CEO a bad reputation?

It’s easy to learn all this. After typing the name of the company and “P/B ratio”, search on google. In the results, there will be sites showing the company owner, company executives and company partners. You can also search those names on the internet. Explore, find the site you can read most comfortably. What you have to do is google the code of a company that has publicly listed shares on the stock exchange. On the Internet you will find announcements, postings and notifications made by the company. Check them out too.

Let’s say you looked at company executives, company’s announcements and investments; you did not see anything negative. While the company’s P / B ratio was 4, the others in the same sector were 10, 15. If you haven’t seen anything negative, you can say that the shares of this company are cheap for now even though the P / B ratio is higher than 1. The cheaper will be valued. You can now add this company to your portfolio for medium term investment. But remember, don’t put all your eggs in one basket.

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Book Recommendations, Financial IQ, investment, Taxation

Why You Need to Increase Your Financial IQ

by Enes Öner10 Comments on Why You Need to Increase Your Financial IQ

The average American today works for six months to pay taxes. This is a very long time. The more one work, the more she pays the government.

In this article, we’ll take a look at how taxes work in favor of corporations and the rich, and then discuss the power and advantages of corporations.

When the poor and middle class try to punish the rich, the rich do not bow down and react. Because they have money, power, and are determined to change things. They don’t just sit around and agree to pay taxes. They look for ways to reduce their tax burden, recruit skilled lawyers and accountants and persuade politicians to change laws and create legal loopholes. They have the opportunity to change the rules.

For example, the US tax law provides some possibilities to avoid paying taxes. Many people cannot access these opportunities because they are busy with their own work. These legal loopholes are details only the rich can see. For example, “1031” means the section numbered 1031 of the State Revenue Law. It allows the seller to delay tax on real estate sold to be exchanged for a more expensive property for the purpose of capital increase.

Real estate can offer great tax benefits. If you are not selling for disposal, you will not pay tax on your earnings as long as you trade them to increase their value. People who do not take advantage of the tax savings made possible by law miss the opportunity to grow their assets.

A high Financial IQ is required to be aware of and benefit from these opportunities. And raising Financial IQ only takes four areas of expertise:

  1. Accounting. We can also call this financial knowledge. This skill is a must to build an empire. The more money one takes the responsibility, the more careful one has to be. Otherwise everything will be ruined. Details matter. Financial knowledge is reading and understanding bank statements. This skill allows to identify the strengths and weaknesses of any organization.
  2. Investment. The science of making money. Strategies and equations are important for making the right investments. This skill is linked to creative intelligence.
  3. Understanding Markets. It requires knowledge of supply and demand. It is necessary to know the “technical” aspects of the markets. Whether an investment is right or not depends on current market conditions.
  4. Laws. A company with technical skills related to accounting, investment and the market grows rapidly. But a person who knows the tax law and is under a corporate shield can get rich much faster than someone working for someone else or just someone who owns a small business. This is like the difference between walking and getting on a plane. The difference is huge when it comes to long-term wealth.

Employees earn and pay taxes, and live with the rest. The company earns and spends money and pays taxes on the remaining amount. This is one of the biggest legal tax loopholes benefited by the rich.

This is easy to do if you have investments that generate good cash flow. For example, you can turn your vacation trips into board meetings in Hawaii. Automobile payments, insurance, repair expenses turn into company expenses. You can show your sports club membership fee as company expense. You can add most of the restaurant expenses to company expenses. There are many more advantages like this, but they should be done before paying tax.

The rich hide most of their wealth. They use companies or foundations to protect their assets from creditors. When someone sues a wealthy person, they face a legal protection shield, and often that wealthy person “has no property”. The rich keep control of everything, but they have no property. The poor and middle class try to own everything and lose them to either the state or other people.

In short, if you have legal assets, find out as soon as possible the benefits and protection shield a company can offer you. You will find many books written on the subject. Even if you look at the company establishment stages, you will get detailed information on this subject. The power of sole proprietorships is well described in Napoleon Hill’s book Think and Grow Rich.

Financial IQ is actually a synergy of many skills and abilities. But I think the combination of the four technical skills I listed above forms the basis of financial intelligence. If you have a desire to make a great fortune, then the combination of these skills becomes even more important.

As part of your overall financial strategy, my suggestion is to have your own company equipped with assets.

Please let me know what you think below.

Keep reading with WHY ACCOUNTING KNOWLEDGE IS NEEDED.

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