Passion fruit & share investment

This morning, my wife went to Kepong Baru wet market to buy groceries. I was at home, taking care of my two girls. 

She phoned me and asked me about the passion fruits sold by a guy. She wished to know whether it is cheap or not coz. I bought the fruits from that guy before. The price tag is RM 18/kg. I told her that it is expensive. Two days ago, it was RM 10/kg, sold by the same guy.

As usual, my wife will look at the price before she buy anything. A very nice and thrifty girl.. 

In fact, my wife invests in share market as well. She always look at the share price of the company of interest, and check whether the price tag is cheap or not, by merely examining the historical share price of the company. Not only my wife, my colleagues with a PhD degree would do that as well. 

Price tag is important in investment, not doubt about that. 

But, the other key aspect when coming to investing is the value and growth prospect of a company. A good company (e.g. better future earnings, etc.) can create better values, hence it deserves a higher price tag (e.g. share price). Thankfully, the investment world has come up with a yardstick to "measure" whether a company is cheap or not, by combining both value and price tag, termed as Price to Earning Ratio (PER). In other words, to know whether a good company is traded at cheap or expensive level, we just have to compare its current PER value with respect to its historical PER values.

Remember:

We have to compare its current PER value with respect to its historical PER values, NOT to compare its current share price with respect to its historical share price.

Of course, apart from PER, there are many other yardsticks such as dividend yield, Price to Book Ratio, etc. But, the PER method is the most common one.

I told my wife about the above method. She just smile, and never practice it. She said she got no time to dig out the info. But she go time to navigate FB, youtube, etc... haha.

Sometimes, I think passion is the key to be successful in investment. To be frank, not many peoples are passionate about the fundamental in value investing, as value investing is a tiring job. We have to gather historical financial data, analyze them, predict the future business prospect, and performing valuation on a company. 

But, there is no free lunch in this world right? To be rich, we have to work. Of course, working as a normal employee would never make us rich. We have to work smart --> and share market is one of the smart ways. I believe the effort we put into analyzing financial data is really worthwhile, as it could generate a massive amount of wealth if we do it the right way, which is hardly (or never) achievable by working as a normal employee.

My wife is very stressful in her company, having to deal with her problematic colleagues and tons of workloads. And yet, her salary is not equivalent to the amount of effort that she has put in. I believe many others are facing the same problems.

I hope my wife would soon realize the importance of investing and gain her passion in investment in one day.

So do my two little girls......