http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks How to Make Money through Investing in Stocks People invest in order to save for retirement, create a rainy day fund or simply to increase their wealth. The American stock market has provided many investors with excellent returns. But in order to succeed you need to learn how to make money through investing in stocks and not simply guess at what to do and lose money in the process. In fact, one of the most famous investors, Warren Buffett, half-jokingly says that the first rule of investing is not to lose money and the second rule is not to forget the first rule! If you watch what investors like Buffet do you can make money through investing in stocks. The basis of his solid approach to investing is the concept of intrinsic value. Playing the Market Back in the 1920’s, the roaring twenties; playing the stock market was common. Stocks were going up and it was hard not to buy a stock and not see its value rise. Unfortunately the stock market crashed in 1929 and the overall stock market lost nearly half its value. Many stocks lost all of their value and companies went out of business. Unfortunately the tendency to play the market has not gone away. As the Chinese market rose a couple of years ago to new heights investors picked stocks based on lucky sounding names. And the Chinese market crashed. The dot com bubble and crash and the 2008 crash were likewise set up by inflated stock values as investors fought to get into what appeared to be an eternally rising market. How do you avoid playing the market? This is where the concept of intrinsic stock value comes in. Benjamin Graham and Intrinsic Value The intrinsic value of stock is its fundamental value based on predicted earnings. Investors compare intrinsic value to market value and when the intrinsic value of stock in a solid company is more than market value the stock is typically considered a buy. This is because the market will eventually catch up and price the stock accurately. If you are holding a stock whose intrinsic value is less than market value it is time to sell the stock before the market corrects down to the real value of the stock based on projected earnings. It was in the wake of the 1929 crash that Benjamin Graham came up with the concept of intrinsic value. And in 1949 he published a book entitled The Intelligent Investor which included his ideas.

1. How to Make Money through
Investing in Stocks
By www.ProfitableInvestingTips.com

2. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
People invest in order to save for
retirement, create a rainy day fund or
simply to increase their wealth.

3. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
The American stock market has
provided many investors with
excellent returns.

4. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
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5. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
But in order to succeed you need to
learn how to make money through
investing in stocks and not simply
guess at what to do and lose money in
the process.

6. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
In fact, one of the most famous
investors, Warren Buffett, half-
jokingly says that the first rule of
investing is not to lose money and the
second rule is not to forget the first
rule!

7. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
If you watch what investors like Buffet
do you can make money through
investing in stocks.

8. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
The basis of his solid approach to
investing is the concept of intrinsic
value.

9. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Playing the Market

10. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Back in the 1920’s, the roaring
twenties; playing the stock market
was common.

11. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Stocks were going up and it was hard
not to buy a stock and not see its
value rise.

12. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Unfortunately the stock market
crashed in 1929 and the overall stock
market lost nearly half its value.

13. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Many stocks lost all of their value and
companies went out of business.

14. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Unfortunately the tendency to play
the market has not gone away.

15. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
As the Chinese market rose a couple
of years ago to new heights investors
picked stocks based on lucky
sounding names.

16. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
And the Chinese market crashed. The
dot com bubble and crash and the
2008 crash were likewise set up by
inflated stock values as investors
fought to get into what appeared to be
an eternally rising market.

17. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
How do you avoid playing the
market?

18. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
This is where the concept of intrinsic
stock value comes in.

19. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Benjamin Graham and
Intrinsic Value

20. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
The intrinsic value of stock is its
fundamental value based on predicted
earnings.

21. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Investors compare intrinsic value to
market value and when the intrinsic
value of stock in a solid company is
more than market value the stock is
typically considered a buy.

22. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
This is because the market will
eventually catch up and price the
stock accurately.

23. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
If you are holding a stock whose
intrinsic value is less than market
value it is time to sell the stock before
the market corrects down to the real
value of the stock based on projected
earnings.

24. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
It was in the wake of the 1929 crash
that Benjamin Graham came up with
the concept of intrinsic value.

25. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
And in 1949 he published a book
entitled The Intelligent
Investor which included his ideas.

26. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Analyze the stock to determine its
price based on predicted future
income and then subtract the current
stock price.

27. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Calculate expected company cash flow
and then discount to current dollars.

28. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Determining intrinsic value of stock is
a discounted cash flow valuation.

29. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
The key to determining intrinsic value
of stock is getting a clear idea of the
medium and long term prospects of
the business in question.

30. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Successful stock investors learn to
judge how well a company will
manage its assets, products, costs,
R&D, and marketing.

31. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
When the picture is clear an investor
can make an informed decision.

32. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
If the market price is less than the
intrinsic value of stock it is time to
buy and if one owns the stock and the
prices are reversed it is time to sell.

33. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
A Formula for Calculating
Intrinsic Value of Stock

34. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
Here is the original formula that
Benjamin Graham suggested as
modified in 1962 and again in 1974.

35. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
• Preceding twelve
months earnings per
share, EPS
• A constant of 8.5
representing an
expected price to
earnings ratio, P/E
ratio, for a company
that is not growing
• g being an estimate of
long term growth
(five years)
• A constant = 4.4, the
average yield of high
grade corporate
bonds in the early
1960 decade
• Y = The current yield
of AAA corporate
bonds
• V = intrinsic value

36. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
The formula is as follows:
V = (EPS x (8.5 + 2g) x 4.4)/Y

37. http://profitableinvestingtips.com/profitable-investing-tips/how-to-make-money-through-investing-in-stocks
How to make money through
investing in stocks is to consider the
intrinsic value of every stock that you
want to buy and every stock that you
hold.