Understanding of Intrinsic Value in stocks.

Understanding Intrinsic Value and Its Limitations

Intrinsic value is the estimated value of a company based on its underlying assets and future earnings potential, independent of its stock price. It's a core concept in value investing.

Important Note: Calculating intrinsic value is complex and requires significant financial knowledge and analysis. It's not a foolproof method and should be used in conjunction with other valuation methods and thorough due diligence.

Steps to Calculate Intrinsic Value

There are several methods to calculate intrinsic value, but the most common is the Discounted Cash Flow (DCF) analysis.

1. Understand the Business:

• Industry analysis: Understand the company's industry, its competitive landscape, and growth prospects.
• Business model analysis: Grasp the company's revenue model, cost structure, and profitability.
• Management analysis: Assess the quality of management, their track record, and their strategic vision.

2. Project Future Cash Flows:

• Revenue forecasting: Estimate future revenue growth based on historical data, industry trends, and company-specific factors.
• Expense forecasting: Project operating expenses and capital expenditures.
• Calculate free cash flow (FCF): FCF is the cash generated by a company after accounting for capital expenditures.

3. Determine Discount Rate:

• Weighted Average Cost of Capital (WACC): This is the average cost of a company's capital (debt and equity).
• Risk-free rate: This is the return on a risk-free investment, like government bonds.
• Equity risk premium: This is the extra return investors expect for investing in stocks compared to risk-free investments.

4. Discount Future Cash Flows:

• Use the discount rate to calculate the present value of future cash flows.
• Sum up the present values of all future cash flows to get the company's enterprise value.

5. Calculate Intrinsic Value per Share:

• Subtract debt and add cash to the enterprise value to get the equity value.
• Divide the equity value by the number of outstanding shares to get the intrinsic value per share.

6. Sensitivity Analysis:

• Test the intrinsic value calculation with different assumptions about growth rates, discount rates, and other variables.
• This helps assess the sensitivity of the valuation to changes in these factors.

Additional Considerations:

• Comparables analysis: Compare the company's valuation multiples (like price-to-earnings ratio, price-to-book ratio) to industry peers.
• Dividend discount model (DDM): For companies with stable dividend payouts, this method can be used.
• Asset-based valuation: This method is suitable for companies with significant tangible assets

Saving on Groceries in Singapore

Saving on groceries in Singapore can be achieved through smart shopping strategies and making informed choices. Here are five effective ways to save on grocery expenses:

1. Shop at Affordable Grocery Stores and Wet Markets

• Supermarkets: Compare prices at different supermarkets such as NTUC FairPrice, Giant, Sheng Siong, and Cold Storage. Each may have different promotions and discounts.
• Wet Markets: Purchase fresh produce, meat, and seafood at wet markets where prices are often lower than in supermarkets.
• Online Grocery Shopping: Use online platforms like RedMart, Honestbee, and Amazon Prime Now for competitive prices and deals.

2. Buy in Bulk and During Promotions

• Bulk Purchases: Buy non-perishable items in bulk to take advantage of lower unit prices. Consider items like rice, pasta, canned goods, and toiletries.
• Promotions and Sales: Look out for discounts, promotions, and special offers. Stock up on frequently used items during sales periods.
• Use Loyalty Programs: Sign up for loyalty programs such as the NTUC LinkPoints card, which offers points that can be redeemed for discounts.

3. Plan Your Meals and Make a Shopping List

• Meal Planning: Plan your meals for the week to avoid impulse purchases and food waste.
• Shopping List: Create a shopping list based on your meal plan and stick to it to avoid buying unnecessary items.
• Avoid Shopping When Hungry: Shopping on an empty stomach can lead to impulse buys, so eat before you shop.

4. Choose House Brands and Lower-Cost Alternatives

• House Brands: Opt for house brands or generic brands, which are often cheaper than name brands but of similar quality.
• Substitute Expensive Items: Replace expensive items with more affordable alternatives. For example, choose local produce over imported goods.

5. Use Discount and Cashback Apps

• Discount Apps: Use apps like ShopBack, Fave, and Lazada for cashback and discounts on grocery purchases.
• Credit Card Offers: Pay with credit cards that offer cashback or rewards points for grocery shopping. Look for cards with specific grocery benefits.
• Coupons and Vouchers: Use digital and physical coupons and vouchers from supermarkets and online platforms to reduce your grocery bill.

By implementing these strategies, you can effectively manage and reduce your grocery expenses in Singapore

Here's a tip. If you have parents above age 65, you can accompany them to go for shopping for Tues / Wed in supermarket to have additional discount of 2%. This will help in reducing the GST (9%) that is being incurred in Singapore. 

How to start to get into a habit of saving money from young in Singapore

Starting a habit of saving money from a young age in Singapore can set the foundation for financial stability and growth. Here are some practical steps to get into the habit of saving:

1. Set Clear Financial Goals

• Define what you are saving for, whether it's a gadget, education, a trip, or an emergency fund.
• Set both short-term and long-term goals to stay motivated.

2. Create a Budget

• Track your income (allowance, part-time job earnings) and expenses.
• Use apps like Seedly, Toshl Finance, or a simple spreadsheet to manage your budget.

3. Open a Savings Account

• Open a savings account with a local bank like DBS, OCBC, or UOB.
• Consider accounts with higher interest rates or specific savings plans for youths, such as POSB Smart Buddy or OCBC Mighty Savers.

4. Automate Your Savings

• Set up automatic transfers from your spending account to your savings account on a regular basis.
• Even small amounts, like $10 a week, can add up over time.

5. Track Your Spending

• Keep an eye on where your money goes. Identify and cut down on unnecessary expenses.
• Avoid impulsive purchases by implementing a 24-hour rule: wait a day before making non-essential purchases.

6. Prioritize Needs Over Wants

• Differentiate between needs (essential expenses like food and transport) and wants (luxuries like dining out or new clothes).
• Prioritize spending on needs and limit spending on wants.

7. Use Cash or Debit Cards

• Using cash can help you be more aware of your spending.
• Debit cards can also help control spending better than credit cards, which can lead to debt if not managed properly.

8. Save Any Extra Money

• Save any extra money received from allowances, part-time jobs, or gifts instead of spending it all.
• Allocate a percentage of any extra income directly to your savings.

9. Learn About Financial Literacy

• Educate yourself about money management through books, online courses, and workshops.
• Websites like MoneySense provide useful resources for financial education in Singapore.

10. Set a Savings Challenge

• Participate in savings challenges, such as the 52-week savings challenge, where you gradually increase the amount you save each week.
• Make it a fun competition with friends or family members.

11. Reward Yourself

• Occasionally reward yourself for reaching savings milestones to stay motivated.
• Choose affordable rewards that won't derail your savings goals.

12. Seek Guidance

• Talk to parents or guardians about their saving habits and seek advice.
• Consider consulting with a financial advisor for personalized tips and strategies.

By integrating these practices into your daily life, you can develop a strong habit of saving money from a young age and build a solid financial foundation for the future

I've been teaching my daughters to start saving at a young age. Although they do not quite comprehend the concept of money. I try to cultivate a habit for them to follow. For the meal allowance that they get every day. Think about how to have delay gratification whereby they can get an icecream at end of the week by saving the 20cents that they did not incur from buying drinks. Go for the alternatives like water instead of drinks.