DIFFERENCE BETWEEN CASH FLOW AND CAPITAL GAINS

There are two sources of return in the stock market.

1.fundementals represented by earning and dividends.

2.speculation represented by the market valuation of these fundamentals.

The first is reliable and sustainable over the long term.

The second is dangerous and riskey.

The two sources of return could be further classified in to cash flow and capital gain.

CASH FLOW

WHEN ONE BELIEVES THE FUNDAMENTALS OF INVESTING , ONE IS LOOKING AT THE DIVIDEND PAYOUTS OF THE COMPANY.

THE CASH FLOW IS PRODUCT OF THE FUNDAMENTALS OR INHERENT STRENGTH OF TGE COMPANY, THE SUSTAINABILITY OF THE BUSINESS ,AND THE ROBUSTNESS OF THE BUSINESS MODEL.

INVESTING IN SUCH COMPANIES THA GOOD QUALITY OF MANAGEMENT , COMPETIVE MARKET POSITION, COR COMPETENCIES,... ETC, ENABLE THE INVESTOR TO EAEN A REGULAR INCOME OVER MANY YEARS.

CAPITAL GAINS

When a stock goes up in the value and one sells it at a profit, the gain is known as capital gain.

When people buy stock in the belief that the price will go up and they will make profit that called speculation.

Warren Buffett buy stock at a discount to their intrinsic value and he would buy business have a sustainable earings over long term. 

As the tech stocks did not fit in with thes conditions , he stayed away from them.

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