Investors are made, not born.
These books will help you to become a great investor of this day and age.
1. “The Intelligent Investor” by Benjamin Graham
Warren Buffett, the legendary investor, and respected financial expert, listed this book as one of the best books to read if you want to learn more about investing.
His favorite chapters include how to navigate the especially strong markets, as well as the especially weak markets.
Investors can use the advice from Graham, who has been called the father of value investments, to strengthen their investment portfolios.
Within this book, readers can understand the meaning of value investing as the ability to find a stock that the market has thus far undervalued, and holding onto it until the market see it as worth something.
The purpose of this book is to help investors take the complications and complexity out of investing.
It takes the essence of investing and transcribes it into something that is simple enough for anyone to understand.
The magic formula rules are described in detail in Joel Greenblatt’s book, “The Little Book That Still Beats the Market,” and are displayed in the following graph:
The author has proven success in investing throughout his career, averaging returns each year of 40% for more than 20 years.
So readers know that they can trust him.
He takes everything that he knows about investing and explains it using math at the level of a sixth grader, using simple language that is easily understood.
3. “Fooled by Randomness” by Nassim Taleb
Nassim Taleb is a very famous investment writer, who uses a set of core values to help people understand the various complexities and subtleties of investing.
In this book, he outlines how the idea of probabilities, and “alternative histories” can help you understand how to be a better investor.
Probability is an inevitability when dealing with the stock market, and understanding how it works, and how you can use it to your advantage.
By using probability as a tool, rather than as something that occurs to you, you can make smarter and more profitable investments now and in the future.
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One of the most important things that a lot of the top investors say every smart investor must have is critical thinking skills.
This is also a skill which, sadly, many investors are lacking.
Often people rely on one of two trading and investment philosophies.
Either they rely on blind luck to guide their investments, or they pick a strategy and blindly follow that as they try and find the right investments for them.
Unfortunately, neither of this are going to lead to long term trading and investment success.
The best way, according to Marks, is to utilize critical thinking when making decisions on investments.
Charlie Munger is one of the most underrated investment strategists.
He has incredible ideas that many people follow in their everyday investment activities, but do not realize are attributed to him.
With this book, readers will find a compendium of the speeches from Munger throughout his career.
It is a very academic read, and will focus on the wisdom of investment trading, as well as the critical thinking, and the psychological aspects of trading that will effect every trading decision that you make.
However, Munger cuts through all of his academic language with wit and humor which will make the ideas easier to understand for any investor.
Most people know who Warren Buffett is, and most of those people trust that he knows what he is doing when it comes to money management and investments.
When asked who inspires him, and where he bases his management and investment philosophies off of, he lists two people – Benjamin Graham and Phillip Fisher.
The following is a graph depicting the performance of the Philip fisher Screen from January 1998 to August 2008:
Phillip Fisher has one of the best-proven investment strategists for finding, buying, and holding companies which end up being large stores of profit in the long run.
If the teachings of Fisher are good enough for Buffett, they are good enough for you.
In Mark Spitznagel’s “The Dao of Capital,” he describes a very specific methodology and philosophy for investing and for building wealth.
He describes the Austrian method of investment.
In this trading and investment philosophy, the goal is to identify, obtain, and maintain the positional advantage in the trade or investment situation.
It is a risky strategy, but it is one of the smarter ways that you can utilize risk taking within your investing and trading.
You can find a comfortable medium between being too afraid of taking any major risks, and being overly risky and dangerous with your decisions.
Warren Buffett is one of the most recognizable names and faces in investments and trading.
He has seemingly found the perfect system for making and maintaining his wealth throughout many different markets.
Despite the highest of highs and the lowest of lows, Buffett has been able to maintain his wealth.
It is thanks to Buffett that many people got into value investing, and it has restored many people’s faith in value investing.
This book goes through his life and gives important and helpful hints that investors can use in their daily practices.
When we set our goals, we typically define them in comparison to other people’s.
Those who have succeeded and have done something with their life, are the ones we look up to, and who we want to emulate.
We want to achieve that they have achieved.
Within Thorndike’s book, he finds eight of the most successful and creative CEOs and details how they obtained their success.
If you want to be like them, you can see what they did, and apply that to your life, and your investment strategies and philosophies.
Often, when the average investor tries to read books on investment, they see something highly theoretical, and not very practical.
The theory works well to an extent, but when you want to apply something to the real world, and to an actual investment situation.
But with Mandelbrot, you will read theories which are legitimately applied to the real world.
It is practical, and realistic for the modern market.
It critiques the common and popular modern finance theory, which believes that the underlying assumptions of distributions are normal.
For those who are looking for a book which will give them a basic understanding of bond investing and equity, Pike’s book is a strong choice.
It will give you the basics of these ideas, including financial statements, cash flows, and more.
It can help people in all aspects of the market, whether on the purely business side, or as someone who is looking to begin or continue investing.
It is touted as a book which can help you understand those other financial and investment books which take the topic to a highly intellectual level.
When we are in the midst of a financial decline, as we are currently, we often have a hard time seeing our way out of it, and how it will ever be better for us.
The same can be said for the reverse, when the market is strong and is providing large profits, we often believe that nothing will end it.
Both of these beliefs are completely wrong.
Mahar details the massive boom from 1982 to the early 2000s.
She wants investors to remember that no matter the high, we will all be tainted in our trades and investments by the euphoria of making money off of smart trades.
This is one of the smaller books on this list, but that does not mean that it is any less informative for readers.
It teaches its readers a history lesson, going back to the crash of the 1920s, detailing the way the market exploded, and then crashed as a result.
What Galbraith was trying to say, and trying to show in this book, is that every market bubble reacts this same way.
It is an informative look at the cycle of the market, and despite being written in the 1950s, it is still relevant to today’s markets.
A book written in the 1970s gives what has become one of the best explanations and statement of what has been called the efficient-market hypothesis.
The efficient-market hypothesis claims that the market is measured by two things – the fact that in the long run averages are the most important, and the general randomness of the market.
Because of these two factors, there is no point in trying to fight the market.
Each investor is going to have a different philosophy or strategy that they will hold to when they are looking for possible trades and investments.
One of the most popular and successful strategies is what is known as the buy and hold strategy.
Siegel’s book has long been seen as the gold standard for strategy.
Siegel is a professor at the prestigious Wharton School and has identified the “Siegel constant,” which says that over the past 200 years, stocks have risen at a steady rate of 6.6%.
John Bogle is the pioneering founding of the 1970s index fund, the Vanguard Group.
Thanks to this experience, he has become a leading voice for what fighting against what has been called “active” fund management.
For anyone who is considering following an active fund management strategy, this book is vital to read.
He believes that active fund management strategies will ask for money and fees for services and performances that you know that you cannot follow through.
Warren Buffett has proven to be one of the most successful investors in the market today.
Some of his works have already been included on this list, as his work is included in many other books that are important for investors to read if they want to be successful.
In this book, a collection of his various essays has been compiled for the investor to read, either as an introduction to investing or as a way to continue and grow your understanding of investment.
In this book by Shiller, he compares the long term market with the short term market.
In the long term market, most financial analysts will describe it as efficient, and for the most part rational.
However, in the short term, the market is but the exact opposite.
In the short run, the market is “hysterical,” as Shiller has described.
The problem with this is that the irrational behavior of investors which is characteristic of the short term can often last much longer than the short term.
This can lead to negative effects that begin to affect the long-term functioning of the market.
The subtitle of this book, “The Impact of the Highly Improbable,” describes the basic foundation of this book.
Taleb uses this book to challenge our ideas of what is typical in the marketplace, and for what you should be prepared for.
Too many times, we only prepare for the predictable.
The unpredictable is much less likely to occur, so why prepare for it?
Taleb reminds us that it is typically the unpredictable events which are most likely to have the greatest effect and that we need to be prepared for everything which can affect us.
Republicans Ready To Finalize Stimulus Bill As Dems Continue To Squabble
Treasury Secretary Steve Mnuchin and White House Chief of Staff Mark Meadows met with House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer on Saturday. This is a rare weekend session to try and break the stalemate between Republicans and Democrats over the next stimulus bill.
No deal was finalized. However, Mnuchin said he and Meadows were willing to meet with Democrats every day. This can go on until an agreement is reached.
The sticking point for Republicans is an unwillingness to extend the $600 per week unemployment benefit. They feel the amount needs to be pared down to a more reasonable $200 per week so that unemployed workers have a financial incentive to find work instead of making more money by remaining unemployed.
Unsurprisingly, Democrats want the $600 to be reinstated and have tied it to a host of other demands that have nothing to do with the pandemic, like their insistence on approving $1 trillion to be sent to state and local governments to fund budget shortfalls, food stamp increases, and assistance to renters and homeowners. Mnuchin said that’s “something we’re not going to do.”
Democrats Refuse to Agree
Mnuchin appeared on ABC’s “This Week” yesterday. There, he said the White House understands the need for extra unemployment benefits. However, he also says the Democrats are holding up the deal.
“The president is very concerned about the expiration of the unemployment insurance,” Mnuchin said, adding “We proposed a one-week extension at $600 so that, while we negotiate a longer term solution, at least all those people don’t lose their money. I’m surprised the Democrats won’t agree to that. They’re insistent on having a larger deal.”
He also said that Republicans aren’t willing to burden our country with more debt.
“There’s obviously a need to support workers, support the economy,” Mnuchin said. “On the other hand, we have to be careful about not piling on enormous amounts of debt.”
Until a Deal Is Made
He added that the White House supports a one-week extension of the $600 per week until a deal is struck. However, he believes $200 is a more appropriate amount for the extra weekly benefit.
“There are cases where people are overpaid,” Mnuchin said.
He did add that both sides agreed on the need for another $1200 stimulus payment for Americans, and that once approved, the checks could be in the mail within a week.
Both sides have agreed to meet daily until a deal is struck, and at least one Democrat sounds optimistic that a deal will be reached sooner rather than later.
“This was the longest meeting we’ve had and it was more productive than the other meetings,” said Schumer. “We’re not close yet, but it was a productive discussion — now each side knows where they’re at.”
Chief of Staff Meadows, however, doesn’t expect a deal is forthcoming. Appearing yesterday on CBS’s “Face The Nation,” Meadows said, “I’m not optimistic that there will be a solution in the very near term.”
Here’s Why The ‘Cockroach Portfolio’ Is Gaining Popularity
Ray Dalio, the founder of Bridgewater Capital, calls it the “all-weather portfolio” and it’s helped his investment management firm amass roughly $140 billion in assets.
Former Libertarian presidential candidate Harry Browne called it his “fail-safe investing” portfolio. Additionally, It just had its best three-month return ever. It returned 18%, far exceeding its average annual return of 7%.
Browne’s investing philosophy was that when times are good, stocks do well. Meanwhile, bad times are good for Treasury bonds, and gold does well during stagflation. Also, cash is king during a recession or crisis.
Since we don’t know what the future holds, Browne advocated for putting 25% of your portfolio into each asset class. He also suggests being prepared for whatever comes. With bonds, gold, and Treasury’s in your portfolio, you’ll underperform during a bull market. However, you can more than make up for it by softening the blow during a down market.
The “Cockroach” Portfolio
Back in 2012, Dylan Grice, a former strategist with SG Securities, called that type “the cockroach” portfolio. He dubbed it as such due to its ability to survive anything thrown at it.
“What I like best about cockroaches,” wrote Grice, “isn’t just their physical hardiness, it’s the simple algorithm they use to survive. According to Richard Bookstaber, that algorithm is ‘singularly simple and seemingly suboptimal: it moves in the opposite direction of gusts of wind that might signal an approaching predator.’ And that’s it. Simple, suboptimal, but spectacularly robust.”
Grice has calculated that for long-term investors, this type of portfolio has done at least as well as the traditional 60/40 stock and bond mix since the early 1970s. But most importantly, it managed to avoid any massive drawdowns.
And just like cockroaches, your first job is surviving as an investor, says Groce, while prospering is job number two.
A Similar Approach
Fortunately for investors who are looking for this type of portfolio, an ETF has recently launched that follows the same approach as the “cockroach” portfolio.
It’s called The Advanced Research Investment Solutions Risk Parity ETF (RPAR) and was launched last November. Alex Shahidi, the managing partner and co-chief investment officer, says they’re up to $620 million in assets so far.
He says the ETF has returned 12% so far this year compared to 1% for the S&P 500.
Most importantly, during the crash in March it fell just 15%, less than half of the drop in the S&P 500.
According to Shahidi, the fund is 25% stocks, 15% industrial commodities, 17.5% gold, 20% long-dated Treasury inflation-protected securities and 42% long-term Treasury bonds. Total exposure to the market is 120%, because the fund is 20% leveraged.
The stock mix is half U.S. and half overseas stocks, with the overseas portion tilted toward high volatility emerging markets.
Nobody knows what the market will do next, so Shahidi says you want to be prepared for any outcome. “You want to be diversified to (different) economic environments,” he added.
He did say that “If I had to pick an asset class for the next 10 years, it would be gold.”
How To Buy Gold For Your Investment Portfolio – Part 2
Yesterday was part one of buying gold and silver coins for your investment portfolio. With gold and silver both on a hot streak, investors are looking for the fastest way to gain exposure to and buy precious metals. You must be prudent and exercise caution so you don’t make a mistake and find yourself with a bad investment.
Do: Buy Gold With Your Savings
Don’t borrow money to buy gold. Use your savings so when you take possession of your gold, it’s yours without any claims against it. With volatile gold prices, you don’t want to be paying back a loan on your gold if the price suddenly dips.
Don’t: Buy Gold With Credit
The current financial system is built on fiat currency and debt with dollars being printed out of thin air. The reason to own gold is the opposite of that. So to purchase gold by using the system it is protecting against defeats the purpose of owning gold. Just use your savings and own your gold outright from day one.
Do: Store Coin Nearby
If a crisis hits and you need access to your gold, you don’t want to be out in public trying to retrieve your gold. So whether it’s in a small safe hidden in your house or buried in your yard, keep your gold nearby for easy access.
Don’t: Store Coins In a Safety Deposit Box
Storing your gold at a bank sounds like a safe decision. But it’s a bad idea for a few reasons. The first is that if there were ever a crisis, you have to go to the bank to retrieve your gold. That assumes the banks will be open during a crisis. Then you have to get access to your safety deposit box, retrieve your coins and safely get them home. That’s a lot of things that need to go right during a crisis. Additionally, gold has been confiscated before. Here in the US, gold was confiscated in 1933 under Franklin Roosevelt. If it were to happen again, gold stored at home, where there is no record if it, is much safer.
Do: Only Invest With Money You Don’t Need For Awhile
Nobody knows when inflation will hit, or the dollar will collapse, or when gold prices will finally take off. But we aren’t trying to time any of those occurrences. The reason to own gold is a long term store of value. So you don’t want to speculate in gold. We could see prices move higher or significantly lower. But long term, history has shown that gold prices steadily march higher as the dollar steadily declines in value. So when buying gold, make sure it’s with money that you don’t need in an emergency. We suggest using savings or other funds that you don’t need to worry about getting access to for at least five years.
If you have any more questions about investing in gold, find a reputable gold coin dealer near you. They will be glad to answer questions.
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