[Ask HN] How should I teach myself about investing?
9 comments
Benjamin Graham's "The Intelligent Investor." The Rich Dad, Poor Dad series. Learn solid economics, accounting and law; at least enough so you can identify good advisors in these areas.
Yes to Graham.
Emphatic no to Rich Dad Poor Dad. Here's why: http://www.johntreed.com/Kiyosaki.html
Emphatic no to Rich Dad Poor Dad. Here's why: http://www.johntreed.com/Kiyosaki.html
Thanks for the link on Kiyosaki.
Upvoted just for the fabulous essay you referenced.
I'm not sure what sort of investing you have in mind - small face-to-face angel participation, or working the treasury bond market. Nor do you say much about the size or timescale of the investments you'd like to make. And I'm in no position to give you expert advice either; all I can say from experience is that nonprofit financial advisers generally seem more helpful with advice about saving rather than investing (eg what sort of IRA and 401k options are available) while wealth management experts either charge a hefty premium for their opinion or function as sales staff for a range of vehicles and funds operated by an employer.
since patience is a key aspect of investment, I think you might as well park your cash for a few months and begin with the basic-but-essential advice offered by the SEC: http://www.sec.gov/investor/pubs/begininvest.htm. This will teach you the fundamentals of how to read a balance sheet or 10-k filing, how to make sense of popular metrics and acronyms and stuff like that. At the same time, take out a subscription to the Economist, Wall Street Journal or Financial Times. there's another newspaper called Investor's Business Daily but I don't rate that very highly. See what insights you can glean on your own for a few months, then buy a few serious-minded books rather than the get-rich-quick variety.
At that point, go talk to some financial advisers, and it will be much easier to assess the quality of their advice without feeling baffled by jargon or bamboozled by a sales pitch. I know, this is kindergarten-level advice from a first-grader - sorry if you've already done all this and are looking for a more technical insight.
I'm not sure what sort of investing you have in mind - small face-to-face angel participation, or working the treasury bond market. Nor do you say much about the size or timescale of the investments you'd like to make. And I'm in no position to give you expert advice either; all I can say from experience is that nonprofit financial advisers generally seem more helpful with advice about saving rather than investing (eg what sort of IRA and 401k options are available) while wealth management experts either charge a hefty premium for their opinion or function as sales staff for a range of vehicles and funds operated by an employer.
since patience is a key aspect of investment, I think you might as well park your cash for a few months and begin with the basic-but-essential advice offered by the SEC: http://www.sec.gov/investor/pubs/begininvest.htm. This will teach you the fundamentals of how to read a balance sheet or 10-k filing, how to make sense of popular metrics and acronyms and stuff like that. At the same time, take out a subscription to the Economist, Wall Street Journal or Financial Times. there's another newspaper called Investor's Business Daily but I don't rate that very highly. See what insights you can glean on your own for a few months, then buy a few serious-minded books rather than the get-rich-quick variety.
At that point, go talk to some financial advisers, and it will be much easier to assess the quality of their advice without feeling baffled by jargon or bamboozled by a sales pitch. I know, this is kindergarten-level advice from a first-grader - sorry if you've already done all this and are looking for a more technical insight.
In addition to taking economics, accounting, and law classes, I really learned a lot from reading public corporation's proxy statements. I would literally spend hours reading through Disney's annual proxy statements. You can find them on the corporations' site usually or as an SEC EDGAR filing. I also learned quite a bit from going through SEC filings http://www.sec.gov/edgar.shtml of companies I admire (Google, Disney, etc).
I also just looked at public stocks (finance.google.com) and tried to figure out what everything meant (EPS, P/E ratio, ROE [return on equity], etc). Reading articles in the Wall Street Journal also taught me a lot.
I also just looked at public stocks (finance.google.com) and tried to figure out what everything meant (EPS, P/E ratio, ROE [return on equity], etc). Reading articles in the Wall Street Journal also taught me a lot.
Basically it comes down to the following:
1) If you're low risk then stick it in a stable government bond.
2)If you're medium risk stick it in an low-fee index tracker
Most funds under-perform the market. There's no statistically sound way you can differentiate successful funds from lucky funds.
Trying to beat the market is a suckers game. There's no way you can out-analyze an analyst who spends 100 hours/week understanding a sector unless you have inside information or unique expertise. The first is illegal, the second is unlikely.
1) If you're low risk then stick it in a stable government bond.
2)If you're medium risk stick it in an low-fee index tracker
Most funds under-perform the market. There's no statistically sound way you can differentiate successful funds from lucky funds.
Trying to beat the market is a suckers game. There's no way you can out-analyze an analyst who spends 100 hours/week understanding a sector unless you have inside information or unique expertise. The first is illegal, the second is unlikely.
if you are a medium/high risk I'd say go for mutual funds. but don't get a US based funds. the fee is very high and pretty much not worth it. get an offshore funds instead. funds in developing countries do not charge yearly fee, only an entry/exit fee. Indonesian based funds, which I invested on, has recently gained over 100% return this year. Read: http://www.thestreet.com/story/10684590/indonesia-etf-up-146...
One of the best sources for investing wisdom is Warren Buffet himself. Read his annual letters to shareholders (http://www.berkshirehathaway.com/letters/letters.html) and his "owners manual" for stock in his company (http://www.berkshirehathaway.com/).
His way isn't sexy, but it works and makes sense.
His way isn't sexy, but it works and makes sense.
Works? I'd say that's an understatement :-) According to Wikipedia: "Berkshire Hathaway stock produced a total return of 76% from 2000-2010 versus a negative 11.3% return for the S&P 500."
Simple advice: Read the classics. Study successful investors. Study failures too!
Good advice: There is no substitute for investing with your own money. Investment simulators are absolutely to be avoided.
Hard truth: It will take years but investing will teach you much about yourself that you don't know (and some of it will not be flattering but you will eventually come to grips with it.) Knowing yourself will eventually make you a better investor and thinker.
Good advice: There is no substitute for investing with your own money. Investment simulators are absolutely to be avoided.
Hard truth: It will take years but investing will teach you much about yourself that you don't know (and some of it will not be flattering but you will eventually come to grips with it.) Knowing yourself will eventually make you a better investor and thinker.
3 ways people make (or claim to make) money in equity markets:
1. Technical analysis - trend following, etc. I personally was unconvinced but some people swear by it.
2. Fundamentals/value investing. Read the intelligent investor and security analysis. Very sound IMO.
3. Arbitrage - read "Beat the Market" by Ed Thorp. Also very sound IMO.
1. Technical analysis - trend following, etc. I personally was unconvinced but some people swear by it.
2. Fundamentals/value investing. Read the intelligent investor and security analysis. Very sound IMO.
3. Arbitrage - read "Beat the Market" by Ed Thorp. Also very sound IMO.
Spend some time here: http://www.bogleheads.org/
read the wiki; post questions in the advice forum; read some of the suggested books. I think William Bernstein is probably the best of them.
read the wiki; post questions in the advice forum; read some of the suggested books. I think William Bernstein is probably the best of them.
This is a good talk by Charlie Munger - http://www.ycombinator.com/munger.html.
I want to understand the field of investing myself, but I'm in the awkward position of not knowing who the experts are, or what the successful methodologies are.
Anyone care to offer some pointers?