Ask HN: How can I learn how to invest in the market?
21 comments
Nobody ever wants to hear this, but I have to say it anyhow: read A Random Walk Down Wallstreet, give up, and invest in index funds.
I'll see your Malkiel and raise you a Bernstein:
http://www.amazon.com/Four-Pillars-Investing-Building-Portfo...
The conclusion remains the same, however. Oh, how terribly dull it all is when compared to a nice game of craps.
http://www.amazon.com/Four-Pillars-Investing-Building-Portfo...
The conclusion remains the same, however. Oh, how terribly dull it all is when compared to a nice game of craps.
I hope this is not "above me" I don't know as much as the average hacker would probably know about markets. I'm 20 and don't have THAT much knowledge.
>>give up, and invest in index funds. Alright, Any book recommendations for that?
>>give up, and invest in index funds. Alright, Any book recommendations for that?
It is not a commentary on you, but rather on markets. On average, investor performance is market average minus expenses, and this holds regardless of investor sophistication.
Actually my understanding is that investor performance is usually better than the market average, but not by enough to meet expenses. Therefore after market returns usually lose. Markets are not perfect. But the imperfections are small.
There was a study I saw a decade ago about whether any funds produced better results than chance. Due to the difficulty of modeling the possibilities, only mutual funds were considered. So people like George Soros did not get counted. In the end 2 names had performed high enough that, with 95% confidence, their performance was not by chance. Their names were Peter Lynch and Warren Buffett. Peter Lynch retired before he got to the 99% confidence.
Interestingly both Peter Lynch and Warren Buffett recommend low cost index funds for average investors.
There was a study I saw a decade ago about whether any funds produced better results than chance. Due to the difficulty of modeling the possibilities, only mutual funds were considered. So people like George Soros did not get counted. In the end 2 names had performed high enough that, with 95% confidence, their performance was not by chance. Their names were Peter Lynch and Warren Buffett. Peter Lynch retired before he got to the 99% confidence.
Interestingly both Peter Lynch and Warren Buffett recommend low cost index funds for average investors.
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0% return over 5-10 years is the best you can do?... and even if you accept the conclusion, then of course there is the question of which index ;)
malkiel's work is based on flawed assumptions which lead to flawed conclusions -- i recommend reviewing those before spending time on his book.
details and a link to the flaws please...
Google "fantasy investing" to find a good online trading simulator and then trade, trade, trade. Nothing compares to trading a real portfolio with "play money". Books are good for teaching basics about stock research but they don't teach you about your own psychological biases, risk tolerance, individual stocks' trading volume, etc.
At the same time, subscribe to some financial channels on YouTube (like Peter Schiff's for example) and watch them every day. Whenever you hear something you don't understand, read up on it. It'll take time but it will be worth it. (Just make sure you don't end up with all-bull or all-bear channels, like I said you want to keep your own emotional biases in check).
At the same time, subscribe to some financial channels on YouTube (like Peter Schiff's for example) and watch them every day. Whenever you hear something you don't understand, read up on it. It'll take time but it will be worth it. (Just make sure you don't end up with all-bull or all-bear channels, like I said you want to keep your own emotional biases in check).
This is a comment I made on a previous submission:
"Trading" is not the answer. "Investing" is. Read The Intelligent Investor and Security Analysis, both by Benjamin Graham; and F Wall Street by Joe Ponzio (His website fwallstreet.com also has a number of gems. Particularly, his post about how to value a business http://www.fwallstreet.com/article/26-calculating-the-value-...)
If you read those materials, you will learn how to invest. They will teach you how to value stocks and more importantly, teach you how to think about the markets - be emotionally detached.
"Trading" is not the answer. "Investing" is. Read The Intelligent Investor and Security Analysis, both by Benjamin Graham; and F Wall Street by Joe Ponzio (His website fwallstreet.com also has a number of gems. Particularly, his post about how to value a business http://www.fwallstreet.com/article/26-calculating-the-value-...)
If you read those materials, you will learn how to invest. They will teach you how to value stocks and more importantly, teach you how to think about the markets - be emotionally detached.
Warren Buffets letters to shareholders would be a good place to start. Read all of them.
The intelligent investor and securities analysis by Ben Graham are essentially reading albeit abit dry.
I'd also recommend (when looking at equities) that you do lots and lots and lots of research on individual stocks and really get to know them before you take the plunge and fully understand why you've decided to buy.
Also, have an entrance and exit point on all investments. Unless you're going for the 'value investing' strategy buying and holding forever.
The intelligent investor and securities analysis by Ben Graham are essentially reading albeit abit dry.
I'd also recommend (when looking at equities) that you do lots and lots and lots of research on individual stocks and really get to know them before you take the plunge and fully understand why you've decided to buy.
Also, have an entrance and exit point on all investments. Unless you're going for the 'value investing' strategy buying and holding forever.
I'm looking for more applied advice. Your advice seems to have more of that, does Buffets' letters include such things?
Thanks for the entrance/exist point strategy. I am planning to invest for the short term so that should be useful
Thanks for the entrance/exist point strategy. I am planning to invest for the short term so that should be useful
Well, I'd say Buffett's letters' strong points are the way it breaks down tough concepts into a language that most people can understand. While I wouldn't say that he dispenses much in the way of investment advice, they make good reading if you're looking for a broad stroke of the US economy (especially the financial sector) as well as the factors that affect his business.
It also helps that his letters tend to be free of the BS that permeates some of the annual reports I've had to read through. When a business he owns isn't doing well, he admits to it without needing to couch behind platitudes.
It also helps that his letters tend to be free of the BS that permeates some of the annual reports I've had to read through. When a business he owns isn't doing well, he admits to it without needing to couch behind platitudes.
Read some books by Michael Lewis and then reconsider your plans.
You need to understand the psychology of markets, booms and busts and how the professionals fleece the wannabes. Understanding economics and reading Warren Buffet's remarks will lead you to invest in safe stocks, et al. That is not the way to getting rich anytime soon.
You need to understand the psychology of markets, booms and busts and how the professionals fleece the wannabes. Understanding economics and reading Warren Buffet's remarks will lead you to invest in safe stocks, et al. That is not the way to getting rich anytime soon.
read jack schwager's books, the better biographies on warren buffett (lowenstein's, also snowball effect), lowenstein's book on ltcm is also worth reviewing.
i highly recommend the origin of wealth -- an amazing book
mark douglas' books can be helpful,
how to make money in stocks by o'neil,
steenbarger's book
george soros' books
hank pruden's book
you want to learn what a trading plan is, and you want a trading plan that will work in irrational markets (since humans are not rational etc.), has some risk mgmtn (risk does not equal volatility), rules to buy and sell, etc.
hope this helps,
i highly recommend the origin of wealth -- an amazing book
mark douglas' books can be helpful,
how to make money in stocks by o'neil,
steenbarger's book
george soros' books
hank pruden's book
you want to learn what a trading plan is, and you want a trading plan that will work in irrational markets (since humans are not rational etc.), has some risk mgmtn (risk does not equal volatility), rules to buy and sell, etc.
hope this helps,
But these are autobiographies, I would like a book that gives me APPLIED knowledge on trading in index funds, options, stocks, bonds, forex..etc. I'll start with stocks/index funds because they're easier.
I want to invest short term(less than a year)
I want to invest short term(less than a year)
not all are (auto-) biographies.
o'neil's book is very applied.
schwager's books are not all biographies, and include several very applied books. the market wizards series include significant amounts of practical advice on risk mgmt, exit strategies, trading plans, etc. -- from some of the best investors.
consider your level of commitment to trading. are you willing to dedicate 4 years of work to becoming a winning trader? are you willing to read 20 books about trading?
there is a zen aspect to learning about trading, which can help explain the value of biographies, when you think about it ;)
best wishes in your journey! ;)
o'neil's book is very applied.
schwager's books are not all biographies, and include several very applied books. the market wizards series include significant amounts of practical advice on risk mgmt, exit strategies, trading plans, etc. -- from some of the best investors.
consider your level of commitment to trading. are you willing to dedicate 4 years of work to becoming a winning trader? are you willing to read 20 books about trading?
there is a zen aspect to learning about trading, which can help explain the value of biographies, when you think about it ;)
best wishes in your journey! ;)
I reckon Reminiscences of a Stock Operator & Monkey Business: Swinging Through the Wall Street Jungle are absolute MUST.
I highly recommend Benjamin Graham's The Intelligent Investor
I'd just like to learn what to look for in market trends, how to accurately research stocks, and how to make money etc. I know some basic terminology and researching but I'd like to be better before investing any money.