Investing and reading [a lot]

[jacob]

http://wexboy.wordpress.com/2013/06/07/why-i-read/
http://wexboy.wordpress.com/2013/07/25/ ... d-part-ii/

[Triangle]

Formatting too fucked up, didn't read. Think I have eye cancer now.

[jacob]

Ha! I used to write my first blog posts like that, bolding important phrases, having been told it was a good idea.

[secretwealth]

Yeah, I'm not reading that shitty formatting. So basically, "I read because learn stuff helps me make money", right?

[Spartan_Warrior]

Oh, snap. I just started a blog and wrote some of my first posts like that too, lol. Then it became too annoying to even write it that way, much less read it.

[jacob]

Read it anyway. It's good stuff!

[jennypenny]

You guys are harsh. It's a good read (except for the part where he knocks my former editing gig LOL).

[lilacorchid]

c/p to notepad!

[Spartan_Warrior]

I actually did power through it. I still don't really understand how reading something like Dostoyevsky helps my investing skills, but I certainly can't complain if he recommends I keep doing it.

[secretwealth]

My walls of text are much more worthy of your time.

[Sclass]

At least the author says that a lot of print is garbage out there.

Also if there's a good trade secret it is seldomly posted oline.

Gem was follow Ugg. I read Yahoo! OMG among other things to follow the toiling masses. I know somebody who speculated on Lulu Lemon after seeing all the suburban moms wearing them.

Maybe I should catch up on the latest about the new prince?

Seriously, very few people I know read annual reports before buying a stock. Foolish behavior. I think they read auto brochures before buying a car, so why not read the simple minded report written for little old lady investors before buying stock? It's simple and quick and beats closing your eyes and using the Force...trust your feelings...,

[Spartan_Warrior]

It's simple and quick and beats closing your eyes and using the Force...trust your feelings...

I find your lack of faith disturbing, Sclass.

[jacob]

Hey, that's how Death Stars get destroyed when the quant models/astro droids get shot up.

[skinnyninja]

To be honest this guy's advice is all wrong for me. I will tell you why.

I am not saying that you should not research a stock you might invest in. But he goes beyond that and seems to be saying "Just read a whole bunch if you want to be a great investor!"

This reminds me of how I dove into the world of Internet marketing and "make money online" almost ten years ago. I was reading and reading and reading all day long about it, and not making a darn thing. Finally I had to try something, I had to build something, I had to put some skin in the game. And I failed. I put in many hours and I failed. But I kept at it and I failed some more and eventually I learned what worked for me. After many failures I found a trickle of income and then I scaled it up. But it was not because I had 50+ blogs in my RSS feed about how to make money online. That was all garbage and a big waste of time. I had to stop reading and start doing.

I am finding the same is true of investing (now that I have some money). I think the real truth is that you don't learn anything unless you have some skin in the game. If you are just reading to read then eventually it becomes a form of self delusion. You read stock tips and investment theory all day and you aren't really taking action and therefore you are learning nothing. But you FEEL smarter.

And for me, this was a trap. I had to finally dive in and put some skin in the game. Not a lot, and not betting the whole house at once. But without any skin in the game I was not really learning. I was just mentally playing with the ideas, the theories, and not really testing anything.

I am really good at research and I am really efficient at reading stuff. But that doesn't usually teach me anything useful. To really learn something I have to put skin in the game (be that time, money, effort, whatever). Some research is required for nearly everything but it is the practical application and testing that teaches me in the end. I am good at reading and research. I am lousy at taking action. Therefore this guy's advice is all wrong for me. Hope that makes sense.

[bibacula]

Personally, I've found that financial history has helped me the most in investing. I needed to see the big picture before I could focus on the parts.

I really like the Wiley Investment Classics like:

- "Where Are the Customers' Yachts?" by Fred Schwed
- "Manias, Panics and Crashes" by Charles P. Kindleberger
- "Extraordinary Popular Delusions and the Madness of Crowds" by Charles MacKay
- "Once in Golconda: A True Drama of Wall Street 1920-1928" by John Brooks
- "Only Yesterday: An Informal History of the 1920's" by Frederick Lewis Allen
- "Supermoney" by Adam Smith
- "Reminiscences of a Stock Operator" by Edwin Lefevre (Read about the rest of his life after finishing the book for a reality check.)

Of course, the best investment book ever written is "The Intelligent Investor" by Benjamin Graham. Just read the other books first.

[Chad]

I am not saying that you should not research a stock you might invest in. But he goes beyond that and seems to be saying "Just read a whole bunch if you want to be a great investor!"

This is actually what Buffett does as well. He reads all day every day. It's not just about reading "how to books", but about reading "everything." By reading "everything" you pick up bits and pieces of information that over time form a larger picture, along with the info that gives you specific ideas. It's the larger picture that a lot of people fail to grasp, which actually prevents them from taking advantage of a lot of specific ideas.

Polymath, in my mind, is better than focused expert in picking stocks. The focused expert is valuable to the polymath, but I don't want the focused expert (limited vision) being the guy that actually makes the decision to buy. Thus, I try to make myself the polymath and identify expert sources to use and educate myself. I don't need to be the expert on Brazil or petrochemical formulation, I just need to know where I can find the experts' information.

[secretwealth]

Skinnyninja--I think that kinda proves the point: you need to read selectively, read the classics, and read what is useful, edifying, and intelligent. I've read through a lot of that internet marketing stuff--it's garbage designed to get clicks, search engine position, and revenue, not to teach.

I think investing is the same way. There's a lot of garbage out there that you can read and learn nothing from, and then there's the real gems that make you smarter and savvier. And the more you read form a variety of sources, the savvier you get.

Ultimately, one way to becoming a good investor is getting a degree in the humanities and learning human nature as it truly is and how it wants to be. The problem with that is probably 80% of classes in humanities departments are crap, and 90% of professors in humanities departments have their heads up their asses. Again, wheat and chaff.

[jacob]

An alternative to reading a lot is in talking a lot. Again, this doesn't mean talking for 1000 hours with one investment expert but talking for 1 hour with 1000 different people who broadly represent the market. In order to make an informed decision on smartphones, you need to know if mom&pop just think buy&hold is the greatest strategy ever; you need to know that the investment manager thinks the market is overvalued; you need to know that all the kids are switching from iphones to galaxies; you need to know that your friend just lost a ton on AAPL... so you gotta talk to all of them.

Remember that the purpose of the market is to aggregate lots of information from extremely many sources (all humans with resources). The more you know about those humans, the better you can predict what they're going to do.

[secretwealth]

Sounds like another good case that understanding human nature creates good investors.

[jacob]

http://wexboy.wordpress.com/2013/10/18/ ... -part-iii/