Beginner stage done? What next? Stock investing.

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wood
Posts: 339
Joined: Wed Sep 16, 2015 5:53 am

Beginner stage done? What next? Stock investing.

Post by wood » Wed Sep 12, 2018 5:49 am

I imagine a lot of the forum members find themselves somewhere in the middle between beginner and expert. What did you do once you considered yourself no longer a beginner in the world of stock investing? Would you suggest getting better at what you already do as an investor, or learn new investing stuff/methods?

How do I know whether to consider myself to have advanced, expert or master competence when it comes to (stock) investing?

Which books do you recommend?
Last edited by wood on Wed Sep 12, 2018 6:15 am, edited 1 time in total.

wood
Posts: 339
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Re: Beginner stage done? What next?

Post by wood » Wed Sep 12, 2018 6:02 am

Just thinking out loud.

I have a couple years worth of experience in the stock market, made my share of mistakes and still learning. I lean towards being a value investor. I haven't read the "curriculum" suggested in the ERE blog nor any of the classic books like Intelligent Investor or One Up on Wall Street. But I do have a bachelors degree and working experience within accounting. I follow news, podcasts, forums, articles and blogs relevant to the subject of investing. I analyze stocks regularly (their financials/fundamentals) and perform 0-10 transactions in a given month.

I think I should:
- become a better value investor. I'm good at judging financials, but poor at judging corporate strategy and market conditions.
- get better at assessing risk and volatility. For example, I'm positive about my portfolio performance but unable to judge how much risk I am exposed to apart from gut feeling and guesstimating a total low-medium-high risk profile to the individual stocks I've picked.
- get introduced to other methods of investing, e.g. short trading, options trading, trend investing, technical analysis (but not daytrading).
- start laying a small foundation in order to some day work professionally in the industry (eg. investment advisor)

Are my goals sensible considering I want to increase my competency as an investor? What should I focus on first? What would be your goals in a similar scenario?

My gut tells me that I could gain something from doing a course in finance and that this would fit well with an introduction to technical analysis. Maybe a statistics course, but I'm poor in math.
Would reading some of the classics serve me well? Any advanced books on value investing to be recommended?
The geography of my competence is limited to my own country, perhaps time would be better spent getting familiar with the US or european stock market?

So much to read and learn, so little time.

arcyallen
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Joined: Sat Jan 20, 2018 11:20 am

Re: Beginner stage done? What next? Stock investing.

Post by arcyallen » Wed Sep 12, 2018 6:30 am

Read the Intelligent Investor!

Recognize you only know about 10% of what you should/could, but frustratingly you won't know most of what the other 90% is. Yet.

Read the Intelligent Investor!

Go through a full market cycle to see how your emotions fluctuate. If you haven't seen the market go down by 50%...and very possibly your portfolio go down by 50%...there's no honest way of knowing how you'll respond. I've seen super smart, very confident people FREAK OUT when that happens.

Read the Intelligent Investor! And anything Warren Buffet has to say. Much of what he says may seem hokey, but it's spot on.

Good luck!

ThisDinosaur
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Re: Beginner stage done? What next? Stock investing.

Post by ThisDinosaur » Wed Sep 12, 2018 7:05 am

Skip the technical analysis. If you do read the "curiculuum," you'll see that the evidence for it is pretty weak. Learn about the other methods you listed and yes, read Graham.

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Riggerjack
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Re: Beginner stage done? What next? Stock investing.

Post by Riggerjack » Wed Sep 12, 2018 10:53 am

Read the 10q's of the company you work for or are familiar with.listen to or read the transcripts of the earnings calls, read the online analysis of the stock at seeking alpha or equivalent.

This is to help you gauge the level of expert knowledge.

I work in Telecom engineering. Reading the experts' logic in pricing, and how they think things are going and will go is an education in itself. It also makes clear how little the experts understand the industry they analyze. Or more to the point, how the world looks from 100000'. What features can be observed at that level.

It puts perspective on my perspective, if you will. The Gell-Mann amnesia effect applies here as well.

ThisDinosaur
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Re: Beginner stage done? What next? Stock investing.

Post by ThisDinosaur » Wed Sep 12, 2018 1:14 pm

I see your Gell Mann amnesia and I raise you a Green Lumber Fallacy.

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Bankai
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Re: Beginner stage done? What next? Stock investing.

Post by Bankai » Wed Sep 12, 2018 1:32 pm

If you haven't seen the market go down by 50%...and very possibly your portfolio go down by 50%...there's no honest way of knowing how you'll respond.
Genuine question as I've heard/read this argument numerous times but just can't decipher the logic behind it.

Why is it always assumed that private investor has to stay (fully) invested going into the bear market and all the way down to the bottom?

I get the 'you can't time the market' arguments but is no one really using any form of stop losses? Is it not better to be 'naturally' taken out of the market as the stops are being hit when things start to go wrong?

Also, why the pride in being able to withstand the loss of 50% of one's equity? Why not the pride in being in cash and avoiding (part of) the loss in the first place instead?

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Riggerjack
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Re: Beginner stage done? What next? Stock investing.

Post by Riggerjack » Wed Sep 12, 2018 5:03 pm

@ bankai

I don't really think that is what they are getting at. Yes, stop loss orders will limit your loss on whatever you have the stop loss order placed on. But what then? Now you have cash, but prices are lower. When do you buy back in? Do you place stop loss orders again?

It's not like a 50% loss is common. Odds are good that none of us will ever see a full market drop of that size again. But big drops in individual stocks happen all the time.

But in 2016, we had a correction, and I thought it would drop more. So I sold my S&P index fund when it was 1800, thinking it would drop further, and I could buy it back in sale. Clearly, that didn't happen.

Had I taken the advice commonly given, and stuck with a SWAN portfolio, I would be telling a different story.

Before 2016, I would have said I could ride out a large loss, and wait it out. Now, I am less sure.

I think that is what they are talking about. In my case, I sold for a profit, but held cash waiting for the sale that never happened. But in or out, big moves in the market can be unnerving. I hope you never really know what I'm trying to describe. Or that it doesn't affect you as it did me.

IlliniDave
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Re: Beginner stage done? What next? Stock investing.

Post by IlliniDave » Wed Sep 12, 2018 7:11 pm

I agree that one never really knows how they will react when the investment world gets turned on it's head until they've been through it. My advice would be to go ahead and jump in anyway. The reason stocks are rewarding is because they are risky. It's better to get your first clobbering when you have a relatively small portfolio. You'll learn a lot about yourself which IMO is probably the most important subject in a self-managed investor's curriculum. There are a lot of ways to achieve success. The first step is having goals. From there it's a matter of finding a way to achieve them without putting yourself through undue stress.

Generation-X
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Joined: Mon May 06, 2013 4:43 am

Re: Beginner stage done? What next?

Post by Generation-X » Wed Sep 12, 2018 8:04 pm

wood wrote:
Wed Sep 12, 2018 6:02 am
Just thinking out loud.

I have a couple years worth of experience in the stock market, made my share of mistakes and still learning. I lean towards being a value investor. I haven't read the "curriculum" suggested in the ERE blog nor any of the classic books like Intelligent Investor or One Up on Wall Street. But I do have a bachelors degree and working experience within accounting. I follow news, podcasts, forums, articles and blogs relevant to the subject of investing. I analyze stocks regularly (their financials/fundamentals) and perform 0-10 transactions in a given month.

I think I should:
- become a better value investor. I'm good at judging financials, but poor at judging corporate strategy and market conditions.
- get better at assessing risk and volatility. For example, I'm positive about my portfolio performance but unable to judge how much risk I am exposed to apart from gut feeling and guesstimating a total low-medium-high risk profile to the individual stocks I've picked.
- get introduced to other methods of investing, e.g. short trading, options trading, trend investing, technical analysis (but not daytrading).
- start laying a small foundation in order to some day work professionally in the industry (eg. investment advisor)

Are my goals sensible considering I want to increase my competency as an investor? What should I focus on first? What would be your goals in a similar scenario?
If you're looking for an identity as to what value investing is, then I would recommend these books:

Beginner starting out w/ zero knowledge and basic math:
Warren Buffett’s 3 Favorite Books: A guide to The Intelligent Investor, Security Analysis, and The Wealth of Nations

Some knowledge of value investing:
Margin of Safety - Seth Klarman (You will have to creatively search on google as it's out of print)

For finding out more about value investing - I'd knock on doors at universities and find a professor that teaches value investing. Take his courses. Ask questions. That's what I did.

You have a very broad scope, so I would tackle topics one at a time - i.e. value investing THEN short trading THEN options trading THEN...

Value investing is a philophy of owning quality businesses at attractive prices - mainly, what to look for in choosing such a business, what price should one pay for such a business.

Shorting is the mechanics in profiting from declining stock price.

Options trading is in its own universe. It's based on a concept of giving someone an offer to make a trade and charging a small fee for that offer. It's a limited time offer and once someone buys the offer, the buyer can decide to trade or not to trade. The seller of the offer must abide by the terms of the trade until the offer expires.

I would recommend striving for a good understanding of each topic as they are studied and make them your own. It's like the swiss army knife - more tools you possess, a better investor you will become.

Understand value investing, understand options, understand index, bonds, futures, currencies.. There are plenty of vehicles to either 1. make you financially successful or 2. bring you to a financial ruin.

I would also recommend sticking to what you like and are really good at. As you study varieties of topics, you will find out what you like and what you're good at.


wood wrote:
Wed Sep 12, 2018 6:02 am
My gut tells me that I could gain something from doing a course in finance and that this would fit well with an introduction to technical analysis. Maybe a statistics course, but I'm poor in math.

Would reading some of the classics serve me well? Any advanced books on value investing to be recommended?
The geography of my competence is limited to my own country, perhaps time would be better spent getting familiar with the US or european stock market?

So much to read and learn, so little time.
I would recommend:

Benjamin Graham

John Burr Williams

Sir John Marks Templeton

Philip Fisher

Warren Buffett

Peter Lynch

Lastly, I also recommend Extraordinary popular delusions and the madness of crowds. It applies equally to so called trumpism to stock market mania.

arcyallen
Posts: 44
Joined: Sat Jan 20, 2018 11:20 am

Re: Beginner stage done? What next? Stock investing.

Post by arcyallen » Thu Sep 13, 2018 3:42 am

Bankai wrote:
Wed Sep 12, 2018 1:32 pm
Why is it always assumed that private investor has to stay (fully) invested going into the bear market and all the way down to the bottom?
I know this is almost impossible to grasp at times. But in order to do what you're talking about successfully, you need to time the market correctly twice - you'll need to know when to sell as it's seems like it's going down, and you'll need to know when to buy again when it seems like it's going up. And I do mean -seems-. That means you'll need to be a psychic to determine what your fellow man (The Market) feels like doing to the market - those quick fluctuations won't be based on fundamentals, they'll be based on the public's emotions. And it's impossible to consistently time. It might work once or twice by chance (and then you'll get REALLY confident!) and then it won't work again.

Read what Buffet has to say on timing the market like that. He might be able to say it a different way that clicks better.
Last edited by arcyallen on Fri Sep 14, 2018 3:21 am, edited 1 time in total.

Dream of Freedom
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Location: Nebraska, US

Re: Beginner stage done? What next? Stock investing.

Post by Dream of Freedom » Thu Sep 13, 2018 9:51 am

Avoid zealotry. There are a lot of tribes out there who are convinced that their way is the right way and only right way. Top down/bottom up, chartists/fundamentalists, Keynesian/Austrian, growth/value/income.
If an someone were given the equation v=i*r and they told you that they only need to know r to find v we would all know they are full of it. But when someone tells you that they don't need to analyze a balance sheet because they read all of these economic reports or that they don't need to look at the supply and demand of a stock because they read the annual report it doesn't seem to raise eyebrows. It should.

The strategy that you choose depends a lot on your own personal needs. If you are living off of your investments an income strategy may make sense, but if you're looking for a huge pile when you turn 66 a growth strategy may be better.

And frankly both Keynesian and Austrian economics have more holes in them than Bonnie and Clyde's last ride.

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