Investing, Finance and Economics 2021 Study Group

[Crusader]

I would like to start a study group to motivate me to get off my ass and not procrastinate on things I've been wanting to learn for a while now. The reading list can be found here:

http://earlyretirementextreme.com/start ... sting.html

We can start with Investments by Bodie. The book has seven parts, so I am thinking 2 weeks per one part, and we can track the progress, questions and thoughts in this thread. To give people time to get the book (whichever edition, they probably didn't change much), let's aim to finish Part 1 by the end of January.

[ertyu]

I'm in. My preliminary thoughts are, I wonder if this textbook is still relevant. It seems to me things have changed too much. QE/monetary plumbing, fund flows, and options mkt dynamics seem most important to understand now. Looking through the table of contents, I have studied some of these things at various points and I am unsure how much they matter right now. Still, I will put my best effort towards this.

Anyone who would like to participate in the study group but can't get their hands on a copy of the book, dm me, I might be able to help.

[Cheepnis]

This was tried about a year ago, don't think it got much traction. I'm finishing McConnell first, and I don't think I could keep up with the 2 week schedule seeing as it looks like I'll need to teach myself a bunch of math to complete this, but I might pop in here when I get it started.

[Alphaville]

I'd like to, but have already started my own syllabus and don't want to derail.

i'll see if i can join you guys for some sections.

i'm currently looking forward to reading up on macroeconomics because i'm specifically interested in both currency and bond markets.

eta:

This was tried about a year ago, don't think it got much traction. I'm finishing McConnell first, and I don't think I could keep up with the 2 week schedule seeing as it looks like I'll need to teach myself a bunch of math to complete this, but I might pop in here when I get it started.

ive asked this elsewhere but is that book about micro or macro or both?

for micro you can do something as easy as khan academy, very user friendly and easy to grasp concepts
https://www.khanacademy.org/economics-f ... oeconomics

and i've enjoyed this video course as well:
https://www.youtube.com/watch?v=Vss3nofHpZI

you don't really need to go heavily into math to get the concepts.

[Cheepnis]

I was unclear, I mean't the math in the Bodie book, McConnell math hasn't gone above multiplication and division.

And both. First half is macro, second half is getting into micro.

[Alphaville]

ah, thanks! i've seen mcconnell's macroeconomics as a standalone... cheaper than the whole enchilada. still pricey everywhere but i'm trawling various libraries in search of free reads.

[ertyu]

ive asked this elsewhere but is that book about micro or macro or both?

it's both, at least the edition jacob recommended for the reading list.
but it's not uncommon for textbook authors to sell a micro only book, a macro only book, and then a thicker micro + macro book.

....

i didn't join the previous study group because i'm pretty solid on micro/macro theory, or at least the college level textbook version of it. at this point, if i actually get over my laziness i'll probably read moseler.

as for bodie math prerequisites: a calc I / intro to stats should be enough.

[Alphaville]

as for bodie math prerequisites: a calc I / intro to stats should be enough.

ah, thanks! yah, im not blocked by math, i'm just not interested in "investment" at the moment, as my investments are handled by a pension fund i do not control.

im actually more interested in understanding fundamental aspects of markets for trading proper, and macro is at the core of both currencies and treasuries markets, hence i need a strong review of the subject at the moment. i took a college class ages ago, but had trouble staying awake for it and dropped it.

macro is also the most mysterious and esoteric of both branches, in my view. i think most of us can agree on micro concepts in an intuitive fashion, whereas macro... is often counterintuitive, and almost a matter of religious faith

---

eta: since i don't intend to become an economist, maybe i'll just read this:
https://www.amazon.com/Concise-Guide-Ma ... 00IHGQVSE/

[Crusader]

If people don't want to join in "strictly", but just want to make a comment on this thread here and there about something that comes up, you are more than welcome to! I will be putting my thoughts in this thread as I read the chapters myself, and I encourage others (ertyu and anyone else) to do so as well.

[Hristo Botev]

Not sure what people's progress has been, but I'm just now finishing Part 1. I'll note this morning that I got a kick out of the fact that Bodie had a footnote on naked shorting (11th ed., Indian version) and an info-inset describing the 2010 flash crash and the institution of circuit breakers; added a lot of context to everything I've been hearing and reading about lately in the news about the GameStop/WSB thing. Wondering if next edition (are they still making editions?) will include an info-inset describing our latest incidence of our market not functioning quite as intended.

[Quadalupe]

Not sure what people's progress has been, but I'm just now finishing Part 1. I'll note this morning that I got a kick out of the fact that Bodie had a footnote on naked shorting (11th ed., Indian version) and an info-inset describing the 2010 flash crash and the institution of circuit breakers; added a lot of context to everything I've been hearing and reading about lately in the news about the GameStop/WSB thing. Wondering if next edition (are they still making editions?) will include an info-inset describing our latest incidence of our market not functioning quite as intended.

My book is the edition jacob mentioned in his blog post, so no such footnotes. But I highly enjoyed the talk about all the upcoming tech stocks in McConnel & Brue edition (published in ~2001, just before/during the dotcom crash).

What are your main take-aways of the book so far?

[Hristo Botev]

What are your main take-aways of the book so far?

That I should have done something like this a long time ago; even if just to have a better grasp on what I don’t know. It’s certainly a Renaissance type knowledge base, as even just one part in to the book I’m already finding that I see benefits in my legal career: these issues come up even in IP litigation (eg, security interests in IP), and whereas before my eyes would gloss over and I’d assume that there wasn’t an angle there to be exploited for leverage, whenever various investment vehicles would come up, now I have a broader view of the entire landscape of a dispute. Also, after the economics book I think the corporate finance and bookkeeping books will be very helpful in areas of my life outside of just my investing practices.

Also, I think I will continue with the “textbook as reading material” thing after finishing Jacob’s personal investing 101 course; it makes sense, which is funny bc 2 years ago I wouldn’t have understood why someone not in school would pick up a textbook. A couple weeks ago I saw a Psychology textbook sitting in one of those little library things I pass on my walk home from work, and I thought, “hey, that would probably be a worthwhile read.” And now it’s sitting in my bookshelf to be read after Bodie and after the economics textbook.

[Jin+Guice]

I tried to start the last study group but it didn't go well. I think I tried to move too fast and failed to motivate everyone to read together. I have a chapter by chapter summaries (with some discussion from others) of where I made it to in McConnel. I got derailed when my friend gave me a course of study to up my social skills and my therapist gave me a course of study to better my communication/ relationship/ emotional skills. I'll be done with both of those between the end of this month and the end of next month. If people want to study this again, I'd give it another shot (picking up where I left off in McConnel personally).

I did think the format of chapter by chapter discussion was useful. I enjoyed the discussions and it allows those who want to do the curriculum in the future to see what those who've done it in the past wrote as they went through as well as add to the thread.

[ertyu]

i think my issue with this is, as i've gotten older just reading the book doesn't stick without a real world application that i'm intetested in sorting out, and that's why anything that's just "let's read these chapters together" is unlikely to stick.

e.g. i would be motivated to start with a particular issue that triggered my interest, e.g. this thread https://twitter.com/coloradotravis/stat ... 6442735616 and then say, "alright, let's go understand that"

Right now, I am finding this very interesting - in particular, is the macro cycle dead because right now there is so much qe + potential for fiscal? or does this cycle still hold? I would also be curious to understand not just the what of the macro cycle, but the why of it

[Redo]

I tried following this 7 book curriculum a few months ago but gave up as I didn't find it very useful. They were way too theoretical and academic.
First, there are two Economics textbooks that cover the same topics. So if you were going to read an Economics textbook, just pick one, don't read both. Also, how useful is it to know theoretical Economics topics such as Laffer curves for a retail investor?
Same thing for the Investment books. Two books that cover the same topics.
For Valuation, Corporate Finance, and Accounting, I recommend watching Damodaran's playlists rather than spend money on textbooks. His videos are actually practical and useful.
Valuation: https://www.youtube.com/playlist?list=P ... G8WwZfN6pK
Corporate Finance: https://www.youtube.com/playlist?list=P ... JHBudZ25Lh
Accounting: https://www.youtube.com/playlist?list=P ... hpdFdi8f7C
Just my 2 cents.

[Quadalupe]

Also, I think I will continue with the “textbook as reading material” thing after finishing Jacob’s personal investing 101 course; it makes sense, which is funny bc 2 years ago I wouldn’t have understood why someone not in school would pick up a textbook. A couple weeks ago I saw a Psychology textbook sitting in one of those little library things I pass on my walk home from work, and I thought, “hey, that would probably be a worthwhile read.” And now it’s sitting in my bookshelf to be read after Bodie and after the economics textbook.

Nice to hear that you get some immediate value out of it! I found McConnell somewhat interesting. Especially the fiat money part was well explained. I also read a little bit of Investment Analysis And Portfolio Management and found the way to quantify risk (it's already in chapter 1 or 2 I think) mind blowingly intuitive (which also shows how poor my grasp of the concepts are).

If you want to do more with textbooks, you could also look into joining an university library. For non-students (in my city) it is ~60 euro's per annum to join, and they have a LARGE collection of textbooks on a myriad of topics.

[Crusader]

Hi guys, OP here. Well, in my usual fashion, I have been procrastinating with my own project. I started reading the book, but found it very broad. And, also, other things happened that made me lose interest in the book:

-> I went to a local (virtual) meetup on stock valuation. We evaluated some stock in the medical field, and the presenter concluded that the stock is very undervalued. So what happened to the stock price after in the following weeks? Nothing. The central question that he was unable to answer is "I know that all of this looks good on paper, but how do you account for external factors? how do you know that the business will be good going forward?". The answer was at least not to my satisfaction. I also asked the entire group "have you guys personally done better than index investing?" and I was shocked that not one person said "yes". It really felt like these guys were doing something akin to horse race betting, rather than really knowing what they are talking about.
-> I wanted to answer a very simple question for myself, before I start picking stocks, which is... how do I optimize my investments for tax purposes (now and going forward), and that question has proven to be an extremely difficult thing to answer. I started learning about what to put in non registered vs. tax sheltered accounts (both tax free and tax deductible), about US (and foreign) witholding tax and calculating the adjusted book value of investments. I still don't understand it all, but I opened a big can of worms. I also am trying to optimize not paying brokerage fees while investing every single month (not trivial and I made a mistake).

The conclusion is that for the time being, there is still stuff I can do to optimize my index investing. Just selling my investments that I have currently in order to get better ones will be a stressful project, as it will trigger capital gains, and I have to consult my accountant when I file my taxes first.

TLDR: I have failed at my own study group, and I will stick to index investing for the time being. If people want to keep this thread open to track their own progress, by all means do that. If the moderator(s) think this should be closed, so be it. I may post my own progress of financial education here if it survives.

[Alphaville]

ah, funny story, i was just reading a free sample of mcconnell and they have a spreadsheet with all the six different versions of the textbook


1. economics / got everything
2. microeconomics / got everything minus macro but includes international trade and balance of payments, about 75% of subjects
3. microeconomics: brief edition / looks like very spotty coverage, consolidates various chapters
4. macroeconomics: shares the beginning of the micro stuff then skips, about 50% of total. if you combine this with 2 you get redundant vs 1.
5. macroeconomics: brief edition / same as micro brief
6. essentials of economics / like the brief editions but across micro & macro, about 50%

i wish i could post up the picture here but it's from a kindle book

[white belt]

-> I wanted to answer a very simple question for myself, before I start picking stocks, which is... how do I optimize my investments for tax purposes (now and going forward), and that question has proven to be an extremely difficult thing to answer. I started learning about what to put in non registered vs. tax sheltered accounts (both tax free and tax deductible), about US (and foreign) witholding tax and calculating the adjusted book value of investments. I still don't understand it all, but I opened a big can of worms. I also am trying to optimize not paying brokerage fees while investing every single month (not trivial and I made a mistake).

The conclusion is that for the time being, there is still stuff I can do to optimize my index investing. Just selling my investments that I have currently in order to get better ones will be a stressful project, as it will trigger capital gains, and I have to consult my accountant when I file my taxes first.

I think you might be blurring the lines a bit between stock picking and portfolio construction. You can construct an entire portfolio with only indexes or ETFs and that may be appropriate to your situation. There’s no one size fits all solution and value-based stock evaluation (which sounds like that meetup) is only one specific investing technique.

The first step that helped me was to first understand the stuff already in my portfolio. For example, my VTSAX allocation’s purpose is, does well if XYZ, but poorly if ABC. You should understand the role of every asset in your portfolio. There is no silver bullet investment, rather each asset class has strengths and weaknesses, and together you assemble them in a way that fits your web of goals, appetite for risk/reward, etc.

As you start to understand the assets you already own, then you may find yourself cracking open the Econ textbooks to answer specific questions, rather then getting lost in reading them cover to cover. For example, why are rising interest rates causing the stock market to sell off? How will my stocks fair with increasing inflation? What happens to my assets if the US dollar loses reserve currency status? Sorry if those questions are too basic, but you get the idea.

Tax ramifications are just another layer on top of understanding the assets in your portfolio. Some assets incur large taxes and so may be more efficient in a tax-sheltered accounts. While other assets (e.g. short options) can’t be legally held in a tax sheltered account. Some of the tax implications can be found by just googling, “should I hold x asset in y retirement account?”

Learning about this stuff is a process and is not going to happen overnight. It probably took me 6+ months of really diving into this stuff before I started making any changes to my portfolio, and I still have a long way to go.

[Crusader]

Exactly. What you are describing is something that I would eventually like to understand, but at the moment, it is rocket science to me. I fully understand that stock valuation is a whole other can of worms compared to portfolio management.

But as a first step, I wanted to simply know where to put my investments, assuming some portfolio I came up with, which is 25% fixed income, 25% Canadian index stocks, 25% US index stocks, 25% international index stocks. Given that... what ETFs do I put where, so that I pay the lowest taxes. The best resource I found is:
https://www.canadianportfoliomanagerblo ... ortfolios/
and their "ludicrous" portfolios, but I still have so many questions... I emailed the owner of the site with some questions and basically he told me that I need to do more reading. Currently, I am trying to understand this page:
https://www.pwlcapital.com/canadian-por ... ortfolios/
specifically, why he is de-registering all the RRSPs in his analysis at the end of the year. That makes no sense to me if RRSPs are supposed to be used for retirement, when your tax bracket is lower. (RRSP is the Canadian version of 401k).

I guess what I am trying to say is that I have bigger gaps in my knowledge that need catering to before I take on the "rocket science".