How to learn about investing

Felix · Post by **Felix** » Fri Sep 21, 2012 2:38 pm

Okay, so I've saved quite a nest egg so far and am about to set up a permanent portfolio as I like the general philosophy behind it and it's hard to screw it up (I don't want to lose money, naturally). However, I am not so sure about the gold position in it, so maybe another position may be appealing to me, but I wonder which. The dogs of the dow thing seems good.

Given that I'm an INTP, merely following some style isn't intellectually satisfying to me and I've reached a point where learning finance and investment has become a potentially profitable endeavour.
However, I'm rather risk averse and want to avoid throwing my F.U. money into a shark tank.
Since there are some pretty smart investors on this board, maybe you can give me some pointers where to start. Some books you "wish you had read before you started" would be a nice start.
This is a rather large field filled with tons of conflicting advice and lots of different prophets (quite similar to religion and nutrition).
So far I've taken an introductory college course, read Mises' book on Austrian Economics, Henry Hazlett, Money and Freedom and such as well as a lot on monetary theory and just started with MMT.
Very little on investing itself, though. Money management and portfolio setup are pretty much unknown to me, how do I pick stocks properly, etc. Most of the practical hands-on stuff is missing.
I figured, if you can't beat them, join them. I also suspect this increased knowledge will change my outlook on the field of finance.

jennypenny · Post by **jennypenny** » Fri Sep 21, 2012 2:49 pm

http://earlyretirementextreme.com/start ... sting.html
I would be nervous only doing part of the PP. You throw the balance off that way. I think it's ok to put only some of your money into the PP, but if you buy only some of the pieces, it might not work. The timing isn't good for buying Tbills right now, but the timing is probably ok for buying the gold component. If you buy the bills but skip the gold you might regret that later.
Why do anything until you're sure? I think most people are taking money off of the table right now anyway.

Felix · Post by **Felix** » Fri Sep 21, 2012 3:16 pm

Yes, I would only put part of my money into the PP. It appears to be very stable. I realize that I need to stick to all the parts as all 4 are crucial.
Thanks a lot for that link. That was exactly what I was looking for.
As you said, I don't want to do something until I'm sure.

Christopherjart · Post by **Christopherjart** » Fri Sep 21, 2012 3:54 pm

I'm still a newbie investor, but I've learned a lot from reading and watching videos on investopedia. There are plenty of forums and blogs that discuss investing. Yes, they often say the opposite info.
I'm not at all convinced by Permanent Portfolio so I'm taking a different path.

karim · Post by **karim** » Sat Sep 22, 2012 1:44 am

It's all about reading lots of books. It depends how much knowledge you have so far. You can start with basic books. I personally like the writings of william bernstein. You can start with Four Pillars of Investing. If you are interested in PP, check out the crawling road podcast. It goes through PP very well.
More in depth understanding might be taking an introductory course on finance and understanding Beta, cost of capital, etc. From there, the skies the limit.
In the end, you have to pick an investment strategy that you are comfortable with because in the end the worse thing you can do is abandoning your strategy.

Post by **jacob** » Sat Sep 22, 2012 4:25 pm

aaii.com ... I splurged $290 on a lifetime membership. The articles tend to be about financial statement analysis, stock screens, and portfolio management. They have a technical---not as in technical analysis trading but as in which equation is used to calculate return on invested capital and why is that important---angle. Sometimes there are interviews with brokers, fund managers,...
All basics can be learned from books, but aaii is good for ideas and "I hadn't thought of that before" insights.

jennypenny · Post by **jennypenny** » Sat Sep 22, 2012 4:42 pm

Have you tried any others (valueforum, alphaclone, etc)? How does aaii.com compare?
I have been very hesitant to pay money for investing information. I did consider going to the bogleheads conference this year.

Post by **jacob** » Sat Sep 22, 2012 5:19 pm

I had a subscription to Valueline once, which compares to S&P reports (I think Valueline is better in terms of how comprehensive their data sheets are but not $$$ better). AAII is more of a how-to-analyze than a what-to-buy. You'll get article like "Here's the Graham stock screen. It focuses on the following ratios because ..." or "Interview: Here's how your order is routed through the broker". There won't be any "5 hot oil stocks to buy for your retirement portfolio"-articles.
It's say the target group are "amateur fund managers". Compare to the glossy money magazines in stores which I'd say are aimed at clueless dentists.
BTW AAII also holds meetups with invited speakers. I never went to one of those.

ICouldBeTheWalrus · Post by **ICouldBeTheWalrus** » Sun Sep 23, 2012 5:31 pm

A lot of public libraries in the US seem to have subscriptions to Valueline. It used to be on paper, but now it's just access to their web site via some kind of login/proxy. If you're particularly lucky (I am), it's possible to access this from home using your library card number or some sort of identifying information.

Felix · Post by **Felix** » Mon Sep 24, 2012 1:33 pm

Thanks everyone for the advice.

After jennypenny's post I have been digging through the blog posts on investing and filled my amazon cart with the basic business/investment books from the reading list and am halfway through the dhando-investor, which I liked, because I like the value investing approach, but it's very light reading. I'll probably go for intelligent investor next.
I guess I have a decent basis in macroeconomics, having read a lot of the big-picture stuff and now need to get into the nitty-gritty hands-on stuff of actually picking investments.
Reading lots of books is standard mode for me anyway, so going for investing and business analysis books is fine for me. aaii.com sounds pretty neat given their focus on the how-tos of analysis. I'll start with the recommended books and subscribe to some of these forums. I'll probably get into aaii after that. I'll have to see if there's a German (or European) version of that available.

JohnnyH · Post by **JohnnyH** » Mon Sep 24, 2012 5:46 pm

I read books, went to Amazon sorted by user review ratings... Weeded out the fake reviews, went from there.
Lot of good websites (ie: crawlingroad), but I usually avoid trader oriented websites.

tylerrr · Post by **tylerrr** » Mon Sep 24, 2012 11:38 pm

@Felix,
if I'm not mistaken, I don't think the Dogs of Dow has done so great in recent years. Although, I love the general philosophy of doing the opposite of the herd. It takes some guts, but this is how you do well, long-term in my opinion.
I personally love the PP. It makes a lot of sense to me.

weiss-blau · Post by **weiss-blau** » Tue Sep 25, 2012 10:00 am

@Felix,

If you're german, don't forget to think about the taxes. What's the point in earning 1.000 Euros more in interest/dividends etc., if your investing is so complicated tax-wise that your tax advisor charges you 5.000 more. That's the reason i'm staying with german banks solely or a foreign bank that has some residence in Germany - otherwise i won't get the required Steuerbescheinigung.

Felix · Post by **Felix** » Tue Sep 25, 2012 6:00 pm

Hey, weiss-blau, yes I'm German. I'll stick to the German market for sure. So it would be dogs of the DAX instead of dogs of the DOW for me.

I don't know if I'll end up with something complicated. Since I still have a job, I guess I won't.

simplex · Post by **simplex** » Wed Sep 26, 2012 9:38 am

Hi Felix,
don't limit yourself to German markets, within the EU you can also quite painless trade (and conform to German tax policy).

Maybe you can have a look at http://www.sdk.org for investor information (non profit association which does not sell).

weiss-blau · Post by **weiss-blau** » Thu Sep 27, 2012 8:03 am

To make myself clear, I didn't mean stick with the german market, but stick with a bank that has a german dependance. The Finanzamt doesn't care whether you invest in american stocks oder nigerian bonds, but it does care for the Steuerbescheinigung! (Which all german banks are required to send you) [And it helps a lot with filling out Anlage Kap

]

Just don't invest in Container-Beteiligungen, Schifffahrtsbeteiligungen, Filmfonds etc., theye're mostly scam.
Btw: Somethhing I don't get about the PP is the high percent rate for (gov) bonds and Treasury bills, but zero for the "normal" savings account.

The last time I checked german Staatsanleihen had an interest of 0,0% (sic!) while I get 3,0% at a Bausparer (guarenteed) and 2,5% at a Tagesgeld, so why tf should one invest in Treasury notes/bills?

simplex · Post by **simplex** » Thu Sep 27, 2012 9:25 am

>The last time I checked german Staatsanleihen had an interest of 0,0% >(sic!) while I get 3,0% at a Bausparer (guarenteed) and 2,5% at a >Tagesgeld, so why tf should one invest in Treasury notes/bills?
It's because the PP is made for the US market. Obviously you can adapt it to the German market. If Bausparer is guaranteed by the German state, take that. Tagesgeld (daily yield money market) is different, because you don't know how stable that is on the longer term and who guarantees it.

Felix · Post by **Felix** » Thu Sep 27, 2012 9:45 am

Thanks for the help.

I think for starters I will still stick to the German market(s). Europe itself is destabilizing as we speak and with the US going into QE3, I don't want to risk any currency exchange screwups.
@ weiss-blau: The PP has 25% allocated to cash, which would imply the 2.5% interest you get at a Tagesgeld-Konto. The low rates on Staatsanleihen is a very recent phenomenon, however, one would buy the 2044 ones, which give you 2.36% return, quite similar to the Tagesgeld.
http://www.deutsche-finanzagentur.de/fi ... abelle.pdf
They are in there as a hedge against further downgrading of return. If interest rates go down, the bonds go up in value correspondingly, which is the main reason to buy them over Tagesgeld.
The thing that bothers me a bit is the gold part. This appeared to be a good thing at the time, being a hedge against inflation, however, gold has risen so much in recent years, I can only see it fall as I fear this is a speculation bubble caused (in part) by the erroneous belief that "Gold is money" and similar ideas which Harry Browne also adhered to. It's a 25% position, so that bothers me a bit. But what else to put in there as a hedge against rampant inflation? I think about replacing it with something like an index of commodities.

Chad · Post by **Chad** » Thu Sep 27, 2012 1:56 pm

Here is timely post by a guy (Barry Ritholtz) a few people on here read a lot. I read him a ton and I would actually consider having him run my money, which is saying a lot for me (but I don't have enough yet to meet his minimum requirement).
http://www.ritholtz.com/blog/2012/09/tr ... ms-2h2012/
He basically provides links to a "top 10 investing rules", books, etc. that he respects or thinks provides insights into investing.

KevinW · Post by **KevinW** » Thu Sep 27, 2012 7:37 pm

Somethhing I don't get about the PP is the high percent rate for (gov) bonds and Treasury bills, but zero for the "normal" savings account.
Everyone handles this differently. Myself, I have a bank checking account and maybe $100 in paper bills that I consider operating funds and not part of my investment portfolio. But I consider all other cash part of my PP cash allocation. I think that approach is most popular on the PP forum.
However I think it would be fine to consider every last cent of cash part of your PP. The downside is that every time you pay a bill or get a paycheck, that could trigger a PP rebalance, which seems like overkill.
The last time I checked german Staatsanleihen had an interest of 0,0% (sic!) while I get 3,0% at a Bausparer (guarenteed) and 2,5% at a Tagesgeld, so why tf should one invest in Treasury notes/bills?
Ideally PP cash should be in the safest vehicle possible, which are very short term sovereign/treasury bills/bonds. Deposit accounts earn a slightly higher interest rate because the market correctly judges them to be slightly riskier.