Hello,
I was wondering if you guys could recommend any books/blogs/websites I could use to increase my knowledge. Assume that I have very little knowledge of financial, economic and investment concepts. Also, website to keep up with the latest news in finance?
^ That’s a good start.
http://www.aswathdamodaran.blogspot.com/
http://www.valuewalk.com/category/value-investing-2/
Jeremy Grantham’s quarterly letters
The Economist
Bloomberg
WSJ
Reading the news is a poor way to increase investment knowledge… Too much noise. I’d probably be a better investor if I tuned out the news other than maybe quarterly reviews. Now if you’re a trader, that’s a different story. But trading =/= investing. My advice would be to start with the Bible, in other words, Security Analysis.
Agree with geo on the news aspect. Gunner, what are you hoping to gain from the knowledge? Is this for a position at work that you’d like to hold? Are you looking to analyze individual securities? Are you just trying to gain enough knowledge to build a sucessful investment portfolio?
The reason I ask is that there is so much material out there to read through and it would probably help people guide you in the right direction if we had more background info.
youtube warren buffet. watch all of his stuff. read intelligent investor. read barron’s. money managers go there and pitch there ideas. They’ll give their reasons show relative multiple analysis etc. And i feel that people are prefering ev/ebitda multiple over p/e ratio. wsj section for money and investing and marketplace.
The Random Walk Down Wall Street book is an all-time classic.
I don’t think I agree with this, but then I also don’t consume news like most people. I find the news very valuable to keep up to date with what is going on. But I avoid/dont read opinion pieces or anything related to what to invest in. But knowing updates in sectors as they happen allows me to choose areas to do more reading in. I find things like CNBC mostly a waste of time
This has proven to be a controversial view point in the past but if you want to be learn to become a better investor, the best way to do that is to spend time investing… that’s been strangely effective for several of us on this website. True story.
Depends on your timeframe. Nothing in the 24 hour news cycle adds value to a long term investor. 99% of it is noise. No one will remember Hong Kong in 10 years, just like no one remembers the Spanish al-Qaeda attacks or the 2004 Tsunami. Both were market moving events at the time. Both were irrelevant to the long term investor (not saying they weren’t important events, just not financially important). 99.9% of news is garbage. The little bit of value is lost in the noise and you wouldn’t know it was valuable until long after its no longer actionable. My two cents anyway.
Not for the long term investor, but if you’re glued to your screen during one of those events and catch the headline quickly on your bloomberg screen, you are cleaning up.
I remember back in 2003 there were a lot of rumors about suspicious packages in the White House. Each time it came out, scalpers would kill it (5 figures to 6 figures in a day depending on your size trading S&P eminis, Eurostoxx or the 30 year Bond). There was a rumor that Bin Laden got caught in the summer of 2004 and I made more coin in 5 minutes than many executives do in a year. It was as if the S&P e mini was on steroids. You then wait a few moments, then ride it all the way down until it stops close to where it started.
Same thing during hurricane season after Katrina. Everytime there was a rumor that there could be a category 4 hurricane, you short equity futures. In late 2004, oil was the big newsmaker. Anytime there was news (no matter how BS it was) that could affect demand or supply, the market would move in one direction violently.
Other rumors like GDP was understated and will be revised and other crap like that would move markets like crazy. If you trade 200 contratcs on the Eurostoxx, that’s $2000 Euro a tick. A 20-30 tick move on nonsense rumors happen often.
Then there are days where real news come out like Ford and GM getting downgraded to junk in April 2005 when the market is trading at the high for the day and you short max size and sit back and smile.
Hiring some dude for 30K a year to yell out Bloomberg headlines was the best investment my firm did…until people start cannibalizing each other and instead of having 20 people making decent coin on decent size you have a few people making incredible coin on max size.
^ I agree with this if you’re a trader. But for the average guy here who is working in a non trading environment, you’ll never be as fast as the guys watching this stuff as a hawk, and as a result, you’ll get creamed.
You basically have three aproaches to choose from: value, momentum, and carry.
There is also something called growth investing, which is typically contrasted with value investing, but the technique is actually fairly similar to value, except that growth investing looks more closely/seriously at the growth component of present value, whereas traditional value investing tends to consider earnings growth as too difficult to project reliably. They will consider it, but apply a healthy discount to reflect the difficulty of estimating it.
value investing has a kind of mean-reverting mentality: if it’s gone up a lot recently, it’s likely to go up slower (or go down) subsequently, unless there is some new event or catalyst.
momentum investing has the opposite logic: if it’s gone up recently, it will continue to go up. Momentum shouldn’t happen if markets are efficient, but we observe it at least over the short-to-medium term, which - for me - is enough to make me take the efficient market hypothesis. I personally think that momentum gets people to think a stock is less risky (or that the bigger risk is not being invested in it), and so more people start to accept the stock as a “demonstrated winner”.
To some extent, value can be thought of as an indication what the market is offering, and momentum is an indication of what the market is demanding. In the short and medium terms price action is based on a mixture of supply and demand.
carry is a strategy that you pursue if you are expecting stable, sideways, or non-trending situations. It’s basically about holding higher yielding (in a cash flow sense) assets and financing them by selling lower yielding assets. If the prices are stable or grow at the same rate, you make money from the spread on those assets. I’ve heard some people argue that global macro breaks down into periods where you buy carry and sell volatility and periods when you sell carry and buy volatility. That sounds more brilliant than it really is, since timing seems to matter a lot.
All great advices. But a good understanding of the business cycle can do wonders for your investment.
what to understand about the cycle
For instance, which phase of the cycle you’re in determines what you should be buying.
I have found this site to be great for taking a deep dive into a company. https://online.capitalcube.com/#!/ . Of course - this is more of a long term value based approach.
Aswath Damodaran’s approach is the best on practical valuation. (in reply to rawraw)
[quote=“geo”]
Well that’s where we differ. I don’t experience a news cycle, because I read all my news from several outlets based in several different countries even. The coverage in written mediums I’ve found to be much more diverse and not highly correlated with visual media. There may be some popular case where someone may go to jail and it’s on TV 24/7, but my news aggregator may show me one article on it.
Also, who really knows what moves the markets day to day – people just assign it in hindsight. I view it as noise, as it seems you do as well.