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Summer Reading That Can Help Make You Rich

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Summer Reading That Can Help Make You Rich

Someone recently asked at a meeting of prominent individual investors about millennials and investing to help newly minted college graduates. My recommendation was Patrick O'Shaughnessy and his excellent book for millennial investor. Also referenced was O'Shaughnessy's father and all his work.

The crowd stared blankly.

Some of the comments and discussions convinced me that that most of these folks are managing their life long accumulations using what they have read in the monthly association magazine.

If you are going to manage your own money, you have to know what you are doing.

Self-managing investors need a deep, in-depth knowledge of markets whether you are investing in individual stock, managed accounts or mutual funds. It does not matter if you favor growth, value or a technical approach to the markets. The other schools of thought are active participants in the market and will have an impact on prices.

Suggested readings would be Benjamin Graham, Joel Greenblatt and Martin Whitman's value investing books. You have to add Tobias Carlisle, Patrick O'Shaughnessy and his father into that mix. Investors also have to read and learn the great growth stock pickers like Louis Navellier, Philip Fisher, Mitch Zacks and William O'Neil. You also need to read Steve Nison, Larry Williams and John Murphy on the basics of technical trading of stocks.

Trend traders have a huge effect on stock prices at times, so Michael Covel's books on the subjects should be on the reading list as well. Counter-trend traders play a part in this mix, so add Victor Niederhoffer to the list as well. Gary Antonacci just published a new book called "Dual Momentum," that investors should tentatively add as well.

Get off to a good start.

Now let's add Aswath Damodaran on valuation and investment fables. Probably better read all the editions of Jack Schwager's "Market Wizards" as well to gather different viewpoints. You really need to understand as many different market viewpoints as possible Guy Wyser-Pratte's "Risk Arbitrage" is also necessary homework. Victor Wendell has written an excellent book on net-net investing that you should probably read as well.

You need to understand the workings of fixed income and interest rates as well. Start with James Grant for the history of interest rate markets. When you are done that move on to Frank Fabozzi's fixed income handbook. You also need to read John Calamos on convertibles to really get a grip on taxable fixed income. Back to Fabozzi again now for the handbook of municipal bonds as they will most likely be an important part of your business if you deal with individual clients. James Lebenthal on municipals also makes a lot of sense if they will be a big part of your repertoire.

Put it all together.

You should read Peter Bernstein on capital markets and risk. David Darst on asset allocation is absolutely mandatory . You need to learn how to diversify and allocate portfolios and not just use an out of the box software package provided by your firm. To take it to the next level read Phil McDonnell on optimizing portfolios.

If you plan to trade options and have not studied Lawrence G. McMillan, Euan Sinclair, Nassim Nicholas Taleb or the like on options pricing, I think you are criminally negligent. Every time you enter an options trade, keep in mind that in all likelihood the firm buying or selling that option from you has had to install special air conditioning units to cool the supercomputers they are using to make prices.

The best advice for most retail investors is to avoid options unless you have the time to put in selling cash-secured puts on stocks that fit a strict value definitions.

The bare minimum start.

Not only should these authors be read and research, investors should have a passion for this stuff deep enough that they want to read them. A lot of this can now be gained through the excellent little books of investing put out by Wiley, but some of it just needs to be worked through. If you decide to adopt a specific style of investing, you have to go still deeper into the subject. Most of all, investors have to keep reading and educating themselves all the time.

The Little Book Series is one of the best ways to get investment education off the ground and to get up to speed quickly. My finger prints are on 4 of these as I served as either a consultant or ghost write on the projects. Authors include: Louis Navellier, Chris Browne, David Darst, Pat Dorsey, Mitch Zacks, James Montier, John Bogle and other investing luminaries and legends.

They are quick, easy reads and will give you a really strong foundation in stocks and markets.

Remember: It's your money!

On the journey to enormous profits, investors need that base education about markets and money.

Charlie Munger once remarked that, "In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time -- none, zero. You'd be amazed at how much Warren reads--and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out."

Once investors have that base knowledge, they need to try and stay up on the world. Just the simple act of reading these pundits and reading the news will make you better informed than most professionals.

Things to keep in mind.

Educating yourself is the last thing Wall Street wants you to do. They NEED you uninformed. Most brokers haven't read all this stuff and most brokers are too busy learning new selling techniques and spitting out computer produced financial plans to deepen their education to this level.

If you know more than they do how they will ever sell you stuff like annuities with 7% commissions, trusts that create trailing 1.5% fees annually or unlisted REITs without outrageous cost structures.

Tags: Benjamin Graham Charlie Munger Chris Browne

Posted in: Education Entrepreneurship Opinion Success Stories General Best of Benzinga

 
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