Tuesday, May 24, 2011

Fool's Gold

I have been on vacations and hence not been able to update the blog.  While on vacations, I decided to read a book regarding the Global Financial Crisis of 2008. So I decided to read the book "Fool's Gold" written by Gillian Tett. I am simply blown away by the amount of research and in depth analysis Gillian has presented in the book. She narrates the unfolding saga of unrestrained greed creating a financial storm and wreaking havoc as if it is Sherlock Holmes detective case. She has done a marvelous job keeping in mind the non-finance background of Ms. Tett.

So what is the book all about. The book is about certain financial products such as CDOs, credit default swaps, SIVs and SPVs.

I would highly recommend the book to anyone interested in learning more about how the financial world works and how the big investment banks turned the world upside down.





Tuesday, April 19, 2011

Internet Not Working

Sorry folks but my internet connection at home is not working due to a faulty phone line. I am making this post from work. Will hopefully get back to more postings as soon as the internet is restored.

Thanks for your understanding.








Monday, April 18, 2011

Day One

So it is day one of my learning at the Day-Trading-Academy and I have decided to start with Timothy Olsen's book, a teenage investor who claims to have started investing at the age of 8, motivated by his grandmother. And by the age of 13 he had already written a book. Timothy also has blog which he regularly updates.  So let us start learning from this wise kid.

Timothy makes mark on the reader of his book in the very beginning of the Preface. He describes how making small amounts of savings can make a huge difference. For example, Timothy explains that

At Age 13: Put $50 into the bank account every month, at 4% interest.
At age 16: Save $75 a month in the same account, for four years.
At age 20: Save $300 per month until age 40.
At age 40: Put $1,000 a month into the same account.
At age 65: You would have more than $850,000!

This is quite a surprise for me as I never thought how small amounts of saving can ultimately accumulate into a larger sum.

Home Work

As, Tim's book explains, and as I have read in other books as well, you cannot just listen to CNBC finance report after the weather report and make a decision to invest in a particular company's stocks. You need to do your own research and leverage the reports generated by various media outlets. 
  1. Economic reports from the US federal reserve and the federal reserve's of various other leading economies.
  2. Academic studies, risk analysis research and reports from research firms are some of the tools available for researching stocks.
  3. Security and Exchange Commission, SEC, filings of the local country.
Doing good research will not always yield good results but would at least minimize the losses. Your research is your risk mitigation strategy. There is no quick get rich schemes. The more research you do, the more safer investments you make. You can either pay expensive commissions to stock brokers or do your own research and avoid the "cost of execution".

 Books TO Read

Tim, in his early days, read the books by Peter Lynch, Warren Buffett and John Bogle.

Peter Lynch, from Fidelity Management & Research Co, authored the book Beating the Street. Peter's books are good for learning about investing in stocks.

Warren Buffett, whose books are good for value stocks and whole companies, needs not introduction and John Bogle is the founder of Vanguard Group whose books are good for mutual funds.

Efficient Market Hypothesis

Researching stocks and going through piles and piles of information is very time consuming. Is iall the time wasted worth it? Especially when the prices of stocks already reflect what is going on in the market. The Efficient Market Hypothesis evolved in the 1960s. As per the EMH theory, there are enough intelligent people out in the market, buying and selling stocks that the prices of stocks are the actual representation of what they should be. Hence in an efficient market, all the information is already reflected in the stock price. Hence, you cannot expect to gain any advantage from any amount of research. 

So, what is better? Speculate, guess or research? Do I need to research when there are much smarter brains out there in Wall St with an IQ of 150 plus doing the same job?

We shall see as we go along  and progress through the different chapters of the six books I have bought.

Ciao till  next time.

Saturday, April 16, 2011

Start reading, stop wishing

So here I am. Ready to jump into the world of day trading. An IT professional wanting to enter the club of the Wall St boys and if possible make a fortune out of it.

As a start, I have bought the following books to start learning Day Trading. Do let me know if you have any better .

  1. Financial Freedom through electronic day trading
  2. The New Day Trader Advantage
  3. The Teenage investor
  4. The 100 best stocks you can buy
  5. Trading for a living
  6. Finding the next star bucks
  7. Money,Markets and Derivatives
All together it is a $404.00 expenditure so let us see if I can at least make $404.00 out of my first investment.

I will be posting what ever I learn from these books and updating the blog with what ever information I gain. The aim is to track my learning curve from a complete start and see how it goes. Is the stock market the solution to escaping the rat race? We will see.