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.
- Economic reports from the US federal reserve and the federal reserve's of various other leading economies.
- Academic studies, risk analysis research and reports from research firms are some of the tools available for researching stocks.
- 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
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.
