Now and then, I have to give credit to a complete idiot.
Dirty laundry: I sometimes have trouble coming up with good topics to maintain a twice-monthly blog posting schedule. In this case, a friend’s friend said something so blithering that I had to contradict. Not harshly, of course. You never know when it’s someone’s wonderful Aunt Edna who, while dumber than a bag of wet nickels, has devoted her whole life to helping her nephew and about two hundred other kids from broken homes. I’d rather not find out the hard way. But the facts, at least, needed a saying.
This brought me to the realization that I have a substantial financial reading list, if I would but share it, to help people self-educate. Self-education is good. Why take my word for this stuff? Better to read people who know more about it than I do. And another of my beliefs is the old saying about lighting candles and cursing darkness. If I don’t feel good, I try to make myself do things that will make me feel more positive.
Before I go into the reading list, I ought to disclose my basic investing outlook and methods. I am not a fan of corporate America. I begin with the presumption that it is impossible to find a publicly traded American company not operated by criminals, at least as I define the term. The harder a company puts on the PR to tell me how wonderful it is, the more I assume the reality is opposite.
I am more an income investor than a growth investor. I don’t like CEO promises and predictions; my basic outlook is “Fuck you; pay up.” I like income because they can’t take it back. I own very few separate issue stocks. I go mostly for index ETFs (exchange-traded funds) and closed-end bond funds (CEFs). I can wring 2-5% payouts from the bond index ETFs, 12-15% from the CEFs (with capital loss potential), and results from the stock ETFs vary but are more volatile than most of the market (this works to my advantage). My primary objective, naturally, is to make money. The secondary objective, which leads to the primary but has to come first, is to keep emotion out of my investing.
It follows, therefore, that I don’t much believe in ethical investing. If you want to get all ethical, buy Satan Inc.’s stock (DEVL), donate the dividends to their enemies, and vote against all management’s recommendations. That is the action on your part that they fear most–but don’t confuse it with investing for gain.
I do believe that financial innumeracy is one of the leading causes of youth poverty in this country. The schools and parents didn’t teach them. The young made the naive assumption that opportunities would be the same for them as they were for their parents, a myth their parents knew was bullshit, but did not puncture. The parents should have.
With that, I offer you a list of excellent reads about money management, investing behaviors, strategies, and suchlike. I hope it will help you beat the rigged game that is our market, even if your method doesn’t even involve buying any stocks.
- Financially Stupid People Are Everywhere; Don’t Be One of Them, by Jason Kelly. You’ll be seeing his name a couple more times, for good reason: Jason combines a very readable style with an iconoclastic, no-bullshit approach. We’re friends, but I was a fan of his writing years before we became personally acquainted. If adulting classes existed, this could be the textbook. If you’re in your twenties and you have debt and/or no savings, start here. It’s the icewater bath you need.
- Warren Buffett Invests Like a Girl, and Why You Should, Too, by Louann Lofton. It turns out that women have investing tendencies that work to their advantage, and Lofton has taken time to observe and quantify these. It’s an excellent read, and likely to promote confidence on the part of women navigating what has historically been a male-dominated industry. Bottom line: if you’re beating their numbers, it doesn’t matter whether you do it through newsletter picks, tarot, Sacred Vagina Meditations, research, or free association. It means you’re better.
- The Motley Fool Investment Guide, by David & Tom Gardner. While I’m out of the business of researching and picking separate issue securities (that would include common stocks), others might not be. Either way, this is a fun read full of helpful education.
- Priceless: The Myth of Fair Value (and How to Take Advantage of It), by William Poundstone. Poundstone is the guy you have never read that you should be reading: author of the Secrets books, who then turned to studies of human psychology. Distilled essence: marketers use our instincts to lead us to decisions that work to their advantage and against ours. Understanding this is worth your while.
- The 3% Signal: The Investing Technique that will Change Your Life, by Jason Kelly. Jason publishes The Kelly Letter, an outstanding investment newsletter. He used to pick stocks. He stopped, and his life got better. This book tells what he does now, and how anyone with an investment account can do the same. Five stars without a moment’s hesitation.
- Your Money & Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich, by Jason Zweig. Another good entry in the field of investing and money psychology. I don’t believe you can go too far wrong applying critical thinking to an understanding of how our minds work.
- The Neatest Little Guide to Stock Market Investing, by Jason Kelly. There is some overlap here between more recent versions of this book and The 3% Signal. That said, if you want to go stock hunting, I’d take this book in addition to the Gardners’ treatise.
Because I feel in a sharing mode, I’m going to make a number of statements that I wish more people could absorb:
- Any stock index report that goes by points rather than percentage change just makes you dumber.
- Any person reporting a stock index result that reports points rather than percentage is either too uneducated to know how dumb this is, or is deliberately using the big number to draw attention.
- Conventional open-end mutual funds are usually a bad deal. They’re great investments for 1975, if you’re currently living then.
- About 90-95% of investors should just buy and accumulate index ETFs (exchange-traded funds).
- Financial media suck. You get stupider every time you watch or read them.
- Bonds don’t automatically mean you get your money back. Bond funds especially don’t mean this.
- If investing a very small amount, you can afford to shoot high. Only when you pile up a big heap o’ money do you have to think about holding onto it.
- Emotion is your investing enemy.
- You don’t know who you are as an investor until you see a crash. Who you are is what you do during and after that crash. A fern could make money in a bull market.
- The Dow is worse than useless; it is distortive. Any time someone cites it as meaningful, my opinion of that person’s investing savvy drops.
- It follows, from the above and previous commentary, that any time anyone says “Dow drops 300 [or whatever number],” without including the percentage change, I conclude that the individual doesn’t understand the markets at all. I may heart them big time, but they said a dumb thing.
- Most people throw away about half their lifetime returns just by playing with themselves all through their twenties, only getting serious come their thirties.
- If you buy an investment you don’t understand, you do a stupid thing.
- Any time someone starts by saying “If you had bought XX back in X month, year Y,” this person is sharing irrelevancy. Why? Because you didn’t. You wouldn’t. Next time, you won’t either. If only that defensive end had gotten to the passer on that third down play in the first quarter, the whole game would have been different–but he did not.
- Always buy the stocks my wife says to buy. Unless, of course, I helped pick them, in which case they’ll tank.
- The choice of a traditional vs. Roth IRA comes down to the tax benefit. If you don’t make enough money to need the writeoff, the Roth is probably more advantageous. However, the Roth means trusting the government to honor a promise years in the future. I never have. Your call.
- Rich traders get to cheat in ways you and I do not.
- For IPOs, if they’re worth getting into, you probably aren’t getting in unless you’re with a big full-commission brokerage. That’s one advantage for full-commission brokers, set against an ocean of disadvantages.