Re: Stock Market Books
A prerequisite to be a successful investor is to be your own man. Very few people profit with the help of a so called stock broker who recommends buying this
stock and then selling it and buying something else. The point is; tread slowly if you want someone to make you rich. In the long run, I know very few people who ever benefited from using a stock salesman. I am not referring to good financial fee only investment advisors.
William Bernstein wrote “The Intelligent Asset Allocator” in the year 2000, and he
followed this book up in 2002 with another book; “The Four Pillars of Investing – Lessons for Building A Winning Portfolio.” Bernstein indicated that this second book contains things he might wished to have written in the first book -- The Intelligent Asset Allocator. It is probably worth you reading the second book, and retaining it as a reference. At your leisure you can borrow the first book from the library to peruse.
I take it you don’t want to be a day trader. Day trading as you know is essentially a zero-sum game minus expenses. Only a very small fraction of people who have attempted day trading are successful, and most present day day-traders are glued to the computer monitor for extremely long periods (this can cause you to get fat and have poor health).
But I recently met a 52 year old guy who said is a retired gas company employee, and now works when he wants to work with a partner as a loan agent. He told me that he has made $800,000 trading S&P500 options in the last few years. He indicated that he uses stops and spends less than an hour each morning on the computer. Of course this guy may have been exaggerating, but he came across as a nice person – he could have been a con artist. Getting back to Bernstein….
Bernstein is worth reading. He explains that risk is a necessary ingredient for reward (the more the risk the more the reward). He also explains how to allocate your investments – that is; invest in an array of indexed mutual funds such as: Large Cap, Small Cap (Value & Growth), Total Market Index, REITS, European Index, International Value Index, Emerging Market Index, Far East Index. – things like this. Bernstein explains how the overall risk is minimized when an investor has a well balanced portfolio with the assets spread over a predetermined array of index mutuals funds whose movements are essentially random with respect to each other. The premise is that in the long run, all of these indexed mutual funds are going to go up, but in the shorter run, some will go down while others are going up or are flat. Saying this in another way, the correlation coefficients of any fund in this allocated array of funds with respect to another fund in this array should be low (the lower the better) – say in the range of minus 0.5 to plus 0.5 on a scale of minus1.0 to plus 1.0.
The beauty of intelligent asset allocating, is that you are using a sound method to be rewarded, and have time to do all of the other things in life which are the important things. “whatever they are.”
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