How about a good read?
The danger of investment books: when reading them, there is a risk of unleashing incredible boredom. Hopefully, these suggestions won’t do that. Most of these books should be available at low cost on Amazon or other Internet booksellers. If you are interested in the investing part of investing, these are good places to begin. Some have been covered in Broker’s Bookcase, my book review column in Life Insurance Selling.
- "The Elements of Investing," Malkiel and Ellis (Wiley, 2010). Simple offering from two guys — the academic inventor of the random walk theory and a real-world investing fellow named Ellis.
- "What Works on Wall Street," James P. O’Shaughnessy (McGraw-Hill, 2005). A grand overview of lots of styles, including the importance of low P/Es (price/earnings ratios).
- "Billion Dollar Mistake," Stephen L. Weiss (Wiley, 2010). How things can go horribly wrong, the dark side.
- "Probable Outcomes," Ed Easterling (Cypress House, 2010, 2011). Primarily for advisors; however, you’ll have no trouble with this book (especially after reading the first three). Ed is a national treasure — again the importance of the low P/E.
- "The Energy of Money," Maria Nemeth, Ph.D. (Ballantine, 1997, 1999). Nemeth tells how she lost $35,000 by being greedy and, most importantly, talks about the monkey mind. Some of this is touchy-feely (she is, after all, a California psychologist), but there's some good stuff, and monkey mind is important.
- "Positive Intelligence," Shirzad Chamine. This book's not about investing, per se, but more about Chamine's version of monkey mind — the built-in saboteurs we all have that work against us. Again, the monkey mind is an important concept. (Nemeth lost $35,000 because of monkey-mind greed; people invested with Madoff for the same reason, greed. On the other side, people often invest because of good marketing. Many advisors — a doctor I know described some advisors as “sharks circling in the water” at dinner seminars — are good at marketing; many don’t like investing. Madoff clearly had good marketers. There’s nothing wrong with presenting yourself attractively. However, it’s wise to develop investing skills before unleashing one’s self on the general public.)
- "Unconventional Success," David F. Swensen (Free Press, 2005). Swensen tells how he manages the Yale endowment. (Some of the techniques would apply to Harvard, too.) The techniques that are available to multi-billion-dollar endowments do not always translate all that well to individuals; nonetheless, the book and the author are important.
I do not subscribe to all the theories discussed above, of course. And during this secular bear market, tactical techniques become increasingly important for parts of portfolios. Tactical focuses on missing the big down days, and the argument is sound that catching the down days is lots worse than hitting all of the up days. Generally (and it is a generalization), tactical tries to realize 75% of the ups and 25% of the down by placing serious focus on daily/weekly/monthly activity. If you are interested in tactically managing your practice, I again suggest you contact Gordon Case at (888) 957-3438 to discuss The Sherman Sheet and Bill Sherman’s ongoing portfolio management programs for advisors.
Have a super week, whether tactical or strategic.
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