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Old 11-25-2006, 02:37 PM   #4 (permalink)
mustard76
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Join Date: Nov 2006
Location: Boston, MA
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Default investment books

When I first started investing I picked my own stocks, but this was too time consuming and I wasn't very good at it. Don't believe anyone who claims they can sell you a "system" that will make it easy to pick stocks. There is only one way to do it right: hard work. It takes a lot of time to do the necessary research and dig up information that other traders may not have. And don't forget that you're competing with experienced traders on Wall Street who have more information and inside connections than you'll ever have.

Next, I tried paying an "investment adviser" at one of the large financial services companies to choose stocks for me. He did a decent job because he had access to a ton of information and research provided by his firm. Unfortunately, he charged ridiculously high fees for his services. Some of the fees were hidden so it took me a while to figure this out. The bottom line was that, after his fees, I was making less than the market return (S&P 500) and I never felt comfortable some of my investments because I didn't understand them.

Recently, I opened and account with Vangaurd and decided to move my money into index funds. I'm resigned to passive investing because I don't have the time to pick stocks and I realized that I need to avoid high (sometimes hidden) fees.

If you want to pick stocks then go for it, but start your education with books like "A Random Walk Down Wall Street" and the books listed below. DO NOT start your education with a "system" put together by a stock trading guru. You will not be able to sort through the hype and identify the information worth learning.

Remember that the best investors don't sell a system. They make money trading stocks.

If you don't have a significant amount of time to spend managing your investments, then stick to passive investing. If you really want to learn to trade stocks dedicate the next year to reading the right books before you make your first trade. Otherwise, you'll learn by losing your hard-earned money.

Here are my recommendations:

A Random Walk Down Wall Street by Burton G. Malkiel
Amazon.com: A Random Walk Down Wall Street: Completely Revised and Updated Edition: Books: Burton G. Malkiel

The Four Pillars of Investing by William Bernstein
Amazon link: Amazon.com: The Four Pillars of Investing : Lessons for Building a Winning Portfolio: Books: William J. Bernstein

Unconventional Success: A Fundamental Approach to Personal Investment by David F. Swensen
Amazon link: Amazon.com: Unconventional Success: A Fundamental Approach to Personal Investment: Books: David F. Swensen
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