# Best book or site to learn on investing in the markets



## Johnny (Oct 30, 2014)

Hi,

I recently took some time off from work because of a new addition to our family. I would like to not return to a regular job and continue enjoying the benefits of being home more with the family. I am looking to learn more on investing for myself and would like to know if there are books or sites you guys can recommend to learn from. I have managed to save some money over the years, but it is making 0.15% because it's in USD. After losing a big chunk back in 2000 in the market (due to bad timing and education), I have been chicken to re-enter the markets. I would like to do it right this time around. 

Looking forward to hearing back with some advice/suggestions.


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## Rusty O'Toole (Feb 1, 2012)

I answered this question in another thread but here is a different answer.

Lately I have been learning to trade options, a lot of what I have learned came from a web TV program called Tastytrade. You can watch an experienced option trader trade options all day in real time, and they also have interviews, analysis, and lessons on trading options.

If you are interested in trading options this is an excellent way to learn about the business.

It is not hard to make 2% or 3% per month on any amount of $5000 or more with minimal risk.

You don't have to spend or risk a cent. They use an excellent platform called Think or Swim which is a TD subsidiary. They have a paper trading platform which allows you to practice and learn just like the real thing, free of charge.


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## Spudd (Oct 11, 2011)

I would recommend "The Wealthy Barber Returns" by David Chilton for a good overview. I have also heard good things about "Millionaire Teacher" but I haven't read that one myself.


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## GoldStone (Mar 6, 2011)

Johnny said:


> After losing a big chunk back in 2000 in the market (due to bad timing and education), I have been chicken to re-enter the markets. I would like to do it right this time around.


What makes you think that your timing will be better this time?

You mentioned in the other thread that you have about $1 million in cash to deploy. I am hesitant to recommend books or sites, because no book or site can teach you how to time your re-entry with such a large sum. It's very tricky.

You might benefit from a consultation with a *fee-only* financial planner.


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## Pluto (Sep 12, 2013)

That's a tough one to answer because there are lots of styles, strategies and what not, and you have to find something that clicks with you. they can all work if executed well.
Are you inclined to trade? If so consider William o'Neil's books, newspaper, and website - Investors business Daily. His stuff is remarkable in that it is all organized around a coherent trading idea. You won't find them focusing on too many large cap dividend stocks - usually smaller fast growers with a focus on preservation of capital and trading - buy right, sell right, then move on to the next breakout. Claims you can get 100% in a year with 5 trades. 
Not into trading? Buy and hold? Want to collect dividends? Lots of advice on that style here in this forum. 

The interesting thing is you have some experience. Also you take some responsibility for your bad experience back in 2000. That bodes well for the future. Regardless of what strategy that ends up fitting you best, I still recommend reading O'Neil's stuff and maybe subscribing to his online paper for a while at least. Focus on learning market direction and reading their article "The Big Picture" to start. That would help you avoid repeating the bad experience. 

Also, to get a different perspective go to youtube and search for Warren Buffett and Charlie Munger videos and interviews. study their thinking and how they go about it. This is a much different approach from O'Neil, but you shouldn't think about differing approaches as right or wrong, good or bad. Rather think about them in terms of what suits you. 

Finally, there is nothing wrong with making money in a down market. So learning how to do that is not a bad idea. Just think, if in 2000, you tilted your strategy negative, and would have bought some puts, you would have made out like a bandit, or at least protected yourself. I don't know when this current bull market will end, but is isn't a young one. If you go long when it ends, you're paddling up stream. Not a good idea if you want your next experience to be a better one than the last.


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## GoldStone (Mar 6, 2011)

Pluto, are you out of your mind? Making money in a down market is an advanced strategy. It is completely unsuitable for a novice investor like OP.

Rusty, your advice about trading options is not much better. The OP is a novice with a large sum to deploy. He took time off work to take care of his young family. You want him glued to the trading screen looking at option quotes???

OP: be extremely careful about any advice you get on the Internet.


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## OptsyEagle (Nov 29, 2009)

Forget options and forget about making money in down markets. One would need to know they are in a down market first and that is where the problem lies. There is no such thing as a market that is going down, only markets that have gone down.

I think it is time for you and perhaps many others to take the 12 step Recovery Program for Active Investors.

http://www.ifa.com/12steps/foreword/

You can either realize that active investing is a mugs game BEFORE you lose your money or AFTER. You will eventually learn it, so the timing of that is up to you.


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## Just a Guy (Mar 27, 2012)

Spudd said:


> I would recommend "The Wealthy Barber Returns" by David Chilton for a good overview. I have also heard good things about "Millionaire Teacher" but I haven't read that one myself.


I'm not a big fan of chiton, I think his philosophy is fundamentally flawed, and not even followed by himself.

He tends to preach pay yourself first (which is good) and cut spending (which is simple minded). If you live frugally, and run into problems, you can't cut spending to solve the problem.

I think a better philosophy is to find ways to increase your income to pay for things you want.

Chilton is an investor, not a frugal guy. What made him, and many others wealthy, was not cutting spending but rather building up passive income.


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## Johnny (Oct 30, 2014)

Thank you for all the comments. Goldstone, I would never put in all my cash into the market. I would like to divide it into real estate, stocks or ETFs and some money markets/GICs for security. Did I miss any?
I agree with Goldstone and OptsyEagle, that I don't have enough experience to predict/invest in a down market. The only thing I really do know from the years is investing in real estate doing rental or flips, but the market is kind of the same as stocks now. It's at a point where the prices are so over-exaggerated that they don't make any sense and make me uncertain to enter at this point.

Besides actively trading on a daily basis, does it make sense to enter the markets now or is it the same case there?


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## Just a Guy (Mar 27, 2012)

For real estate beginners, I suggest www.easysafemoney.com. 

You also forgot looking into starting a business if you want to be truly diversified.


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## lonewolf (Jun 12, 2012)

OptsyEagle said:


> Forget options and forget about making money in down markets. One would need to know they are in a down market first and that is where the problem lies. There is no such thing as a market that is going down, only markets that have gone down.
> 
> I think it is time for you and perhaps many others to take the 12 step Recovery Program for Active Investors.
> 
> ...


 JP Morgan was smart he had an astrologer for an assistant. Morgan was fond of saying millionaires do not use astrology billionaires do.


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## GoldStone (Mar 6, 2011)

Johnny said:


> Besides actively trading on a daily basis, does it make sense to enter the markets now or is it the same case there?


Warren Buffett thinks that U.S. stock market is in the zone of reasonbleness:

http://youtu.be/cSU3y0N60XU?t=6m22s

Canadian market is valued about the same. Both markets are more expensive than their historic averages. I think this is justified based on where interest rates are. Stocks are the place to be as long as interest rates stay low and we don't experience an outright deflation.

I think you can do a LOT worse than put your money in a low-cost balanced fund:

The case for simple, boring balanced funds

Of the names mentioned in the article, Mawer Balanced would be my top choice (Mawer Tax Effective Balanced for taxable accounts). Steadyhand Founders would be #2. One good balanced fund is all you need.


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## GoldStone (Mar 6, 2011)

Speaking of Steadyhand...

After a long search, pharmacist finds a place for his money


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## OptsyEagle (Nov 29, 2009)

Johnny said:


> Besides actively trading on a daily basis, does it make sense to enter the markets now or is it the same case there?


Unfortuneately, no one will be able to answer that question. If you cannot invest the money and pretty much ignore it for 10 years or so, then I would not advise you to make an investment in stocks ... or real estate, for that matter. In 10 years, whether we are at a temporary top or bottom will not make that much difference to you, barring some nasty black swan event, and even those are usually erased quite well in that length of time.


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## lonewolf (Jun 12, 2012)

OptsyEagle said:


> Unfortuneately, no one will be able to answer that question. If you cannot invest the money and pretty much ignore it for 10 years or so, then I would not advise you to make an investment in stocks ... or real estate, for that matter. In 10 years, whether we are at a temporary top or bottom will not make that much difference to you, barring some nasty black swan event, and even those are usually erased quite well in that length of time.


 I disagree, there are a lot of speculators that do well trading the 22 week cycle, the seasonal cycle, the 4 yr cycle & or other cycles & or price patterns that are shorter then 10years & are longer then intra day cycles & or price patterns.


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## Just a Guy (Mar 27, 2012)

There are probably a lot of them who lose money as well...

There is no right answer, if you are lucky you can do well at any time...but you can also be unlucky at any time.

It's best to think of invested money as spent money...not there anymore if you need it.


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## OptsyEagle (Nov 29, 2009)

lonewolf said:


> I disagree, there are a lot of speculators that do well trading the 22 week cycle, the seasonal cycle, the 4 yr cycle & or other cycles & or price patterns that are shorter then 10years & are longer then intra day cycles & or price patterns.


Put a few hundred thousand people in a room flipping coins, and you should be able to see one of them who will call it correctly 10 times in a row. How many people, do you think, are trying to call the next move in the stock market?

So if the OP does not want to invest a $1 million on the next coin flip, he should stop trying to find someone who thinks he knows what is going to happen tomorrow. There are lots who think they know, but none that do.


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## Pluto (Sep 12, 2013)

GoldStone said:


> Pluto, are you out of your mind? Making money in a down market is an advanced strategy. It is completely unsuitable for a novice investor like OP.
> 
> Rusty, your advice about trading options is not much better. The OP is a novice with a large sum to deploy. He took time off work to take care of his young family. You want him glued to the trading screen looking at option quotes???
> 
> OP: be extremely careful about any advice you get on the Internet.


I believe learning to make money in a down market should be on the agenda of every investor. I didn't say anything about being glued to a trading screen looking at option quotes. It is not as time consuming and complicated as you assume. And you seem to have missed the word "learn". Moreover, it isn't the first thing to learn, but is should be in the curriculum. Whether one deploys it, is a personal choice. I don't really accept the advice to not learn, and hopefully the op won't either.


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> Forget options and forget about making money in down markets. One would need to know they are in a down market first and that is where the problem lies. There is no such thing as a market that is going down, only markets that have gone down.
> 
> I think it is time for you and perhaps many others to take the 12 step Recovery Program for Active Investors.
> 
> ...


At least you acknowledge that one can know that a market has gone down. The other side of that seems to be knowledge of when a market has gone up. Yes? And isn't it possible to know that the economy and markets are cyclical? The OP already has had some experience of that. And what you are implicitly advising the OP to do is to be blind to topping markets when he already was and got burned. Hopefully he will weigh all the responses he gets carefully. 

As to the article you cite: I read the article. And I also have read and studied alternate perspectives. Have you? I suspect you seek out and read articles that support what you already believe, and avoid stuff that might challenge what you already believe. did you ever read IBD? Did you ever read their big Picture article daily through an entire bull and bear market? 

The premise of your post is, one can only know a down market after it has gone down. The corollary of that is that one can only know an up market after it has gone up. Can that really be true? In 2009 after a brutal pounding, how long did it take you to realize that the market had turned up? what made you realize it was a major up trend? What ever it was, if anything (for you), it is the opposite that tells one the market is going down. I suspect you take the past and extrapolate into the future and ignore the fact that stock markets and the economy are cyclical. That can be dangerous, as the OP found out in 2000. 

There was a professional money manager on TV last month who claimed that in the last bull market he gradually took his clients out of stocks and into cash as the market matured. In 2009 he said his clients thanked him for that. Your perspective seems to be that what he did for them in impossible because its impossible to know when the odds are against one in stocks. I saw another money manager some weeks on TV who said the Can bank stocks top out when their p/e's get around 13. Their p/e's were above 12 and bumping up against 13. And this was just slightly before the recent pullback where the banks and energy stocks got sold off. 

What is so difficult about that? Isn't it clear that if some stocks are banging up against their historical high p/e's that the odds are not in ones favour? Why do you have to wait until after they have gone down to know?


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## uptoolate (Oct 9, 2011)

I like the Millionaire Teacher as a basic primer. Wealth Barber Returns is better than the original in my opinion. If you want really dense The Intelligent Investor by Graham. A newer edition with contributions from Buffet and Jason Zweig. My favourite of all is probably Bill Bernstein's Four Pillars of Investing as it strikes a nice middle ground. The Affluent Investor by Phil DeMuth is also good though a couple of the sections may not be that applicable to Canadians and are a pretty depressing commentary on our American neighbours. I liked OptsyEagle's suggestion about the 12 Steps. The reason I like Bernstein, DeMuth, Ferri, Ellis, Malkiel and Bogle is that they are frank about all of the people who would like to have a piece of your money - leaving you less, sometimes much less. The Bogleheads site is a good resource as well.


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## OptsyEagle (Nov 29, 2009)

Pluto, that was a very long post that says that you think you can tell when a market is at the top or bottom, whereas I know you cannot.

You may get lucky once and a while but for the most part, the attempt to time the market will cost you money. I have figured out by now that you intend to spend your money in losses to prove my point, but it is my opinion, that if the OP falls back on his common sense, he can save this loss of capital and therefore will be much better off.

That common sense being; if there was any way to do it, the billions of bucks behind the extremely large investment banks, hedge funds and mutual funds would most likely have found it by now. Since none of these entities have ever shown a statistically significant performance that proves they can do it, one should assume that it might just be a little more difficult then it looks.


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## GoldStone (Mar 6, 2011)

Pluto,

*"Sometimes the questions are complicated and the answers are simple."*

Yes, stock markets can and do go up and down in short- to mid-term. No, you don't have to time every turn of the tide. In the long run, the markets move from the lower left to the upper right. Unprofitable businesses disappear. Profitable businesses continue to compound their earnings. It's time in the market that matter, not timing the market.

The solutions you propose are unnecessary and unworkable. A simple balanced portfolio solves the problem you are trying to solve. Put ~60% in equities, ~40% in fixed income. Add new money on a regular basis. Rebalance annually. Elegant and simple, unlike what you propose.


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## uptoolate (Oct 9, 2011)

What they said!


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> Unfortuneately, no one will be able to answer that question. If you cannot invest the money and pretty much ignore it for 10 years or so, then I would not advise you to make an investment in stocks ... or real estate, for that matter. In 10 years, whether we are at a temporary top or bottom will not make that much difference to you, barring some nasty black swan event, and even those are usually erased quite well in that length of time.


You are assuming no one can answer that question. 
Why is your 10 year time horizon so good? If the OP bought a tsx etf in 2000 when the market was at 8000, 10 years later the tsx was at 12000. Isn't that a 4.14% compounded annually? Why is that good? 
I know people in 2000 who knew the market was nuts, got out and just waited until valuations were better. There is nothing wrong with having cash until good value presents itself. Since we know the market and the economy is cyclical, and you are willing to wait 10 years, why not just wait 1 or 2 years for a stellar buying opportunity? 

For myself I like Canadian banks. but not at any price and any p/e. The historical high p/e of the banks is about 13. They are near that now. So I think I know that the odds are not in my favour to buy the banks right now. In previous years, their p/e's have been much lower, dividend yield higher, and so I drew the conclusion the odds were in my favour. Your view is, no one can know the odds - so if one has 10 years to wait, throw it all in anytime at any value. Hmmmm. Since I like the banks, your advice to me would be to buy anytime at any price as long as I have 10 years to wait. that's not good advice. 

yes, I know. we can't get any where near what Buffett does because his approach is so complicated and arcane and we are all just a bunch of morons compared to him. But one of his metaphors is - we like hamburgers in our house, so when hamburgers go on sale we buy more. Supposing the banks were hamburgers. And supposing they went on sale and were priced at or below their median p/e. and someone said buy more. Stock up. Isn't it possible that that's better than buying near a top and waiting 10 years for a paltry return? What is so difficult and arcane about that? Waiting until good value presents itself is not complicated, and unknowable.


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> Put a few hundred thousand people in a room flipping coins, and you should be able to see one of them who will call it correctly 10 times in a row. How many people, do you think, are trying to call the next move in the stock market?
> 
> So if the OP does not want to invest a $1 million on the next coin flip, he should stop trying to find someone who thinks he knows what is going to happen tomorrow. There are lots who think they know, but none that do.


But your advise to the op is that it is a coin toss. For you it must be a coin toss because according to you, no one can know. But I know, for instance, that when the bank p/e's are around 7 the odds are in my favour, and when they are around 13, the odds are not in my favour. 
You sound like an investor who waits too long to get in, and then has to wait 10 years for a profit. Using my approach, in 2008 may june I was out. period. The odds were not in my favour due to various factors that are learnable. then using a value approach I bought banks, riets and sundry other stocks in OCT, Nov, and later in march 2009 on margin. By 2010 I was way in the profit zone. But you have to wait 10 years, presumably because you can't tell when the market is weakening, and when stocks are cheap. Just because you can't tell when stocks are on sale doesn't mean the op can't learn to tell.


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## My Own Advisor (Sep 24, 2012)

Some great books....

1. Millionaire Teacher
2. The Wealthy Barber Returns
3. Your Money & Your Brain
4. The Elements of Investing
5. The Four Pillars of Investing

I just reviewed The Empowered Investor on my site and it links to a free copy of the book. If you want to win the hardcopy just enter the draw.
http://www.myownadvisor.ca/empowered-investor-book-review-giveaway/


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## GoldStone (Mar 6, 2011)

Pluto said:


> Why is your 10 year time horizon so good? If the OP bought a tsx etf in 2000 when the market was at 8000, 10 years later the tsx was at 12000. Isn't that a 4.14% compounded annually? Why is that good?


You cherry-picked the start and the end dates. 2000: major top. 2009: major bottom. Interestingly enough, the return was still positive!!! 

Of course, that's not how most of us invest. Working age investors typically invest a certain percentage of their annual earnings. You cannot prove any point by looking at one period.



Pluto said:


> I know people in 2000 who knew the market was nuts, got out and just waited until valuations were better.


So what? I know people who missed the entire bull run of the last 5 years. S&P 500 tripled from the bottom of March'09. They missed it because they expected a double-dip recession, hyperinflation, or whatever.

Survivorship bias: People who get the timing right brag about it for the rest of their lives. People who get the timing wrong weep quietly in the closet.



Pluto said:


> There is nothing wrong with having cash until good value presents itself. Since we know the market and the economy is cyclical, and you are willing to wait 10 years, why not just wait 1 or 2 years for a stellar buying opportunity?


Balanced portfolio and rebalancing solve this problem nicely. Frankly, I think we are talking about the same solution. We just frame it in different terms.


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## OptsyEagle (Nov 29, 2009)

Pretty much what GoldStone said.

Anyway Pluto, we have both made our points so I don't see any reason to add more. Who knows. Maybe you will be the one. Don't forget to write a book.


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## uptoolate (Oct 9, 2011)

Ah yes, agree. Your Money and Your Brain is very good as well.


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> Pluto, that was a very long post that says that you think you can tell when a market is at the top or bottom, whereas I know you cannot.
> 
> You may get lucky once and a while but for the most part, the attempt to time the market will cost you money. I have figured out by now that you intend to spend your money in losses to prove my point, but it is my opinion, that if the OP falls back on his common sense, he can save this loss of capital and therefore will be much better off.
> 
> That common sense being; if there was any way to do it, the billions of bucks behind the extremely large investment banks, hedge funds and mutual funds would most likely have found it by now. Since none of these entities have ever shown a statistically significant performance that proves they can do it, one should assume that it might just be a little more difficult then it looks.


You seem to be very sure of your view. But I have no evidence that you look for and study anything that challenges your view. You seem to be locked into a specific paradigm, and are unwilling to venture into areas you would consider heresy. You seem to be mostly influenced by the efficient market hypothesis - everything boils down to chance, so one might as well get a monkey as a stock advisor. Did you ever hear of the best, ie Templeton, Lynch, Buffett promote the idea that everything in stocks boils down to chance or pure luck? 

You speak of common sense, and so again I will give a common sense example, the banks. When their prices got hammered in the last bear market and their p/e's low, and yields high, I drew the conclusion that the odds were in my favour, and bought stocks. As this bull market progressed, and p/e's expanded I became less confident in appreciation potential. Apparently their historical high p/e's are around 13 and that level was reached this Sept. My view is at that level the odds are not in my favour, so I did not buy. Your view is I can't calculate the odds. And if I do, I was just lucky. Your view is buying at historical high p/e's is just as good a buying at the historical low range. I don't get it. And you don't offer any evidence for your views.

You claim none of these entities have ever shown a statistical significant performance that they can do it. What's your reference? Lynch running a mutual fund had a career (I think about 13 years) average around 30%. Buffett and his partner, around 20%, Templeton over 30 or more years about 20%. these are statistically significant performance differentials over the indexes. The efficient market hypothesis says its just luck. But how do they know? they don't, they just assume it. In fact, they to their credit, call their perspective a hypothesis. You elevate a hypothesis to a immutable fact, while ignoring evidence to the contrary. 

But I do agree that the average institution does not beat the market. Reasons for that have been offered. One is that managers are loath to employ a strategy unlike other managers. It s the herd instinct. its safer in terms of job security. They are, on average, crowd followers. as such, perform like the crowd. They can't get fired for being like all the rest. 

but individual, small time investors, are not institutions. Individuals can be totally out of the market in about 10 minutes if they want to be, but institutions can't because they own way more stock. Since they can't get out fast, they can't do what individuals can. See, you assume that individuals must emulate institutions, and institutions an average aren't standout performers, therefore individuals can not out perform them. But what if your assumption is incorrect? Why do individuals have to act like institutions? They don't. So why assume that they must?


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> Pretty much what GoldStone said.
> 
> Anyway Pluto, we have both made our points so I don't see any reason to add more. Who knows. Maybe you will be the one. Don't forget to write a book.


You could add why you imply buying bank stock at a p/e of 13 near its historical high is just as good as buying them with a p/e of 7 and unusually high dividend yields. Your luck and chance theory would dictate that they are both equally good. Why?


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## GoldStone (Mar 6, 2011)

Pluto said:


> You could add why you imply buying bank stock at a p/e of 13 near its historical high is just as good as buying them with a p/e of 7 and unusually high dividend yields. Your luck and chance theory would dictate that they are both equally good. Why?


Stocks do not exist in a vacuum. They compete for investor's money with other asset classes. Bonds and real estate in particular. Compare bond yields and real estate yields to their historic averages. There is your answer.


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## OptsyEagle (Nov 29, 2009)

Pluto said:


> You could add why you imply buying bank stock at a p/e of 13 near its historical high is just as good as buying them with a p/e of 7 and unusually high dividend yields. Your luck and chance theory would dictate that they are both equally good. Why?


First of all, I didn't say anything about buying any stock at any PE.

However, since you brought it up, I would say that buying TD bank at $50 when it's PE is at 13 is a much better deal then paying $60 for the same stock on the same day just because it's PE is now calculated at 7. I would say all that happened there was the person paid $10 more per share. I hope they enjoy their PE.

The stock market already knows the PE of the stock. Do you really think the guy selling you his bank stock at a PE of 7 doesn't know what the PE is? Take a look at the PE of Washington Mutual, 6 months before it went bankrupt. I bet it had a very low PE. Microsoft in the 80s traded for a PE well above 30 for almost every trading day of that decade and it would have been a steal at that price, on any of those days. 

My point isn't to cherry pick a story of the past, my point is that the stock market already knows everything you know about the PE of every stock. Sometimes the stock market will be right and sometimes it will be wrong, but at all times you will never know until the future becomes the past.


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## Underworld (Aug 26, 2009)

I think one thing for sure is that you need to get your money out of savings and start investing it. 
If you had 1 million sitting in the bank over 10 years the value of your money would loose almost 32% of its value due to inflation (4%?). 

I think start off by taking baby steps investing in a diverse manner. Real estate, dividend stocks, bullion etc... And only investing like 30 grand per year to start off with, increasing it as you build confidence.


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## james4beach (Nov 15, 2012)

GoldStone said:


> You cherry-picked the start and the end dates. 2000: major top. 2009: major bottom. Interestingly enough, the return was still positive!!!


I don't think it's positive. From stockcharts (which includes dividends by the way) I see that XIU from the 2000 top to 2009 bottom returned more like -30% which is -4% annualized.
In GICs you would have earned +4% to +5% annualized ... total return of around +50%

Stock returns are very sensitive to timing because the stock market is an extremely volatile thing


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## GoldStone (Mar 6, 2011)

james4beach said:


> I don't think it's positive. From stockcharts (which includes dividends by the way) I see that XIU from the 2000 top to 2009 bottom returned more like -30% which is -4% annualized.


1. I referred to major tops and bottoms in terms of years, not in terms of exact days.
2. One cherry-picked time period is meaningless, as already mentioned above.
3. Most of us invest on a DCA basis, for a few decades in a row. Try finding a 30-year period where GICs beat stocks. Heck, try finding a 30-year period where GICs beat a balanced portfolio... a more appropriate option for people who can't tolerate volatility.


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## GoldStone (Mar 6, 2011)

james4beach said:


> Stock returns are very sensitive to timing because the stock market is an extremely volatile thing


The returns are sensitive to timing if you sell at the bottom. You can say that about most asset classes. Did you sell your gold because it's down 38% from the top of 2011?

ADDED: if that sounds harsh, James, it's because I want to expose your extreme biases.


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## lonewolf (Jun 12, 2012)

GoldStone said:


> 1. I referred to major tops and bottoms in terms of years, not in terms of exact days.
> 2. One cherry-picked time period is meaningless, as already mentioned above.
> 3. Most of us invest on a DCA basis, for a few decades in a row. Try finding a 30-year period where GICs beat stocks. Heck, try finding a 30-year period where GICs beat a balanced portfolio... a more appropriate option for people who can't tolerate volatility.



I bet it would be hard to find a 30 year period where the average investor in stocks beat the average investor in GICs. My thinking is it does not matter that stock indexes might have out performed GICs in certain time periods, The average investor in stocks is not going to perform as well as the average investor in GICs.

A few years back I read that the best performing mutual fund of the last 10 years even though it was up strongly the average investor lost money because they bought high & sold low. So even though these investors were smart enough to pick the best performing mutual fund they still lost money


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## uptoolate (Oct 9, 2011)

The 'average investor' lost money mainly because they bought and sold! That is the message. Stay the course! Buy and buy and buy. Resist the urge to think that you are the one who knows where the market is going and just stay in and continue to invest according to a good plan and your chosen asset allocation.


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## CPA Candidate (Dec 15, 2013)

This thread has gone off the rails.

I would recommend the Intelligent Investor. The discussion around investor psychology is probably the most important lesson and what most people screw up.


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## cainvest (May 1, 2013)

I believe the average investor has done fine over the past few decades, those people being the ones owning mutual funds and GICs bought through one of the major the banks or big investment firms. Those average investors don't know enough to muddle in their investment affairs, it's likely more of a concern to the much smaller percentage of new DIY/self-directed types who know just enough to be dangerous to their portfolio.


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> First of all, I didn't say anything about buying any stock at any PE.
> 
> However, since you brought it up, I would say that buying TD bank at $50 when it's PE is at 13 is a much better deal then paying $60 for the same stock on the same day just because it's PE is now calculated at 7. I would say all that happened there was the person paid $10 more per share. I hope they enjoy their PE.
> 
> ...


Your point is that you believe in the efficient market hypothesis, and you seem to forget it is an unproven hypothesis, not an immutable fact. True to your faith, you dismiss any fact or event that contradicts it. People don't all get the news about a stock at the same time, so how could the market be efficient? And some might act on the news by selling, and others buy because they interpret the news differently. Since people interpret the news differently, there is really no such thing as "the market knows". 


Anyway, now that I have your p/e theory along with your coin toss theory I have a better handle on your perspective. Remember, the OP is desiring good/best books or other educational material. And your p/e theory is helpful to me in understanding why it might take you 10 years to make a paltry profit. Do you have a book or well formed article that supports your p/e theory? 

Even though I know the efficient market theory is a poor one, I think the OP should learn about it. I promote people learning and finding out for themselves, so they become less dependent on opinions of others. I realize you don't want that: what you want is for new people who are asking questions, to blindly follow you, and to cross off their list anything that contradicts your view. The most recent test of your hypothesis view got about 4.5% for the coin toss theory, and about 10% for pro management. that's a statistical difference in my view, however I wouldn't expect you to agree. Too, you fail to address how Templeton and others cited above who could care less about the efficient market hypothesis got career averages of 20% and even higher. What makes you try to dodge these facts?


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## Pluto (Sep 12, 2013)

CPA Candidate said:


> This thread has gone off the rails.
> 
> I would recommend the Intelligent Investor. The discussion around investor psychology is probably the most important lesson and what most people screw up.


I agree. But the thing that screwed me up when I first read this book was I got taken in by the "margin of safety" thing. I didn't realize that it didn't work very well, and it was like taking the last puff of a discarded cigar.


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## Just a Guy (Mar 27, 2012)

You could read the rich dad series...as for investing, it's useless (except for the definition of an asset vs a liability) but it'll make you feel better about yourself for doing something that others will think "risky".


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## Pluto (Sep 12, 2013)

GoldStone said:


> Pluto,
> 
> *"Sometimes the questions are complicated and the answers are simple."*
> 
> ...


1. No one said you you I or anyone had to time every turn of the tide. 
2. In the long run, we are all dead. How long is "long run"? look ad the Japanese market which hasn't reached where it was in the 1980's. How about the Chinese market the las few years? 
3. yes, I know you are taking about North American markets, but I presume you are not cherry picking markets to prove your perspective, by picking a "long run" time frame that does not include post 1929 crash. In that one the early in, early out, such as Joe Kennedy, did fine. the all in all the time guys had to wait 10, 15, 20, 25 years to break even depending on when they got in. by that time many would be 60 to 90 years old, provided they did not jump off a high building first. 

4. Responding to another post of yours: yes we are talking about much the same thing only in different terms, which is why I wonder why you criticize it.


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## Pluto (Sep 12, 2013)

james4beach said:


> I don't think it's positive. From stockcharts (which includes dividends by the way) I see that XIU from the 2000 top to 2009 bottom returned more like -30% which is -4% annualized.
> In GICs you would have earned +4% to +5% annualized ... total return of around +50%
> 
> Stock returns are very sensitive to timing because the stock market is an extremely volatile thing


I see your point. 
I picked 10 years to see how OptsyEagles plan would work out. I started in 2000 because that's when the OP said he had invested previously, but I didn't pick the top because otherwise I'd be accused of cherry picking to obtain a desired conclusion. Interestingly, I got accused of cherry picking anyway. On top of that, facts contrary to his theory are dismissed as bragging and lucky. Oh well. It comes with the territory - posting heresy within view of a member of the church of efficient markets is just asking for trouble. I should have known. Their ultimate conclusion for good performance is, It's luck. But they forget that their conclusion is their starting assumption, and in between their assumption and their conclusion there is no proof.


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## Pluto (Sep 12, 2013)

GoldStone said:


> You cherry-picked the start and the end dates. 2000: major top. 2009: major bottom. Interestingly enough, the return was still positive!!!
> 
> Of course, that's not how most of us invest. Working age investors typically invest a certain percentage of their annual earnings. You cannot prove any point by looking at one period.
> 
> ...


1. Cherry picking: This was merely a test of OptsyEagles minimum 10 year time frame. Another part of his theory is anytime is a good time because it's all a coin toss anyway. Given that, it isn't possible to cherry pick. he is the one who gave the anytime parameter, not me. 
2. So you know people who missed the entire bull market. they have no eye for value. so what's their missing the value approach got to do with me? 
3. survivorship bias: I might be mistaken but I haven't noticed you bragging. Does that mean you must be weeping in the closet? OH I get it, your comment is to dismiss facts that don't support OptsyEagle's claimed knowledge. I don't find such dismissal strategies to be of value as they have noting to do with investing. 
4. yes I know you use a balanced asset allocation portfolio strategy. Yes I know it is similar to what I do. I am happy you have an approach that you like. I have no desire to persuade you to do anything you don't want to do. I do not think you approach is a bad approach. I believe lots of people use that approach and it works for them. Wonderful. I believe your approach has solved a problem for you. I accept that. Wonderful. You seem to assume, however, that the solution you speak of is the only solution, and that it must be used by everyone, and since it must be used by everyone, you seem to have this need to undermine other viable strategies. What stops you from just stating your views and then letting others decide for themselves? the problem that it doesn't solve for me is I believe there are market circumstances in which it is profitable to be 100% in stocks, and maybe even use margin. Your approach seems to require me to be partly in bonds when I don't want to be. It might also require me to have less bonds when I want more. Too, I suspect you follow predetermined rules regarding allocation %. I don't want to do that. I accept the fact that other people do want to do that and are going to do that. I have no interest in trying to make them change. for new people I encourage them to learn about differing approaches and then make their own mind up. I don't care if they ultimately chose an approach different from mine. Its their money and their choice.


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## OptsyEagle (Nov 29, 2009)

Pluto said:


> I see your point.
> I picked 10 years to see how OptsyEagles plan would work out. I started in 2000 because that's when the OP said he had invested previously, but I didn't pick the top because otherwise I'd be accused of cherry picking to obtain a desired conclusion. Interestingly, I got accused of cherry picking anyway. On top of that, facts contrary to his theory are dismissed as bragging and lucky. Oh well. It comes with the territory - posting heresy within view of a member of the church of efficient markets is just asking for trouble. I should have known. Their ultimate conclusion for good performance is, It's luck. But they forget that their conclusion is their starting assumption, and in between their assumption and their conclusion there is no proof.


and where is your proof? I am sure you can list a slew of numbers but I doubt any can be proved to be the result of anything more then luck.

I am confident that the majority of active stock investors will underperform the S&P500 index in any 10 year period that you cherry pick or not. That is because of the laws of math state that the average minus expenses cannot be higher then the average. The unfortuneate part about this is that the amount of underperformance is only supposed to be equal to the fees and few other incidentals, but in almost any study that I have seen, over multi-year time frames, the index usually outperforms about 85% of active investors. The other thing is, if you take the 15% of investors that did outperform the index in one time period, you will find that they usually do not continue to outperform in the next time period. That tells me that the reason these investors outperformed the index in the 1st place, was due almost entirely to luck.

So in summary, that 4.14% return, that you seem to think proved something here, is a return that would be higher then what the average investor obtained, over that very same time period.


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> and where is your proof? I am sure you can list a slew of numbers but I doubt any can be proved to be the result of anything more then luck.
> 
> I am confident that the majority of active stock investors will underperform the S&P500 index in any 10 year period that you cherry pick or not. That is because of the laws of math state that the average minus expenses cannot be higher then the average. The unfortuneate part about this is that the amount of underperformance is only supposed to be equal to the fees and few other incidentals, but in almost any study that I have seen, over multi-year time frames, the index usually outperforms about 85% of active investors. The other thing is, if you take the 15% of investors that did outperform the index in one time period, you will find that they usually do not continue to outperform in the next time period. That tells me that the reason these investors outperformed the index in the 1st place, was due almost entirely to luck.
> 
> So in summary, that 4.14% return, that you seem to think proved something here, is a return that would be higher then what the average investor obtained, over that very same time period.


Well, OptsyEagle, this thread is about suggesting books or other educational material for the OP. Have you suggested anything specific yet for him to read? 

If you want to start a thread on your subject I'd be happy to reply there. In the meantime, since this has gone a field of the intent of the thread, I'm opting out of replying to your theory here. Feel free to start a thread on your views, with supporting books and articles to help me understand what you are talking about.


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## lonewolf (Jun 12, 2012)

Perhaps this thread has not gone off topic. There are all kinds of books & educational stuff on the internet on how to make money in the markets, Yet with all the books & educational stuff its not working for the average investor. Just like in a poker game the money will work to the strongest players the rest are payers.

The educational bubble is the result of the focus being on learning. It is pretty hard to become speculator that can extract more money from the market then they add liquidity when the focus is on learning. Everyone has a different knowledge, understanding, emotional make up, intelligence, ability to think, time to invest, money management etc. So if you try to learn to invest & the system that you are trying to learn does not fit the speculators personality it wont work as well for the speculator as the speculator that designed the system to fit his personality as well as give them an edge.


The focus has to be on how to think to invest so you can think & judge to design a method that gives the speculator an edge plus fits their personality not someone else personality. The first step is to learn how to think to be able to judge truth from falsehood.


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## GoldStone (Mar 6, 2011)

CPA Candidate said:


> This thread has gone off the rails.


I agree. I'm one of the guilty parties who took this thread off topic. Sorry OP.

To atone for my sin, I recommend:

1. MoneySense Guide to the Perfect Portfolio
http://www.moneysense.ca/uncategorized/moneysense-guide-to-the-perfect-portfolio-2

2. The Big Secret for the Small Investor
http://www.amazon.ca/The-Big-Secret-Small-Investor/dp/0385525079

3. The Little Book of Behavioral Investing: How not to be your own worst enemy
http://www.amazon.ca/The-Little-Book-Behavioral-Investing/dp/0470686022


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## My Own Advisor (Sep 24, 2012)

What's your fav. book GoldStone?


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## OptsyEagle (Nov 29, 2009)

I assumed OP left 4 or 5 pages ago. 

I did offer the link to the 12 steps for the recovery of active investors. Here it is again.

http://www.ifa.com/12steps/foreword/

Hard to dispute the logic.


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## GoldStone (Mar 6, 2011)

My Own Advisor said:


> What's your fav. book GoldStone?


Hard to say. I'm past saturation point. :hopelessness: :biggrin:

I like MoneySense Guide to the Perfect Portfolio as an intro book for newbies. It's basically a printed version of Canadian Couch Potato site, organized for sequential reading back to back.


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## lonewolf (Jun 12, 2012)

Based on statistics Elliott Wave Principal by Robert Prechtor & AJ Frost.

Do not know recent stats still hold, @ one time over half the winners of the United States trading championships used Elliott wave as their method. Prechtor set the all time record with the biggest gain ever in the option division (not sure if it still stands). The United States Trading championships has been the bench mark of trading competition. Since Elliott wave is a fractal it can be used for short term to long term trading. Any book Prehctor has written is worth reading.


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## humble_pie (Jun 7, 2009)

OptsyEagle said:


> ... in almost any study that I have seen, over multi-year time frames, the index usually outperforms about 85% of active investors



wondering if you would happen to have any source for these studies?

i remember asking Canadian Capitalist this question, but in answer he had only one decades-old & biased study carried out by one individual for a US stockbroker (paine webber i believe) that had long since gone bankrupt.


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## OptsyEagle (Nov 29, 2009)

humble_pie said:


> wondering if you would happen to have any source for these studies?
> 
> i remember asking Canadian Capitalist this question, but in answer he had only one decades-old & biased study carried out by one individual for a US stockbroker (paine webber i believe) that had long since gone bankrupt.


Not off hand, but there have been many. I agree, the result of most studies tends to come out anywhere between the index beating 55% of investors to as high as 85%. Obviously the time frame will make a difference. Since the index is pretty much the average, it really cannot outperform the average investor by more then the fees in any short term time frame. It's when you extend the time frame out, that the outperformance of the index starts to leave the pack of investors further and further behind.

The other studies I have seen, that I cannot link you to, other then from the link I listed on the 12 steps, is the fact that the few investors that do outperform the index, in a longer time period, tend to underperform it in the next time frame. Which tells me that the outperformance that was achieved in the first place was most likely due to luck. This example given in step 5 illustrates an example of that lack of persistence of good performance, using an example in US mutual funds.

http://www.ifa.com/12steps/step5/track_record_investing

I know this company has a horse in this race, in convincing people that index investing is better then active investing so a bias cherry picking example may be here, but I think we all have seen a mutual fund that had a great track record in the recent past, go to a lousy track record soon after we invested in it. So I suspect the persistence of performance that this company illustrates is probably pretty accurate, with just the degree varying fairly widely from one time period to the next.

Anyway, I still buy stocks myself, so I am as addicted to the game as anyone else. The only difference I have is that most of my stocks that I invest in, are managed in an index like fashion (buy 20 blue chip stocks and hold them and try to ignore just about everything about them in the future) and I have no delusion, like most active investors have, that I will be the exception and outperform the S&P500 over my lifetime of investing.


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## humble_pie (Jun 7, 2009)

OptsyEagle said:


> Not off hand, but there have been many [studies proving that stock-pickers underperform indexes]


here we go again each:

the only "study" i've ever seen produced on cmf forum was the heavily-biased one mentioned above. It's so old that it actually compared stock pickers with mutual fund buyers ...




> I still buy stocks myself, so I am as addicted to the game as anyone else. The only difference I have is that most of my stocks that I invest in, are managed in an index like fashion (buy 20 blue chip stocks and hold them and try to ignore just about everything about them in the future) and I have no delusion, like most active investors have, that I will be the exception and outperform the S&P500 over my lifetime of investing.



what's noticeable in this forum is that the wealthy & the will-be-wealthy investors do pretty much what you are describing. They buy quality core stuff & they tend to hold.

over the past couple of years - as more & more exchange-traded products holding derivatives such as options & swaps have proliferated - i've been noticing how many ETFs do not, actually, hold the very stocks they claim they hold in their popular literature. They hold sample lists, which in turn can be loaned out. 

goldstone & the other ETF industry salesmen here in cmf forum don't like questions along these lines, of course. But the questions are going to persist, because this complex sector is going to take years to investigate. It might open up sooner if one of the big banks holding loaned/swapped securities blows up, as haroldCrump has described.

for my part, i've held XIU since 2001, will not buy more (its options are pitiful) but will concentrate instead on augmenting my curated collection of individual stocks.

i will concentrate on holding relatively large-cap stocks at local canadian brokers that i know are governed by the securities commissions & the IIROC here in canada. At least there is a small degree of recourse.

i have less confidence in a US ETF or index fund or mutual fund lending its shares to who knows what hedge fund situated who knows where on the planet. No one can possibly know what securities authority might be involved. No recourse is possible.


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## Johnny (Oct 30, 2014)

I didn't leave, but I lost track a few pages ago for sure! I got busy looking at all the links/suggestions of the places/books I should be reading. Thank you to all!


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## Just a Guy (Mar 27, 2012)

humble_pie said:


> wondering if you would happen to have any source for these studies?
> 
> i remember asking Canadian Capitalist this question, but in answer he had only one decades-old & biased study carried out by one individual for a US stockbroker (paine webber i believe) that had long since gone bankrupt.


http://www.cfapubs.org/doi/abs/10.2469/faj.v70.n4.3


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## humble_pie (Jun 7, 2009)

Just a Guy said:


> http://www.cfapubs.org/doi/abs/10.2469/faj.v70.n4.3



this study compares actively-managing mutual fund managers with passive index fund products, apparently concluding that the majority of the former underperform the latter.

although the study is not fully available via the link, it does *not* appear to deal with individual stock pickers.

as i've mentioned, true studies on individual stock pickers' performances are scarce to non-existent.

large historic brokers such as the big green would be capable of running complex stats on proportion of AUM invested in ETF & index products vs proportion of AUM invested in individual stocks & bonds.

over years, trends in these statistics would provide sound data for a broker to mine, showing the direction in which the business was moving.

however, i doubt any broker sitting on top of such a data mine would ever disclose it.


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## OptsyEagle (Nov 29, 2009)

The only studies that I have seen that relate directly to individual investors pertains to the difference in performance of a mutual fund and the investors in that same fund over a particular time period. They attempt to calculate "dollar weighted" returns and compare them to the funds returns and every time I have seen it, the active investor underperformed the fund.

It would be difficult to assess the average retail investor in any other way, since the data is pretty much confidential. 

Also, the lack of a link does not indicate that something isn't true, it just indicates that the poster does not have the link readily available and the time and/or interest to go find it. In my opinion, with all my posts, the readers can either accept the post, reject the post or go look into the situation themselves. I would love to see a link that shows how the average retail investor outperformed passive investing, but I doubt very many will be able to be given. 

I have no problem with being proven wrong, its just that in this case it has not happened yet, but I am still hopeful that it will.


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## Just a Guy (Mar 27, 2012)

Humble, 

It appears to me that you read just enough to prove, in your own mind, that you are correct. That's a bad habit to fall into.

In fact, the entire article is online from that link...you need to click on the "PDFs" button just below the title.

Being a true research paper, it also sites several other papers which, in turn, site several more...

True, while this paper doesn't focus directly on the topic of outperforming the market it does conclude that if you underperform in the first few years, you will likely be fired as a manage, whereas those who survive the indusrtry for 10+ years rarely outperform, they just don't usually underperformance their peers as badly.


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## humble_pie (Jun 7, 2009)

Eagle no one is going to "prove" anyone wrong, especially not someone with as detached & objective point of view as yourself. 

usually when one asserts that studies prove something, one has a specific study in mind, though.

the difficulty here is that financial industry insiders don't & won't disclose client stock trading information, therefore it's impossible to build the stock picking populations that would need to be surveyed.

eliminating the one-sided ETF industry salesmen on here, who unfortunately pump only how stupid, misguided & hysterical stock pickers are, it's fascinating to see how the successful stock pickers in this forum do, over time, gravitate towards an index-type median.

to the best of my recollection, there's never been anybody in cmf forum who consistently said, year after year, i made millions investing in marginal stock XYD. It's true we do hear whoops of excitement over stellar performers like ACQ (introduced by yourself, if i'm not mistaken, to the everlasting good fortune of so many on here) but these enthusiastic cries are due to the relative youth & energy of numerous cmf forum participants.

a few years ago, Argonaut introduced the idea that a sensible investor could pick through a large-cap subset taken from the top tsx 60 index & come up with a brief list of 5 stellar common stocks. Others evolved this idea into 10 or 20 stocks, but the basic idea was always the same. It said Hold Quality & Lose the Losers.

need i point out that folks holding individual stocks are also enjoying zero (0) MERs plus greatly-simplified tax planning & reporting?


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## humble_pie (Jun 7, 2009)

Just a Guy said:


> Humble,
> 
> It appears to me that you read just enough to prove, in your own mind, that you are correct. That's a bad habit to fall into



sigh. Judgmental people are so unpleasant. _You this. You that. You don't. You're wrong. You're bad_.

tch.

ps the verb is "cite" as in "citation." 
i do know how to read, thank you.


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## GoldStone (Mar 6, 2011)

humble_pie said:


> the difficulty here is that financial industry insiders don't & won't disclose client stock trading information, therefore it's impossible to build the stock picking populations that would need to be surveyed.


This is not exactly true. Academic researchers studied brokerage account records (stripped of the client personal IDs, of course). The largest studies looked at tens of thousands of accounts.

Terrance Odean is widely recognized as one of the leading experts on this subject. He co-wrote a book chapter that reviews 100+ academic studies in his field:

The Behavior of Individual Investors

I am not going to cite any quotes. There is enough juicy material there to prove pretty much any point of view, if you are willing to cherry-pick quotes.


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## Just a Guy (Mar 27, 2012)

humble_pie said:


> sigh. Judgmental people are so unpleasant. _You this. You that. You don't. You're wrong. You're bad_.
> 
> tch.
> 
> ...


Auto correct does weird things, but I suppose that's to distract from the fact that you admitted you never read the article in your first response.

P.S. The word irony comes to mind in reading this.


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## warp (Sep 4, 2010)

Back to the original question about investment books:

Start with "The Investment Zoo"

Years ago I read a good book by Lowell Miller...titled " The Single Best Investment"

Start with those 2, then read all of "The Little Book of" investment series.
Easy reads, and entertaining too.

good luck.


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## Rusty O'Toole (Feb 1, 2012)

Re the lack of up to date studies on the efficacy of investment experts. Since they all seem to prove the experts underperform random chance, is it any wonder the industry avoids the whole subject like the plague?


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