It was the end of 2010 when I first started investing. The world was still coming to grips with the fact that the shit had indeed hit the fan! At that time there was a lot of panic spreading and it was hard for some to ignore the noise. People weren’t talking about Dow 18,000 they were scared of the Dow 5,000! It is amazing the fear that creeps into peoples minds when things aren’t going well, but this fear is for those who have let the economy play them instead of playing the economy in their favor. I think this was the best of times for a neophyte investor like myself to start my investing education. I was entering the market near the bottom of a cycle, a bottom that had been particularly nasty and reverberated throughout global markets. The news was gloom and doom pretty much daily. So, what made me decide it was a good time to enter the stock market back then?
I attribute my modest success to one main factor, perspective. If I had listened to mainstream financial media I would have been paralyzed from acting. If I had listened to the emotional signals from both greed and fear I would have likely made poor decisions. Fortunately, I had a better source of perspective than that of the media and it came from a source I have always relied upon to help guide me through life; books. Not just any books, but books written by thoughtful investors on the philosophy of the subject matter as well as the technical aspects. These were my guides. Each author had a different take on investing, but one thing became clear very quickly; boom and bust cycles are part of the capitalist system and should be anticipated with somewhat regularity. The great thing about historical perspective is that you can see events through a somewhat objective view vs. the subjective view that happens when experiences are unfolding; the more emotional elements of experience that sometime cloud judgement. This makes for novel news stories, but a very poor source of information from which to develop an investment philosophy.
Here is a list of books I was reading at the time:
- Common Stocks and Uncommon Profits by Philip A. Fisher
- Security Analysis by Benjamin Graham
- The Battle For Investment Survival by G.M. Loeb
- A Random Walk Down Wall Street by Burton Malkiel
- The Intelligent Investor by Benjamin Graham
- The Future For Investors by Jeremy Siegel
- The Bogleheads’ Guide to Investing by Taylor Larimore
- Dividends Still Don’t Lie by Kelly Wright
- The Ultimate Dividend Playbook by Josh Peters
These were the books that served as a framework as I learned my investment approach. Remember, I had no prior experience in investing or formal education in finance or related subject matter that would prepare me for my new interest. What I did have was a desire to learn, the same desire to learn that has given me the ability to remodel bathrooms and do my own automotive repairs. This basic curiosity lives within all of us even if it has been dulled by the division of labor and specialization that causes us to believe that we need others to do things for us.
Reading these books allowed me to tune out the frequency of popular financial media that seems hell bent, just like advertising, on manipulating our emotions so that we act against our best interests. Sure, some of this material wasn’t quite as exciting as some of the stuff I could have been reading, or more likely watching in this day and age, in fact it was at times down right boring. But elaborate packaging is only required when the content itself is lacking substance.
Even though the volatility was high back then I felt comfortable making trades, much more than I do today. Watching the incredible rise of the market over the past few years has been impressive. Much of those gains I’ve missed out on due to liquidating my portfolio in the middle of 2013 to purchase a foreclosure. That money has simply grown in a different asset. True, part of the gains I’ve made in the value is a reflection of the labor I’ve provided myself that I would not have done had I simply left the money in the market and watched my account balances swell. However, I believe there is also a value to life that lies outside the ability to be reflected in monetary valuation alone.
Watching the trend of the markets reaching ever skyward, I have been content watching from the sidelines. “Deals” are hard to find these days and I know that soon the tides will turn and pessimism will set back in causing The Bear to awake from his peaceful slumber. The Bulls will be corralled and panic and mayhem will rein! Ok, perhaps not that dramatic, but you get the picture. It’s times like these that The Stoic likes to come out and watch as The Bear beats a path of destruction through the markets and hand pick through oversold stocks that lay on the ground, having been discarded by people “panicking” likely from the garbage they have consumed from the popular financial media. There is always some economic or political event that causes the markets to make radical shifts. Markets may be efficient over the long-term, but there anything but efficient in the short-term. It is the occasional inefficiencies that I like to do my shopping in the market.
If you select one of the books from the above list you will better prepare yourself to take advantage of favorable investment climates. I can’t promise you will be entertained, but I can say that you will be educated, and education trumps entertainment every time when it comes to an investors mindset.