Showing posts from March, 2010

Book Review: The Greatest Trade Ever

The Greatest Trade Ever, by Gregory Zuckerman, is a very good and captivating read. In fact, I will recommend this book to any aspiring investor or trader.

Interesting points that I have learnt from the book:

1) Search for a sound idea. A good start may be 'Which market can I find mispricing?'

2) Look at the odds and probabilities. Little Downside, Huge Upside, and High Probability of occurence.
Structure your bets so that the downside is small.

3) Test and re-test your investment idea. Think contrary and see if your idea is correct.

4) Reverse track when you found that you are wrong

5) Be steadfast to your convictions, even if most peaple disagree.

6) It is extremmely difficult to get people to invest in your idea, when you are against the concensus. Most people will agree that betting against the concensus is a great profit-making method, but few will be able to put the method into practice.

7) Know when to strike (i.e. buy/short) is important. Sometimes, you may be hurt if you are t…

Difference between Investor and Journalist/Blogger

Ultimi Barbarorum has a great post on differentiating between investor and journalist/blogger:
It's a topic that I would not have thought about, and yet it is one that I should have thought about, especially since I am a avid reader of blogs and news.
And, I can't find myself re-reading and agreeing with this paragraph found in the post:
Much more than philosophy, investing should be a solitary activity. A group of people or colleagues you can check your ideas with is a good thing, but you must take responsibility for your investments yourself. You will receive conflicting advice, all of which will sound plausible but most of which is wrong. Consider that 98% of the people you encounter who claim to know what they are talking about simply don’t, and have as much chance of being right about these things as you do. You will find out about things you need to know much much later than the professionals. Y…

Book Review: How The Wise Decide

How the Wise Decide is authored by Byrn Z and Aaron S.
It is an interesting book as it profiles the good CEOs on how decision are made. Nevertheless, the book commit a common scientific error: the lack of control group.
Interesting points:
1) Go to the source. Check with the source of the raw information before making the decision. - Make this approach routine. - Cultivate long-lasting contacts with the sources - Know which source is more important, and which source is less important
2) Meet people who tend to disagree or tend to state their independent stand. - Get all people to say their viewpoint at least once. - People may quarrel over their viewpoints. Do not allow people to carry any bad feelings beyond the meeting. - Seek differing opinions. Different opinions help to light up the blind spots. - Ask for formal commitment to the decision, if you think that the person is likely to disagree with the decision silently.
3) Do not be afraid of the risk behind the decision. - Check thoroughly…

Book Review : How We Decide

How We Decide is written by Jonah Lehrer, an editor/writer.
It is a good book, especially for people who wish to learn how to make better decisions.
I will attempt to list some interesting points that I read from the book. Read the book if you wish to make better decisions.
Some interesting points: 1) We have two parallel brains: the emotional brain and the rational brain.
2) The emotional brain makes decisions very fast but its accuracy depends on experience. Situations that require fast decisions would need the emotional brain. Emotional brain is better than rational brain for repetitive situations, as emotional brain recognizes patterns faster than the rational brain.
3) The rational brain is useful in new situations or situations where time is not a factor.
4) Also, always run a rational check on emotional decisions if time permits. This will help to reduce errors.
5) To make the decisions more accurate, one has to spend time to evaluate the decisions, aka spot mistakes in previous dec…

Secret to Investing Success!?

It's interesting to see a thread on secrets to investing success in Next Insight. And in that thread, you'll see people advocating value investing, quoting Buffet, asking for high dividend stocks etc.
It's interesting because I disagree.
I disagree because I feel that there is no one secret to investing success.
I think that each starting investor has to find their own path, and that path will be their own secret to investment success.
First, the investor should find the suitable investment philosophy i.e. whether technical or fundamentals, short-term or long-term, diversified or concentrated etc. A suitable investment philosophy should fit his own psychological traits.
Next, the investor has to consistently refine or expand his strategy. For a value investor, it may be starting with low P/E stocks and then moving to low P/B stocks. Or starting with quantitative ratios and moving on to qualitative measures.
In between, the investor also has to learn his own psychological trait…