My Problem: I do not know how to invest properly (Part 0)
I’ve heard on a podcast I enjoy (EconTalk) that “whatever you did or graduated with in college is your favorite way of looking at the world.” That being said, as an accountant, all I think about are ways to manipulate numbers and what incentives are present in everything. My professional skepticism (as it’s called) is set off ad infinitum by the constant advice that investing is easy or one should just use the vehicles in place created by the experts. As a zoomer (Gen Z), I am absolutely sick of being told to “trust the experts”. In short: I don’t believe investing is easy. I don’t think it’s all luck. And I don’t have a definitive plan with answers. But I do have an idea on how to start.
My idea is three pronged:
Read a series of books to establish and refine my Investing Philosophy,
Make five stock selections in a new industry/sector every fortnight, and
Check-back in after one year for each set of investments and learn what I did that worked and what did not.
After writing down the list from Reddit (Didn’t go by upvotes, again don’t trust Reddit, just wrote down every book in the thread.), I noticed a lot of the books involve Buffett and Munger. So to supplement some of the blindness of Reddit, I searched up a recommended reading list by both of them and added it to my pool. As follows are all the books I expressed initial interest into (organized by author name) for building my Investment Philosophy:
Max Bazerman, “Judgment in Managerial Decision Making”
Peter Bernstein, “Against the Gods”
Peter Bevelin, “A Few Lessons for Investors and Managers”
John Bogle, “A Clash of the Cultures”
John Bogle, “The Little Book of Common Sense Investing”
John Brooks, “Business Adventures”
Christopher Browne, “The Little Book of Value Investing”
Warren Buffett, “Berkshire Hathaway Letters to Shareholders (1965-2017)”
Joseph Calandro Jr., “Applied Value Investing”
Tobias Carlisle, “Deep Value”
Tobias Carlisle, “The Acquirer’s Multiple”
David Clark & Mary Buffett, “The New Buffettology”
David Clark & Mary Buffett, “Warren Buffett and the Interpretation of Financial Statements”
George Clason, “The Richest Man in Babylon”
Daniel Crosby, “The Behavioral Investor”
Lawrence Cunningham, “The Essays of Warren Buffett”
Aswath Damodaran, “Investment Valuation”
Aswath Damodaran, “The Dark Side of Valuation”
Aswath Damodaran, “The Little Book of Valuation”
Pat Dorsey, “The Five Rules for Successful Investing in Stocks”
Pat Dorsey, “The Little Book That Builds Wealth”
David Einhorn, “Fooling Some of the People All of the Time”
Philip Fisher, “Common Stocks and Uncommon Profits”
Philip Fisher, “Paths to Wealth Through Common Stocks”
Timothy Geithner, “Stress Test”
George Goodman (Adam Smith), “The Money Game”
Benjamin Graham & David Dodd, “Security Analysis”
Benjamin Graham, “The Intelligent Investor”
Joel Greenblatt, “You Can Be a Stock Market Genius”
Joel Greenblatt, “The Little Book That Beats the Market”
Bruce Greenwald, “Value Investing: From Graham to Buffett and Beyond”
Bruce Greenwald, “Competition Demystified”
Tren Griffin, “Charles Munger: The Complete Investor”
Robert Hagstrom, “The Warren Buffett Way”
Robert Hagstrom, “The Warren Buffett Portfolio”
John Heins & Whitney Tilson, “The Art of Value Investing”
Daniel Kahneman, “Thinking, Fast and Slow”
Donald Keough, “The Ten Commandments of Business Failure”
Charles Kindleberger & Robert Aliber, “Manias, Panics, and Crashes”
Seth Klarman, “Margin of Safety”
Edwin Lefevre, “Reminiscences of a Stock Operator”
Arthur Levitt, “Take on the Street”
Michael Lewis, “Liar’s Poker”
Michael Lewis, “The Real Price of Everything”
Peter Lynch, “One Up On Wall Street”
Peter Lynch, “Beating the Street”
Burton Malkiel, “A Random Walk Down Wall Street”
Howard Marks, “The Most Important Thing Illuminated”
McKinsey, “Valuation: Measuring and Managing the Value of Companies”
McKinsey, “Value: The Four Cornerstones of Corporate Finance”
John Mihaljevic, “The Manual of Ideas”
Jeremy Miller, “Warren Buffett’s Ground Rules”
Mark Minervini, “Trade Like a Stock Market Wizard”
James Montier, “Value Investing”
James Montier, “The Little Book of Behavioral Investing”
Charles Munger, “Poor Charlie’s Almanack”
Thornton O’Glove, “Quality of Earnings”
William O’Neal, “ How to Make Money in Stocks”
James O’Shaughnessy, “What Works on Wall Street”
Mohnish Pabrai, “Mosaic”
Mohnish Pabrai, “The Dhando Investor”
Christine Richard, “Confidence Game”
LJ Rittenhouse, “Investing Between the Lines”
Joshua Rosenbaum, “Investment Banking”
Howard Schilit, “Financial Shenanigans”
Alice Schroeder, “The Snowball”
Jack Schwager, “Market Wizards (1989)”
Fred Schwed, “Where are the Customers’ Yachts”
Robert Schiller, “Irrational Exuberance”
Jeremy Siegel, “Stocks For The Long Run”
George Soros, “The Alchemy of Finance”
Guy Spier, “The Education of a Value Investor”
Nassim Nicholas Taleb, “Fooled By Randomness”
Nassim Nicholas Taleb, “The Black Swan”
Phil Towns, “Rule #1”
Pierre Vernimmen, “Corporate Finance Theory & Practice”
John Burr Williams, “The Theory of Investment Value”
Adam Smith, “An Inquiry into the Nature and Causes of the Wealth of Nations”
— c1776,Thomas Robert Malthus, “An Essay on the Principle of Population”
— c1798,David Ricardo, “On the Principles of Political Economy and Taxation”
— c1817,Charles Mackay, “Memoirs of Extraordinary Popular Delusions and the Madness of Crowds”
— c1852,Thorstein Veblen, “The Theory of the Leisure Class”
— c1899,Edwin Lefevre, “Reminiscences of a Stock Operator”
— c1923,
George Clason, “The Richest Man in Babylon”
— c1926,Benjamin Graham & David Dodd, “Security Analysis”
— c1934,
John Maynard Keynes, “The General Theory of Employment, Interest and Money”
— c1936,
John Burr Williams, “The Theory of Investment Value”
— c1938,Fred Schwed, “Where are the Customers’ Yachts”
— c1940,
Benjamin Graham, “The Intelligent Investor”
— c1949,Philip Fisher, “Common Stocks and Uncommon Profits”
— c1958,Philip Fisher, “Paths to Wealth Through Common Stocks”
— c1960,
Warren Buffett, “Berkshire Hathaway Letters to Shareholders (1965-2017)”
— c1965,George Goodman (Adam Smith), “The Money Game”
— c1968,John Brooks, “Business Adventures”
— c1969,
Burton Malkiel, “A Random Walk Down Wall Street”
— c1973,Charles Kindleberger & Robert Aliber, “Manias, Panics, and Crashes”
— c1978,Max Bazerman, “Judgment in Managerial Decision Making”
— c1986,Thornton O’Glove, “Quality of Earnings”
— c1987,George Soros, “The Alchemy of Finance”
— c1987,William O’Neal, “ How to Make Money in Stocks”
— c1988,Michael Lewis, “Liar’s Poker”
— c1989,Jack Schwager, “Market Wizards”
— c1989,Koller, Goedhart, & Wessels (McKinsey), “Valuation: Measuring and Managing the Value of Companies”
— c1990,Seth Klarman, “Margin of Safety”
— c1991,Jeremy Siegel, “Stocks For The Long Run”
— c1994,Aswath Damodaran, “Investment Valuation”
— c1996,Peter Bernstein, “Against the Gods”
— c1996,James O’Shaughnessy, “What Works on Wall Street”
— c1997,Lawrence Cunningham, “The Essays of Warren Buffett”
— c1997,Joel Greenblatt, “You Can Be a Stock Market Genius”
— c1997,Robert Hagstrom, “The Warren Buffett Portfolio”
— c1999,Robert Schiller, “Irrational Exuberance”
— c2000,Bruce Greenwald, “Value Investing: From Graham to Buffett and Beyond”
— c2001,Nassim Nicholas Taleb, “Fooled By Randomness”
— c2001,Howard Schilit, “Financial Shenanigans”
— c2002,Arthur Levitt, “Take on the Street”
— c2002,Mohnish Pabrai, “Mosaic”
— c2002,Pat Dorsey, “The Five Rules for Successful Investing in Stocks”
— c2004,Pierre Vernimmen, “Corporate Finance Theory & Practice”
— c2005,[MAYBE] Bruce Greenwald, “Competition Demystified”
— c2005,Charles Munger, “Poor Charlie’s Almanack”
— c2005,Christopher Browne, “The Little Book of Value Investing”
— c2007,Mohnish Pabrai, “The Dhando Investor”
— c2007,Alice Schroeder, “The Snowball”
— c2008,David Einhorn, “Fooling Some of the People All of the Time”
— c2008,Donald Keough, “The Ten Commandments of Business Failure”
— c2008,Joseph Calandro Jr., “Applied Value Investing”
— c2009,James Montier, “Value Investing”
— c2009,Joshua Rosenbaum, “Investment Banking”
— c2009,Christine Richard, “Confidence Game”
— c2010,Daniel Kahneman, “Thinking, Fast and Slow”
— c2011,Howard Marks, “The Most Important Thing Illuminated”
— c2011,[MAYBE] Tim Koller, Richard Dobbs, & Bill Huyett (McKinsey), “Value: The Four Cornerstones of Corporate Finance”
— c2011,John Bogle, “A Clash of the Cultures”
— c2012,LJ Rittenhouse, “Investing Between the Lines”
— c2013,John Heins & Whitney Tilson, “The Art of Value Investing”
— c2013,John Mihaljevic, “The Manual of Ideas”
— c2013,Timothy Geithner, “Stress Test”
— c2014,Tobias Carlisle, “Deep Value”
— c2014,Guy Spier, “The Education of a Value Investor”
— c2014,Tren Griffin, “Charles Munger: The Complete Investor”
— c2015,Jeremy Miller, “Warren Buffett’s Ground Rules”
— c2016,Tobias Carlisle, “The Acquirer’s Multiple”
— c2017,Daniel Crosby, “The Behavioral Investor”
— c2018,Peter Bevelin, “A Few Lessons for Investors and Managers”
— c2019,
By reading the books chronologically, I’m hoping to experience that each book is expanding the potential of my investing philosophy universe. As though each book is pulling my perspective back and opening up new possibilities at the peripherals. I gave each book an interest determined relative to how I interpreted the books’ abilities to aid me in my goal of learning how to become an investor relative to when I read it. I will select and read a minimum of one title per author on the list. I assigned the books one of four different classes. These are:
(1) Fundamentals,
(2) Applications,
(3) Thinkers,
(4) Picturesque,
Fundamentals are books I believe will form the basis of how I invest. Books instrumental in designing the framework that facilitates the laws (or rules) of my developing Investing Philosophy Universe.
Application books give a bit of insight into the methodology. How to apply knowledge and approaches to do so specifically.
Thinkers are modifiers. These are books that change the way I think about a problem. More variables to consider, levels of thinking that might deceive me with biases, less explicit instructions of a person’s process and more open-ended conditions I can use to augment my investment process.
Picturesque books are the scene setters. I was not around in the 1930’s, but I can imagine what I would do and invest in if I were. These books are invaluable as they can put me into the perspective of the authors of their time. They’re also a good bit of fun.
Parts B and C are related as they are the trial and error portions. More specifically, the testing of my view of the world and the acknowledgement of what I got wrong and what I believe caused it so that I can modify my Part B for the future. The tenacity to explicitly learn from my mistakes is something I’ve lacked in the past, but seeing it in others has forced me to realize its importance. (I have another idea about this that I’ll write another article on someday.)
Part B was the driver for my idea resulting in this project. It accomplishes two objectives I had in mind:
Learn investing properly, and
Find out which industry/sector I have proclivity with.
As of writing this, I am a CPA candidate and what I’ve learned through my studies is that the possible daos for accountants are uncountable. What better way to find what industries might agree with me than to measure which ones I can achieve the highest returns through analyzing? For this, I will invest $500 every two weeks into a different sector or industry.
I have thought about going by the Standard Industrial Classification (SIC) codes, but there are hundreds of them and I don’t know how feasible it will be to find securities when filtered this way. Regardless, after I have learned more I will return and finalize the exact methodology. This is mainly the beginning documentation of Part A.
In short, I will be reading the books I have selected with my ‘10-page Challenge’ Analysis (see below) in the order of their initial publication (copyright date from the Library of Congress) starting with the earliest. (I want to follow the release of new ideas as close to the original timeline as I can to get the full story as it happened). There are quotes from passages followed by my comments that lead to my interest ranking. Followed by, if I have selected to read the book and how I will classify it for my reading perspective. Then, I will be making consistent stock picks with my own investment theses and rationale for decision-making. Finally, I will be reviewing my selections and writing a concluding report about what I learned, what I could have done better, and what the outcome of the idea concluded.
As of the date I publish this first article, I have started studying for the FAR portion of the CPA exam. I'm hoping to use these two projects (CPA exam and Idea 1) to wire my learnings and immerse myself in the practice. If curious about how I felt reading each intro, the notes are in the next post; elsewise, let's begin!
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