Stock Market?

[Jorge10]

I dont know anything about the stock market, but would really like to learn about it. I usually read a book about something when I want to learn, so which books do you guys recommend to get me started?

Thanks

[Riddick]

I would like to see a comprehensive sticky on this.

[Evan]

http://www.amazon.com/gp/product/0060555...ks&v=glance

[erby]

One book I highly recommend is Malkiel's "A Random Walk Down Wall Street."

ERBY [img]/images/graemlins/spade.gif[/img]

[Jorge10]

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I would like to see a comprehensive sticky on this.

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I was surprised there wasnt one.

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One book I highly recommend is Malkiel's "A Random Walk Down Wall Street."


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Thanks, Any others?

Also I saw your suggestion too Evan, looks good, any other?

[jively]

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Thanks, Any others?

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The 4 Pillars of Investing by William Bernstein:

http://www.amazon.com/gp/product/0071385...ce&n=283155

[Evan]

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Also I saw your suggestion too Evan, looks good, any other?

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Intelligent Investor is like 600 pages and worth reading twice. That should keep you busy for a while.

[BarkingMad]

If you're interested in reading all about the pessimistic view that markets cannot be beaten, and that decades of dollar cost averaging over a diverse group of securities is the only way to invest, then Malkiel's book is great. Another such book that I made the mistake of buying is 'Winning the losers game' by Charles Ellis.

Before accepting the "markets cannot be beaten / timed" mindset, consider this. Look at a chart of the DJIA from 1900 until now and ask yourself - "are there any 20-40 year time spans where an investor could have dollar cost averaged over the course of their working life and STILL lost money?" If you are observant, you'll see that there are several such periods.

Even if you dollar cost average over decades you cannot escape "timing" the market. A 20-40 year time span of using this approach basically constitutes one long term "trade" in which the entry and exit point are determined by chance (the year(s) you happen to start investing and then retire) rather than strategy and research. If your average entry price is greater than than your exit price, you lost money on your "trade".

If you are interesting in reading some success stories from people who are consistently beating the market, try the 3 'Market Wizard' books by Jack Schwager.

If you are interesting in reading some info about how to time the markets succesfully, here is a list of books I like.

Methods of a wall street master - Vic Sperandeo

Trader Vic 2- Vic Sperandeo

Trade your way to financial freedom - Van K Tharp (cheesy title, great book)

Trading systems that work - Thomas Stridsman

Long term secrets to short term trading - Larry Williams

The right stock at the right time - Larry Williams

Stock market logic - Norm Fosback

How I trade for a living - Gary Smith

One up on Wall street - Peter Lynch

New market timing techniques - Tom DeMark

Trading Systems and methods - Perry Kaufman

Trading stocks and commodities w/ the insiders / secrets of the COT report - Larry Williams (mostly futures related but the COT report is released for the SP500 & other stock indexes)

Cybernetic Trading strategies - Murray Ruggerio

Anything by William O'neil

The stock traders almanac - Yale Hirsh (released yearly)

Bollinger on Bollinger bands - John Bollinger

Day trading with short term price patterns and opening range breakout - Toby Crabel

[jively]

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Look at a chart of the DJIA from 1900 until now and ask yourself - "are there any 20-40 year time spans where an investor could have dollar cost averaged over the course of their working life and STILL lost money?" If you are observant, you'll see that there are several such periods.

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Which 40 year periods are you talking about? I don't believe there are any 30-year periods where the US stock market had a 0% return or less. The DJIA may have looked down or flat (1929-1956, 1966-1982), but the dividend yields were high, and investors did have a positive return. Dollar-cost averaging probably helped this as well. Give me the time periods and I'll calculate what the return would have been.

Plus, having a diversified portfolio with small stocks, value stocks, real estate stocks, and international stocks would have greatly improved the performance.

-Tom

[BarkingMad]

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Which 40 year periods are you talking about? I don't believe there are any 30-year periods where the US stock market had a 0% return or less. The DJIA may have looked down or flat (1929-1956, 1966-1982), but the dividend yields were high, and investors did have a positive return. Dollar-cost averaging probably helped this as well. Give me the time periods and I'll calculate what the return would have been.

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Sorry for kicking the sacred cow in it's hind-quarter. I wasn't trying to start a debate, but since I did I'll follow through.

I concede that if we are looking for a zero % gain or less, 40 years is a stretch, but I did say "20-40 year period". If you'd like to calculate the dividend return over the past century to see what kind of difference it would have made during dismal market periods, knock yourself out. To me, the bottom line is that, historically speaking, there are periods where the long term buy and hold strategy would have been far from lucrative. Furthermore, even during periods when buy and hold performed well, a knowledgeable investor/trader with good emotional discipline & a willingness to do some homework could have done much better by focusing on the intermediate term trend (weeks to months).

The market can be timed successfully, it's being done by too many (myself included) for me to believe otherwise. The market is made up of human beings, humans are not perfect. Some work hard and some are lazy. Quality of research varies widely. Emotional discipline varies widely. Why then should the markets be completely efficient? It defies common sense and mountains of evidence to the contrary. Malkiel, Cootner, Ellis and the like are simply wrong.

Here is what a greater mind than I has to say about buy and hold. From a Vic Sperandeo interview...

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What do you think are the greatest misconceptions people have about the market?

In my opinion the greatest misconception is the idea that if you buy and hold stocks for long periods of time, you'll always make money... Anyone who bought the stock market between the 1896 low and the 1932 low would have lost money. In other words there is a 36 year period where a buy and hold strategy would have lost money - and that doesn't even include the opportunity loss on the funds. As a more modern example, anyone who bought the market between the 1962 low and the 1974 low would have lost money.

If something can happen once, I think logic tells you that it can happen again. Actually, I believe that anything can happen, but certainly if it has happened before, it can happen again. From 1929 and 1932, the market dropped an average of 94%. In fact, it has even happened in more modern times - during 1973 - 74, the "nifty fifty" stocks lost over 75% of their value.

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That interview took place around 1992. Since then the popular stocks that make up the Nasdaq composite index lost on average more than 75% of their value between 2000 and 2003, and the index is currently trading below it's 1999 levels. Even the Dow is trading at approx it's 1999 levels, with a major bottom between now and then. Some of the "safer", blue chip stocks that I tried to hold from 2000 - 2003 paid a dividend, and it didn't keep me in the black during that period.

To conclude, please don't misunderstand me, I'm definitely not a "perma-bear", nor am I even suggesting that buy and hold doesn't "work". If I buy the Dow 30 today and come back in 40 years to check on it, chances are I will have made some money. But it's no guarantee. Not even close.

Cheers.