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Newbie - Where to start?


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Hi, I'm new to investing and would like to learn about value investing, I'm interested to learn in detail about businesses, reading annual reports, balance sheets and understanding the numbers. What is the best resource to get started? Can someone please recommend any books or courses? 

 

My apologies if this is incorrect place to post this question or its already covered elsewhere in the forum.

 

-Thanks!

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If you go to the book section and filter by number of replies, that will get you a decent representation of the most popular books.

 

If I knew nothing about investing, I would start with a few accounting books (not the most sexy advice), that way you can understand the language that many investing books speak in. Then I would maybe go on to Margin of Safety. It's a simpler and more enjoyable version of the Intelligent Investor, and you will gain a basic framework for investing. Perhaps read a bio about Buffett (my favorite is Making of an American Capitalist), and go from there. 

 

Just my opinion and someone else probably has a better way. 

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Joel Greenblatt's books belong to the top of the stack for any budding investor, because they are an easy read and relatively short. "The little book that beats the market" and" Magic formula investing" are both highly recommended.

Beyond books there are ton of online resources, you tube channels and podcasts. I like in particular "Focused compounding" and Motley Fool Industry Focus" podcasts. especially "Focused compounding" has a tremendous back catalogue on many topics for new investors. The MF podcasts are great to get a contemporary view on many growth business and the investing landscape.

Keep in mind that investing is not a static science. What may have worked 10,20, 30 years ago may not work any more, or  more likely needs to be applied differently. The basic principles however remain the same.

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I would actually discourage any new investor from worrying about accounting in the beginning. For one, its boring as shit. And more importantly, I know wayyy too many people who thinking investing is 100% based upon "the numbers" when the truth is that the numbers are merely a % of the pie/equation that ultimately drive everything. Best example is the company YOU thought was overvalued based upon "the numbers" when in reality it was cheap and YOU made the analytic mistake because YOU were focused on the wrong components. Most obvious examples, GOOG and AMZN for two decades...Worry about the accounting later on. Most accounting is stupid easy to learn/understand anyway. If you dont know it you can look it up/figure it out later generally with little more than a google search or asking a friend who does it. 

Books like Reminiscences of a Stock Operator, the Market Wizards series(especially the early ones), and even a favorite of mine that is underrated, Bull! A history of Boom and Bust by Maggie Mahar, are great and exciting books on investing. 

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I really enjoyed WB’s partnership letters. They are relatively easy to digest and he does a good job of explaining the principles underlying his investment decision. 

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59 minutes ago, Gregmal said:

I would actually discourage any new investor from worrying about accounting in the beginning. For one, its boring as shit. And more importantly, I know wayyy too many people who thinking investing is 100% based upon "the numbers" when the truth is that the numbers are merely a % of the pie/equation that ultimately drive everything. Best example is the company YOU thought was overvalued based upon "the numbers" when in reality it was cheap and YOU made the analytic mistake because YOU were focused on the wrong components. Most obvious examples, GOOG and AMZN for two decades...Worry about the accounting later on. Most accounting is stupid easy to learn/understand anyway. If you dont know it you can look it up/figure it out later generally with little more than a google search or asking a friend who does it. 

Books like Reminiscences of a Stock Operator, the Market Wizards series(especially the early ones), and even a favorite of mine that is underrated, Bull! A history of Boom and Bust by Maggie Mahar, are great and exciting books on investing. 

I agree that reading an accounting book is pretty worthless. However, if you have no concept of how to value a business it is important to know the basic measures. Weather valuing on assets, growth, or earnings. Margin of Saftey by klarman and the intelligent investor I think are great starting points. Joel Greenblatts book is good too. 

 

But yes you need to learn the basic financial lingo and get some benchmarks on how to value a business. 

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I'd start with all of buffett's letters in chronological order starting with the partnership, chapter 8 of intelligent investor (Mr. Market), read the magic formula book by Greenblatt, and then switch to Terry Smith's letters. That'd be a quality foundation. 

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I would recommend Warren Buffett's letters to shareholders.

Eventually, learning how to read financial statements is necessary, but I wouldn't start with it because it's very dry and you risk getting bored and losing interest. It would be like trying to learn to play an instrument before listening to music or learning grammar before having a conversation.

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Thanks, these are all great suggestions, after watching few Mohnish Pabrai's recent lectures, I started reading Nick Sleep's Nomad letters, will start looking into WB's old letters and Greenblatt's books. 

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Just keep in mind that there are different styles and no approach fits all, in terms of risk tolerance. Getting started, I would  avoid high concentration. I really come to like the Motley Fool approach , especially if you are inclined to growth investing. just keep in mind that with investing, things are almost guaranteed to get messy at some point:

 

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Posted (edited)

Just to throw some things in here. ....

You know squat - so go to school. Spend 3-5K doing 'investment related' courses, and learn the basics in a structured manner - you will learn a lot more, and faster, than you will ever learn by trying to absorb random facts from a firehose of information. You will learn the basic theory. Applying that theory to the 'real world' is up to you - THAT is what you need to learn, and you will not get it from a book. Most people just do not 'get' that.

Find out what you DO know, and strengthen your competency in it - for most people that will be the industry you work in, and getting all the industry certifications. Your INVESTMENT will be the cost/time to get the certifications, your payoff will be the higher compensation earned - because you have the certifications. Your best and lowest risk investment, is in yourself. Again, most people just do not 'get' this.

When you are finally ready to 'start', invest in an industry specific ETF, concentrated in the industry that you know. Let the professionals do their thing, they will do it a lot better than you will, and their fees will be a lot less than the losses you will incur if you tried doing it yourelf. If you invested in trades certifications, you may not even go this route - prefering instead to upgrade/flip housing stock on your own.

Notice that NONE of this is in the press - there's a reason for that! Industry can't get rich unless there's a steady market inflow of punters who know squat. Thereafter it's just a matter of seperating fools from their money! Don't be the fool. 

Good luck

SD

 

.

Edited by SharperDingaan
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2 hours ago, Spekulatius said:

Just keep in mind that there are different styles and no approach fits all, in terms of risk tolerance. Getting started, I would  avoid high concentration. I really come to like the Motley Fool approach , especially if you are inclined to growth investing. just keep in mind that with investing, things are almost guaranteed to get messy at some point:

 

100%. I think you only want to be concentrated if you have a great deal of certainty/conviction and can basically get to a point where your thesis cant be killed. 

For all investors, but especially new ones, concentration is great, but it can also be deadly. Risk management and position sizing are way more important than probably even fundamentals. Lets get real, you can buy the biggest piece of shit fraud or whatever, and if its a 1% position, you're going to be fine. It may even be valuable "tuition". 10%+...you can probably recoup, especially if you are younger...but thats where it starts getting hard. The secret to winning life is simple, just dont fuck up. Or as Buffett says, rule number 1.

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Posted (edited)

Before you start your investing career - spend a little time with the scum of the earth! 

They are very good at what they do, qute pleasant to talk you, but just dance to a different drummer. Work a year on the VSE, and keep your eyes/ears open. You should get a great 'practical' education, and become immune to most scams  😁

Some of the more sterilized books to read are 'Fleecing the lamb: The inside story of the Vancouver Stock Exchange', and 'The Wizards: Millionaire Magicians of the Vancouver Stock Market'. The more 'unwashed' books are kept as 'manuals' - and you will not be able to obtain one. It's all about the 'people' skills ...

Have fun!

SD 

Edited by SharperDingaan
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Lots of good answers here. 

Personally I think I'd start with Terry Smith's Fundsmith Annual Letters, and the Fundsmith Owners Manual (on their website).  They are very no-BS and straightforward.  The Buffett annual letters are also great, but if I'd read them a bit later on, I think I'd have picked up more of the nuance on top.  Lindsell Train also have a ton of simple-but-wise papers on their website.  And Chuck Akre.  I think people like this are good places to start as they have some of the simplest (& best) strategies to start with i.e. 1: buy high quality companies 2: do nothing.  But they expand a bit more...

Then various classic books, as discussed.  Fit them in, but don't get over-obsessed by reading everything.  I think it's worth reading a book on the History of Bubbles - the classics include ones by Edward Chancellor and Galbraith.

And... just invest a bit.  There's no better way to learn than just doing it - a 'model portfolio' isn't the same in terms of the important psychological emotions you need to learn (& learn how much you can control your emotions in the face of adversity/opportunity).

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Posted (edited)

There are a series of fabulous talks on Value Investing - Talks at Google on You Tube. Moderated by Saurabh Madaan.  These are terrific and you will learn a ton of different approaches - Tom Gaynor, Whitney Tilson, Bill Nygren, Francios Rochon, Howard Marks, Aswath Damodaron, Pat Dorsey.  If I was running an MBA program on investing - I'd spent a course just listening and studying these guys. 

It's a very well done series by Sarah Madaan.

https://www.flame.edu.in/academics/flame-investment-lab/resources/saurabh-madaan

 

Edited by cubsfan
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On 5/25/2021 at 12:00 PM, CapriciousCapital said:

My 2 cents-- start with accounting.

My take - start with what peeks your interest and take it from there. If it's accounting, great, but for 98% of the people it's something else.

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