The Best Books on Learning How to Invest
dell' 1/11/2013
di Francesco Carlà
di Francesco Carlà
I have realised that one of the most frequent
questions sent to me at f.carla@finanzaworld.it
throughout my years at FinanzaWorld has been:
"What are the best books on intelligent investing?"
Before anything else, I need to say one thing:
there is no such thing as a perfect book, even
in this field.
But there are many books covering the fundamental
concepts and intuitions that need to be patiently
gathered and assembled, in order to develop a
sound understanding of good investment practices.
This is the exact criterion I’ll be using. I will
describe the fundamental concepts that I have
found in each of my favourite books, which use
different methods for teaching intelligent investment.
The Intelligent Investor
My first stop is the mother of all investment books:
The Intelligent Investor by Ben Graham (first edition:
1949). Ben Graham taught Warren Buffett and many other
investors active after the Second World War.
There are three key ideas in this book: two correct
and one mistaken.
The two correct ideas are revolutionary and
absolutely crucial:
They are:
1) Always think about the business that a security
represents; never think about how it’s moving on
the market (Mr Market). Mr Market just represents
the place where stocks are technically exchanged;
it cannot really judge what a business is worth.
Actually, Mr Market suffers from bipolar disorder
- sometimes it’s euphoric and sometimes it’s
depressed, for no apparent reason.
2) "Price is what you pay, value is what you get":
in other words, the price of an investment is what
you pay for it, while value is what you get from it.
This means that the ability to make an accurate
valuation of an investment is the key to intelligent
investment. In fact, this is what we do at FinanzaWorld
with my screening and analysis method, known by all
as the "Frullatore” [Blender].
The mistaken idea is:
3) "Buy only with a margin of safety": that is, only
invest by buying a security or a business at a price
discounted from the value of its assets. It would be
very risky to follow this hint, as you almost always
end up investing in second- or third-level companies.
In fact Charlie Munger, Warren Buffett’s famous partner,
was someone who understood very early on that you
should instead "buy a good company at a fair price".
This is the right concept.
Graham deserves a lot of credit in the history of
investment. His books (another important one is Security
Analysis, written together with Dodd in 1934) are packed
with humour and intelligence, and you can clearly sense
the thoroughness of his preparation and his intellectual
curiosity.
It was he who first understood that the best investors
are not mathematicians but true philosophers, deeply
learned men, enthusiastic and with an insatiable
curiosity for life and the world.
They are quite literally (human) learning machines.
Thales had already proved this to the ancient Greeks,
in his famous story of the olive presses of Miletus:
http://en.wikipedia.org/wiki/Thales#Business
Common Stocks and Uncommon Profits
It's no coincidence that another correct concept,
contained in another fundamental book on good
investing methods, is based on the third, mistaken
concept in Graham’s The Intelligent Investor.
The title of the book, published in 1958 and written
by Philip Fisher - Common Stocks and Uncommon Profits - is
self explanatory and very apt.
There are at least three correct concepts that you
can get from this book:
1. If managers are not honest (or smart), do not invest;
2. Don’t diversify too little, but not too much either;
3. Don’t focus on quarterly and short-term earnings.
Finally: in investments, never follow the crowd.
Fisher lived for nearly a century (1907-2004) and
his book has been constantly in print for more than
50 years. It doesn't have Graham's humour, but in
some ways the practical suggestions it contains
are even more useful.
Where Are the Customers' Yachts?
Another very interesting book is Where Are the
Customers' Yachts? by Fred Schwed, Jr. The first
edition dates from 1940, the second from 1955.
This book contains two important concepts:
First: nobody ever gets rich by gambling on the
stock exchange;
Second: the results of 90% of traders and stock
brokers are worse than the market indices.
As Buffett was to say some years later: "Wall Street
is the only place that people ride to in a Rolls Royce
to get advice from those who take the subway".
Here is another example of hard-hitting humour against
technical analysis and the like:
"There have always been a considerable number of
pathetic people who busy themselves examining the
last thousand numbers which have appeared on a
roulette wheel, in search of some repeating pattern.
Sadly enough, they have usually found it."
Reminiscences of a Stock Operator
Another classic book is the semi-fictional
Reminiscences of a Stock Operator (1923) by Edwin
Lefèvre, a sort of fictional biography of Jesse
Lauriston Livermore, a Wall Street trader who
worked before the 1929 crisis.
Livermore had direct experience of many of the
financial market traps and the hard lesson he
learned is summarised in the following sentence,
often wrongly ascribed to Buffett:
"It never was my thinking that made the big money
for me. It always was my sitting. Got that? My
sitting tight!"
This is our concept of the “marathon” in embryonic
form.
Another sentence in this book should be written
in stone: "A stock operator has to fight a lot
expensive enemies within himself".
This book is just as fresh and amusing a century
after it was first published and it is still
in print.
-One up on Wall Street/Beating the Street
There are two more recent books containing some
good concepts, which I read between the late 80s
and early 90s. They were "written" in 1988 and
1992 by one of the most famous fund managers
of the time, Peter Lynch.
Their titles are One up on Wall Street and Beating
the Street.
Lynch is a typical representative of the golden
age of US managed hedge funds, of which he had
an insider’s knowledge, having managed the
Fidelity Magellan Fund from 1977 to 1990. He
certainly managed it successfully.
What is the best concept you can find in his
books? You already know it well: "Invest in
what you know".
It’s no accident that this concept appears, in
a slightly different form, in the 5 Principles
of FinanzaWorld's Finanza Democratica:
"Invest only in what you know and understand".
A Random Walk down Wall Street
A book published in 1973 by Burton Malkiel, an
economist from Princeton, popularises the theory
of efficient markets. I am talking about A Random
Walk down Wall Street.
There are two main concepts in this book, one
correct and one mistaken:
The correct one is:
It is statistically very unlikely that a managed
hedge fund can do better than a passive hedge fund.
I completely agree with this concept, especially
if we consider the difference in costs between
these two kinds of hedge funds.
The mistaken one is:
Markets are always efficient, so it is impossible
to do better than the markets in the long run.
Markets are often efficient, but not always. For
this reason, they can be beaten by using the right
techniques, as we have proved in the course of
many years at FinanzaWorld and also, decades on, by
the article The Superinvestors of Graham & Doddsville:
http://en.wikipedia.org/wiki/The_Superinvestors_of_Graham-and-Doddsville
Can the markets be beaten?
Warren Buffett himself clashed directly with
Malkiel in a lecture given at Columbia University
in 1984, and it was no accident that this took
place at that university. For it was there that
Graham and Dodds had, for years, taught their
famous course on Value Investing, at which the
best student turned out to be the “Oracle of Omaha”.
Malkiel has never been able to advance empirical
arguments capable of rebutting Warren Buffett's
more practical ones, which we shall look at shortly.
-Warren Buffett's letters to Berkshire shareholders
As far as Buffett is concerned, one of the most
amusing and informative "books" for intelligent
(and good) investing is actually the whole series
of letters to Berkshire Hathaway shareholders,
written by Warren Buffet and edited by the Fortune
journalist, Carol Loomis:
http://www.berkshirehathaway.com/letters/letters.html
This incredible treasure trove contains an absolutely
huge amount of good ideas on business and investment,
and indeed on life.
The letters cover thousands of pages, in which Buffett
uses humour worthy of Groucho Marx and the precision
of Pascal to recount his thoughts on investment,
entrepreneurship, money, management, human motivation,
investor psychology (right and wrong), the structure
of financial statements, business figures, business
in general, life, philanthropy, other people... The
list goes on.
It’s extremely unlikely that any serious investment
and business professional has not spent time reading
and re-reading these crucial letters thoroughly and
comprehensively. That would be like a Christian
who’d never read the Gospels and Saint Paul or a
communist who hadn’t read Marx's Das Kapital.
After all, we are talking here of someone that has
made his and other people's capital grow (since 1965)
at an average annual rate close to 20%, although,
of course, the real golden years ended in the late
90s because of a series of key factors. The first
of these was Berkshire's size, but there were other
reasons too.
Buffett has never written a book on investment
techniques and strategies, strictly speaking.
However, many others have tried to cover this
subject, in more than 50 books, in which they
have dissected Warren Buffet's activity from
many points of view.
Just put the word "Buffett" into Amazon and
you will see. It's a jungle, in which you will
find a huge number of completely useless and
often harmful books.
Instead, here are the ones I find interesting:
The Essays of Warren Buffett: Lessons for
Investors and Managers by L. Cunningham. This
is the best book for understanding Buffett's
letters to shareholders.
Cunningham organises the huge quantity of Buffett
material, dividing it into subjects and themes, a
very useful endeavour, especially for non-experts.
Warren Buffett and the Interpretation of Financial
Statements, Buffettology and The Tao of Warren
Buffett by Mary Buffett (Warren Buffett's former
daughter-in-law) and David Clark.
These are three very useful books, by what could
be considered insiders, since Mary Buffett was
fairly close to the “Oracle” for some years, but
they don't add much to what is already in the letters.
To get a better understanding of how Warren Buffett's
thinking was formed and developed, you can start
by reading the two following huge biographies:
The Snowball: Warren Buffett and the Business
of Life by Alice Schroeder and Buffett: The
Biography by Roger Lowenstein.
"Other guys read Playboy, I read annual reports."
In the 70s, Americans used to read Playboy.
Warren Buffett used to read annual reports,
which are the main source of information on
good investing.
Annual reports are mainly written in the language
of numbers used in financial reports, a language
that should be mastered by any serious investment
professional wanting to analyse thousands of
listed companies, in order to find the gems amid
the trash.
Reading Financial Reports
One of the best books I have ever read on this
important subject is, without doubt Reading
Financial Reports by Lita Epstein.
Obviously, this refers to the situation in the
US, but it is extremely useful in general. After
all, as FinanzaWorld readers know well, Wall Street
is in the Champions League of investment.
Doing well over there is very important for an
Intelligent Investor and for anyone serious
about investing well.
What I Learned Losing a Million Dollars
For those of you familiar with my Principles of
Investment, who know how important the "Carla'
Method" has been for portfolio management over
the years, including emotional and behavioural
aspects, I would suggest the following book:
What I Learned Losing a Million Dollars by Jim
Paul and Brendan Moynihan (1994).
The main concept in this book is simple: if you
are not yet convinced that it is much better to
be a "marathon" investor than a "hundred-meter"
trader, then you must read it and you'll definitely
agree with me. Forever.
Jim Paul, one of the Black Swan’s really unlucky
examples, died in the 9/11 Twin Towers incident
in 2001.
The Black Swan
The Black Swan (2007) is a book by the
philosopher-trader Nassim Nicholas Taleb.
Obviously, this is not specifically about
investment, but you can learn a lot about the
concept of risk and other matters important
to professionals in the field and many others.
The most important concept of the book is very
simple: be careful not to jump to conclusions
when the premises (and myths) may well be
uncertain and unproven.
The black swan may be lurking and do a lot of
damage, like the bursting of the dot-com and
real estate bubbles.
A typical example is the infamous Modern
Portfolio Theory (MPT), which when used for
real in financial practice led to the LCTM
disaster.
The hedge fund Long-Term Capital Management
(LCTM) had recruited to its board of directors
Merton and Scholes, joint Nobel prize-winners
for MPT. But a black swan can come between
theory and practice.
Finanza Democratica
You can find my (anti-Black Swan) Method, the
Frullatore [Blender] and the other main principles
of FinanzaWorld (FW) in my book titled Finanza
Democratica (Democratic Finance) and in the
video streaming version, in my three-level
course called Investi Personalmente (Invest
by Yourself):
https://www.finanzaworld.it/statico/page/13/master-investi-personalmente (in Italian)
Some concepts that I (and everyone at FW)
consider essential are:
1. Never spend too much on investments. If you
are spending 2% a year on commissions, you’re
spending too much.
2. Never invest in things that you don't
understand and don't know about without guidance
from a really independent adviser.
3. Never invest for just a few months or a few
years. You should invest for the long term: 10,
15, 20 or 30 years. You are running a marathon
and not a 100-metre race.
4. Never break the first three rules. If you
break all three you will be in really serious
trouble. If you break two of them you will be
in a lot of trouble.
And even if you break just one rule, you will
still be in trouble.
There are many other useful, interesting and
important books: biographies of great
businessmen and investors such as Gerstner of
IBM or Walton of WalMart; books on the psychology
of investment and behavioural finance; books
on management and the history of the financial
markets; books on current, past and maybe
future financial tools; books like The
(Mis)Behaviour of Markets: A Fractal View of
Risk, Ruin, and Reward by Benoit Mandelbroot.
But I could end up writing a book about the
best books on learning to invest well.
And maybe sooner or later...
In the meantime, please write to
f.carla@finanzaworld.it and let me know if
you read any of these books and what you think
about them. And maybe let me know which concepts
you liked most.
Best regards to all of you,
Francesco Carla'
Who We Are
FinanzaWorld is a leading provider of financial
consulting services. The company evolved from
an idea by Francesco Carla', with the aim of
joining finance and the new technologies of
interactive communication in order to create
a community of financially informed users.
Today FinanzaWorld is one of the most important
websites of financial information in Italy,
with a network of more than 300,000 readers
of the daily newsletters, among which the
famous newsletter by Francesco Carla', which
has more than 250,000 subscribers that include
some of the most important thought leaders
in the fields of finance and technology.
Since 1999, FinanzaWorld has introduced to
the Italian public such concepts as democratic
finance and intelligent investing.
Francesco Carla' is an independent economic
journalist and financial analyst. He has
taught at the Università La Sapienza in Rome
from 1996 to 2002, and at the Università IULM
in Milan from 2002 to 2009. In 1999 he
founded FinanzaWorld, the company committed
to global financial education and communication
from which he developed the concept of
democratic finance. From 2000 to 2004 he wrote
and directed the financial TV program Netstocks
on Rai 3 and Rai News 24. During his career as
a journalist he wrote for many Italian magazines
and newspapers, like Panorama, L'Espresso, Epoca,
La Gazzetta dello Sport, Corriere della Sera and
Vanity Fair. He also published a series of books
on financial investments: Investire su Internet
(with L. de Biase, 1999), Trading online (2000),
Simulmondo (2001), Italia-Google (2006), Guida
alla grande crisi del 2008 (2008) and Finanza
democratica (2009). Prof. Francesco Carla' also
appears frequently in the media (Radio Capital,
Radio Vaticana, Radio Radicale, Class/CNBC, Rai)
and has been a featured speaker across Italy and
Europe. Francesco Carla' serves as president of
Finanza World.
questions sent to me at f.carla@finanzaworld.it
throughout my years at FinanzaWorld has been:
"What are the best books on intelligent investing?"
Before anything else, I need to say one thing:
there is no such thing as a perfect book, even
in this field.
But there are many books covering the fundamental
concepts and intuitions that need to be patiently
gathered and assembled, in order to develop a
sound understanding of good investment practices.
This is the exact criterion I’ll be using. I will
describe the fundamental concepts that I have
found in each of my favourite books, which use
different methods for teaching intelligent investment.
The Intelligent Investor
My first stop is the mother of all investment books:
The Intelligent Investor by Ben Graham (first edition:
1949). Ben Graham taught Warren Buffett and many other
investors active after the Second World War.
There are three key ideas in this book: two correct
and one mistaken.
The two correct ideas are revolutionary and
absolutely crucial:
They are:
1) Always think about the business that a security
represents; never think about how it’s moving on
the market (Mr Market). Mr Market just represents
the place where stocks are technically exchanged;
it cannot really judge what a business is worth.
Actually, Mr Market suffers from bipolar disorder
- sometimes it’s euphoric and sometimes it’s
depressed, for no apparent reason.
2) "Price is what you pay, value is what you get":
in other words, the price of an investment is what
you pay for it, while value is what you get from it.
This means that the ability to make an accurate
valuation of an investment is the key to intelligent
investment. In fact, this is what we do at FinanzaWorld
with my screening and analysis method, known by all
as the "Frullatore” [Blender].
The mistaken idea is:
3) "Buy only with a margin of safety": that is, only
invest by buying a security or a business at a price
discounted from the value of its assets. It would be
very risky to follow this hint, as you almost always
end up investing in second- or third-level companies.
In fact Charlie Munger, Warren Buffett’s famous partner,
was someone who understood very early on that you
should instead "buy a good company at a fair price".
This is the right concept.
Graham deserves a lot of credit in the history of
investment. His books (another important one is Security
Analysis, written together with Dodd in 1934) are packed
with humour and intelligence, and you can clearly sense
the thoroughness of his preparation and his intellectual
curiosity.
It was he who first understood that the best investors
are not mathematicians but true philosophers, deeply
learned men, enthusiastic and with an insatiable
curiosity for life and the world.
They are quite literally (human) learning machines.
Thales had already proved this to the ancient Greeks,
in his famous story of the olive presses of Miletus:
http://en.wikipedia.org/wiki/Thales#Business
Common Stocks and Uncommon Profits
It's no coincidence that another correct concept,
contained in another fundamental book on good
investing methods, is based on the third, mistaken
concept in Graham’s The Intelligent Investor.
The title of the book, published in 1958 and written
by Philip Fisher - Common Stocks and Uncommon Profits - is
self explanatory and very apt.
There are at least three correct concepts that you
can get from this book:
1. If managers are not honest (or smart), do not invest;
2. Don’t diversify too little, but not too much either;
3. Don’t focus on quarterly and short-term earnings.
Finally: in investments, never follow the crowd.
Fisher lived for nearly a century (1907-2004) and
his book has been constantly in print for more than
50 years. It doesn't have Graham's humour, but in
some ways the practical suggestions it contains
are even more useful.
Where Are the Customers' Yachts?
Another very interesting book is Where Are the
Customers' Yachts? by Fred Schwed, Jr. The first
edition dates from 1940, the second from 1955.
This book contains two important concepts:
First: nobody ever gets rich by gambling on the
stock exchange;
Second: the results of 90% of traders and stock
brokers are worse than the market indices.
As Buffett was to say some years later: "Wall Street
is the only place that people ride to in a Rolls Royce
to get advice from those who take the subway".
Here is another example of hard-hitting humour against
technical analysis and the like:
"There have always been a considerable number of
pathetic people who busy themselves examining the
last thousand numbers which have appeared on a
roulette wheel, in search of some repeating pattern.
Sadly enough, they have usually found it."
Reminiscences of a Stock Operator
Another classic book is the semi-fictional
Reminiscences of a Stock Operator (1923) by Edwin
Lefèvre, a sort of fictional biography of Jesse
Lauriston Livermore, a Wall Street trader who
worked before the 1929 crisis.
Livermore had direct experience of many of the
financial market traps and the hard lesson he
learned is summarised in the following sentence,
often wrongly ascribed to Buffett:
"It never was my thinking that made the big money
for me. It always was my sitting. Got that? My
sitting tight!"
This is our concept of the “marathon” in embryonic
form.
Another sentence in this book should be written
in stone: "A stock operator has to fight a lot
expensive enemies within himself".
This book is just as fresh and amusing a century
after it was first published and it is still
in print.
-One up on Wall Street/Beating the Street
There are two more recent books containing some
good concepts, which I read between the late 80s
and early 90s. They were "written" in 1988 and
1992 by one of the most famous fund managers
of the time, Peter Lynch.
Their titles are One up on Wall Street and Beating
the Street.
Lynch is a typical representative of the golden
age of US managed hedge funds, of which he had
an insider’s knowledge, having managed the
Fidelity Magellan Fund from 1977 to 1990. He
certainly managed it successfully.
What is the best concept you can find in his
books? You already know it well: "Invest in
what you know".
It’s no accident that this concept appears, in
a slightly different form, in the 5 Principles
of FinanzaWorld's Finanza Democratica:
"Invest only in what you know and understand".
A Random Walk down Wall Street
A book published in 1973 by Burton Malkiel, an
economist from Princeton, popularises the theory
of efficient markets. I am talking about A Random
Walk down Wall Street.
There are two main concepts in this book, one
correct and one mistaken:
The correct one is:
It is statistically very unlikely that a managed
hedge fund can do better than a passive hedge fund.
I completely agree with this concept, especially
if we consider the difference in costs between
these two kinds of hedge funds.
The mistaken one is:
Markets are always efficient, so it is impossible
to do better than the markets in the long run.
Markets are often efficient, but not always. For
this reason, they can be beaten by using the right
techniques, as we have proved in the course of
many years at FinanzaWorld and also, decades on, by
the article The Superinvestors of Graham & Doddsville:
http://en.wikipedia.org/wiki/The_Superinvestors_of_Graham-and-Doddsville
Can the markets be beaten?
Warren Buffett himself clashed directly with
Malkiel in a lecture given at Columbia University
in 1984, and it was no accident that this took
place at that university. For it was there that
Graham and Dodds had, for years, taught their
famous course on Value Investing, at which the
best student turned out to be the “Oracle of Omaha”.
Malkiel has never been able to advance empirical
arguments capable of rebutting Warren Buffett's
more practical ones, which we shall look at shortly.
-Warren Buffett's letters to Berkshire shareholders
As far as Buffett is concerned, one of the most
amusing and informative "books" for intelligent
(and good) investing is actually the whole series
of letters to Berkshire Hathaway shareholders,
written by Warren Buffet and edited by the Fortune
journalist, Carol Loomis:
http://www.berkshirehathaway.com/letters/letters.html
This incredible treasure trove contains an absolutely
huge amount of good ideas on business and investment,
and indeed on life.
The letters cover thousands of pages, in which Buffett
uses humour worthy of Groucho Marx and the precision
of Pascal to recount his thoughts on investment,
entrepreneurship, money, management, human motivation,
investor psychology (right and wrong), the structure
of financial statements, business figures, business
in general, life, philanthropy, other people... The
list goes on.
It’s extremely unlikely that any serious investment
and business professional has not spent time reading
and re-reading these crucial letters thoroughly and
comprehensively. That would be like a Christian
who’d never read the Gospels and Saint Paul or a
communist who hadn’t read Marx's Das Kapital.
After all, we are talking here of someone that has
made his and other people's capital grow (since 1965)
at an average annual rate close to 20%, although,
of course, the real golden years ended in the late
90s because of a series of key factors. The first
of these was Berkshire's size, but there were other
reasons too.
Buffett has never written a book on investment
techniques and strategies, strictly speaking.
However, many others have tried to cover this
subject, in more than 50 books, in which they
have dissected Warren Buffet's activity from
many points of view.
Just put the word "Buffett" into Amazon and
you will see. It's a jungle, in which you will
find a huge number of completely useless and
often harmful books.
Instead, here are the ones I find interesting:
The Essays of Warren Buffett: Lessons for
Investors and Managers by L. Cunningham. This
is the best book for understanding Buffett's
letters to shareholders.
Cunningham organises the huge quantity of Buffett
material, dividing it into subjects and themes, a
very useful endeavour, especially for non-experts.
Warren Buffett and the Interpretation of Financial
Statements, Buffettology and The Tao of Warren
Buffett by Mary Buffett (Warren Buffett's former
daughter-in-law) and David Clark.
These are three very useful books, by what could
be considered insiders, since Mary Buffett was
fairly close to the “Oracle” for some years, but
they don't add much to what is already in the letters.
To get a better understanding of how Warren Buffett's
thinking was formed and developed, you can start
by reading the two following huge biographies:
The Snowball: Warren Buffett and the Business
of Life by Alice Schroeder and Buffett: The
Biography by Roger Lowenstein.
"Other guys read Playboy, I read annual reports."
In the 70s, Americans used to read Playboy.
Warren Buffett used to read annual reports,
which are the main source of information on
good investing.
Annual reports are mainly written in the language
of numbers used in financial reports, a language
that should be mastered by any serious investment
professional wanting to analyse thousands of
listed companies, in order to find the gems amid
the trash.
Reading Financial Reports
One of the best books I have ever read on this
important subject is, without doubt Reading
Financial Reports by Lita Epstein.
Obviously, this refers to the situation in the
US, but it is extremely useful in general. After
all, as FinanzaWorld readers know well, Wall Street
is in the Champions League of investment.
Doing well over there is very important for an
Intelligent Investor and for anyone serious
about investing well.
What I Learned Losing a Million Dollars
For those of you familiar with my Principles of
Investment, who know how important the "Carla'
Method" has been for portfolio management over
the years, including emotional and behavioural
aspects, I would suggest the following book:
What I Learned Losing a Million Dollars by Jim
Paul and Brendan Moynihan (1994).
The main concept in this book is simple: if you
are not yet convinced that it is much better to
be a "marathon" investor than a "hundred-meter"
trader, then you must read it and you'll definitely
agree with me. Forever.
Jim Paul, one of the Black Swan’s really unlucky
examples, died in the 9/11 Twin Towers incident
in 2001.
The Black Swan
The Black Swan (2007) is a book by the
philosopher-trader Nassim Nicholas Taleb.
Obviously, this is not specifically about
investment, but you can learn a lot about the
concept of risk and other matters important
to professionals in the field and many others.
The most important concept of the book is very
simple: be careful not to jump to conclusions
when the premises (and myths) may well be
uncertain and unproven.
The black swan may be lurking and do a lot of
damage, like the bursting of the dot-com and
real estate bubbles.
A typical example is the infamous Modern
Portfolio Theory (MPT), which when used for
real in financial practice led to the LCTM
disaster.
The hedge fund Long-Term Capital Management
(LCTM) had recruited to its board of directors
Merton and Scholes, joint Nobel prize-winners
for MPT. But a black swan can come between
theory and practice.
Finanza Democratica
You can find my (anti-Black Swan) Method, the
Frullatore [Blender] and the other main principles
of FinanzaWorld (FW) in my book titled Finanza
Democratica (Democratic Finance) and in the
video streaming version, in my three-level
course called Investi Personalmente (Invest
by Yourself):
https://www.finanzaworld.it/statico/page/13/master-investi-personalmente (in Italian)
Some concepts that I (and everyone at FW)
consider essential are:
1. Never spend too much on investments. If you
are spending 2% a year on commissions, you’re
spending too much.
2. Never invest in things that you don't
understand and don't know about without guidance
from a really independent adviser.
3. Never invest for just a few months or a few
years. You should invest for the long term: 10,
15, 20 or 30 years. You are running a marathon
and not a 100-metre race.
4. Never break the first three rules. If you
break all three you will be in really serious
trouble. If you break two of them you will be
in a lot of trouble.
And even if you break just one rule, you will
still be in trouble.
There are many other useful, interesting and
important books: biographies of great
businessmen and investors such as Gerstner of
IBM or Walton of WalMart; books on the psychology
of investment and behavioural finance; books
on management and the history of the financial
markets; books on current, past and maybe
future financial tools; books like The
(Mis)Behaviour of Markets: A Fractal View of
Risk, Ruin, and Reward by Benoit Mandelbroot.
But I could end up writing a book about the
best books on learning to invest well.
And maybe sooner or later...
In the meantime, please write to
f.carla@finanzaworld.it and let me know if
you read any of these books and what you think
about them. And maybe let me know which concepts
you liked most.
Best regards to all of you,
Francesco Carla'
Who We Are
FinanzaWorld is a leading provider of financial
consulting services. The company evolved from
an idea by Francesco Carla', with the aim of
joining finance and the new technologies of
interactive communication in order to create
a community of financially informed users.
Today FinanzaWorld is one of the most important
websites of financial information in Italy,
with a network of more than 300,000 readers
of the daily newsletters, among which the
famous newsletter by Francesco Carla', which
has more than 250,000 subscribers that include
some of the most important thought leaders
in the fields of finance and technology.
Since 1999, FinanzaWorld has introduced to
the Italian public such concepts as democratic
finance and intelligent investing.
Francesco Carla' is an independent economic
journalist and financial analyst. He has
taught at the Università La Sapienza in Rome
from 1996 to 2002, and at the Università IULM
in Milan from 2002 to 2009. In 1999 he
founded FinanzaWorld, the company committed
to global financial education and communication
from which he developed the concept of
democratic finance. From 2000 to 2004 he wrote
and directed the financial TV program Netstocks
on Rai 3 and Rai News 24. During his career as
a journalist he wrote for many Italian magazines
and newspapers, like Panorama, L'Espresso, Epoca,
La Gazzetta dello Sport, Corriere della Sera and
Vanity Fair. He also published a series of books
on financial investments: Investire su Internet
(with L. de Biase, 1999), Trading online (2000),
Simulmondo (2001), Italia-Google (2006), Guida
alla grande crisi del 2008 (2008) and Finanza
democratica (2009). Prof. Francesco Carla' also
appears frequently in the media (Radio Capital,
Radio Vaticana, Radio Radicale, Class/CNBC, Rai)
and has been a featured speaker across Italy and
Europe. Francesco Carla' serves as president of
Finanza World.
Segnala questo articolo ad un amico