Tuesday, June 18, 2013

The Little Investment Guide Book



Last weekend I read another investment guide called the little book about making money or something like that.  I don't know why it is always called the little book, something like the popular For Dummies series. I think someone started it long ago, a retired investment banker who wanted to share his experience and wrote a slim volume with the title my little book that started a trend though the writer was emphasizing passive investment. A week before I read another slim volume called 'The Sages' about George Soros, Warren Buffett and Paul Volcker.  It was a very educational book and the investment styles of both Soros and Buffett are so much different.  Volcker who was the Federal Reserve head before the infamous Greenspan is another specie. The common link is their down to earth insight and prescience towards crisis and their calls for financial reform.I realize again my ignorance after reading these books.

The little book series was about fundamental investment along the Buffett (and Benjamin Graham) school of thought. Soros on the other hand is a strategic and macroeconomic thinker, familiar with global trends - he is uniquely qualified to have a world view; born in Hungary, fleeing Eastern Europe in the wake of both the Nazi and then Communist take over, studying economics in London, earning his living as a stock broker, before moving to Wall Street in New York and soon started a hedge fund. Buffett on the other hand, never left the country, studying the fundamentals of companies and buying and holding stock or businesses while Soros made his riches exploiting opportunities all over the world, gaining notoriety when shorting the British pound and 'breaking' the bank of England.

I prefer Buffett's buy and hold strategy, looking for bargain stocks that have lost favor with the general market (thereby cheap) or in a turnaround position but fraught with risk. I am again reading another book by Jim Rogers called 'Street Smarts'. Rogers worked with Soros and co created the Quantum Hedge Fund. He made his riches investing in trends like Soros until he retired and traveled the world. He now lives in Singapore, preparing his family for the coming Chinese century, his young children studying Mandarin. Soros and Rogers have a world view and are strategic thinkers similar to other known investors like Mark Mobius and John Templeton. In experience I am biased towards the Soros view, born in one Asian country (Philippines) where I studied economics (that dismal science), living and investing in Singapore, following a buy and hold strategy and moving to the US and modestly investing in American stocks and real estate following value investing guidelines.

Unfortunately I don't have the patience or the inclination to study companies like Buffett, instead focusing on cheap blue chip companies that are recovering their former glory or trying to improve their business after a downturn or unpopular in the market. Companies like Bank of America, Nokia and City bank. I just borrowed a new guide called the little book about trading which will hopefully round out my learning. I am not a brilliant investor by any standard and think my meager investment are both widespread - diversified as some gurus would say and as Buffett would say - diversification is the strategy of those who are ignorant of the market or something like that. I don't have the big pockets or guts of a Buffet or Soros and prefer diversifying my modest savings so I wont lose everything in one disaster following Nassim Taleb's Black Swan thesis. Hence, I don't have the deep technical skills needed in value analysis but instead compensate with a strategic view of the economy by buying cheap stocks and real estate for the long term, exploiting the bearish trends until the bulls recover.

To conclude, I am a mish mash of theories whether Benjamin Graham, or the efficient market theory but with some investment experience in the stock market of three different countries in a mix of stock, mutual funds, ETFs, REITS and investment bonds.  I can understand economic trends and try to profit from them with an understanding of macroeconomic theory (but all hogwash as Buffett would say stating that he would not change his investment even if a central banker whispered a secret  his ear- a testament to his knowledge of the companies he has invested in). Therefore I am a modest investor following Kiyosaki's Rich Dad Poor Dad strategy of investing in real estate while keeping myself updated of world trends by watching television shows like the BBC's recent 'Changing Wealth' about today's high net worth individuals. This is called improving one's financial literacy as Kiyosaki would say.

At the end of the day, I think I have come at the right opportunity with both the real estate and stock market prices down due to the financial crisis of 2008-09 and with my modest knowledge and experience, I invested my meager savings in rental property and stocks, experiencing a good return now that the US economy is recovering. Luck plays a big part as Taleb would say but opportunity prefers the person with a prepared mind. Such is the circumstances I find myself in, where investment opportunities abound while I adjust to my new circumstances and job challenges. I think I would have invested more if not for the Roth IRA restrictions which limit ones contribution per year. Other method would risk the payment of capital gains taxes. I guess I am an opportunist looking for the next wave, trying to profit modestly and avoiding loss just like everybody else, saving hard earned money from the monster of inflation

1 comment:

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