School of Hard Knocks 02 (Jan 10 - Jan 13)

[winston]

The Maxims of Wall Street: A Crash Course in Financial Freedom by Alexander Green

Winston Churchill once said, “It is a good thing for an uneducated man to read a book of quotations.”

My good friend and Investment U colleague Dr. Mark Skousen has a new book out called The Maxims of Wall Street. It’s like a crash course in how to survive and profit from today’s volatile markets.

A former economist with the CIA and professor at Columbia University, Skousen has spent more than 30 years reading, teaching and lecturing about financial markets. Along the way, he has collected a treasure trove of proverbs, slogans, stories and juicy quotes.

Here are just a few of my favorites:

• “When your outgo exceeds your income, your upkeep becomes your downfall.” Rick Rule

• “A share of stock is not a lottery ticket. It’s an investment in a business.” Peter Lynch

• “The big money is not in the buying or the selling, but in the sitting.” Jesse Livermore

• “A great business at a fair price is superior to a fair business at a great price.” Charlie Munger

• “In a bear market, the winner is the man who loses the least.” d**k Russell

• “Easy money – isn’t.” Ken Fisher

• “Investors should purchase stock like they purchase groceries – not like they purchase perfume.” [/b ]Benjamin Graham

•[b] “You can’t pick cherries with your back to the tree.” J.P. Morgan

• “Never confuse genius with a bull market.” Humphrey B. Neill

• “The one investment certainty is that we are all frequently wrong.” Bill Gross

• “If you don’t profit from your investment mistakes, someone else will.” Yale Hirsch

• “Investments should be based not on optimism but arithmetic.” Benjamin Graham

• “My broker told me to buy this stock for my old age. It worked wonderfully. Within a week I was an old man.” Eddie Cantor

• “If past history was all there was to the investment game, the richest people would be librarians.” Warren Buffett

• “Investment success accrues not so much to the brilliant, as to the disciplined.” William J. Bernstein

http://www.investmentu.com/2011/July/ma ... treet.html

[winston]

10 Life Lessons From CEOs By Joe Mont

BOSTON (TheStreet) -- The average person may never have to appease shareholders, appear before a congressional panel or pull the trigger on massive layoffs.

But how CEOs handle success, adversity and all manner of corporate curveballs does offer some insight for the working men and women who may never be household names.

The following are 10 chief executives and the lessons their leadership can offer the average business owner, employee or entrepreneur:

http://www.thestreet.com/story/11187165 ... L_atb_html

[winston]

The Key to Success In Investing... and In Life by Alexander Green

At an investment conference last year, I sat on a panel with an analyst who told us he had a "system" that accurately predicts stocks, bonds, currencies, precious metals, oil prices, and interest rates.

All would be revealed, he promised, in his workshop that afternoon.

He was so confident - brazen really - that I figured no one in the audience was buying his schtick.

Boy was I wrong. Attendees flooded his workshop, spilling out into the hallway.

Yet, in my experience, there is an inverse relationship between the specificity of an investment forecast and the quality of its results.

If, for example, you hear someone say, "Stocks are making a bottom here," you can safely chalk it up to naivete or inexperience. If an analyst says, "My indicators show the market will trade higher a week from now," he or she may just be confused.

But if you hear, "the Dow will find support at 10,320 before rebounding to 11,250 and then settling back to 10,800," run. That kind of analyst should be wearing a sandwich board that says "I Haven't the Foggiest Idea What I'm Talking About."

Physicists, chemists and engineers can make fairly accurate predictions. But in many areas - and especially in the realm of human behavior - all bets are off.

Investors hate uncertainty, of course. And history shows they will pay "experts" a great deal to remove it.

If only they could. Instead you have smart, articulate, attractive, well-paid men and women on CNBC each day talking utter nonsense. Of course, channels like these don't exist to help you reach your financial goals. They exist to attract viewers and sell advertising.

Experienced investors understand that, to a great extent, the future is unknowable. And that's ok. Investment success doesn't come from following the right predictions. It comes from following the right principles

That's why The Oxford Club recommends that you asset allocate properly, diversify broadly, stick to quality, and run trailing stops behind your individual stocks to protect your principal and your profits. This gives you unlimited upside potential with strictly limited downside risk.

You will still suffer setbacks from time to time, especially in times like these. But this is a time-tested approach - and it works.

I would love to tell you when the stock market will rally or whether the economy will double-dip. But no one can know these things with any certainty.

Sure, you can look at all sorts of indicators, traditional gauges and historical parallels. But that's not enough. As Warren Buffett said, "If past history was all there was to the game, the richest people would be librarians."

Success in the financial markets takes time and patience. You can't be in a hurry. In the investment arena, high confidence and big egos are routinely taken down like the Berlin Wall.

Humility is essential to investment success - as it is to so much else in our lives.

That doesn't mean selling yourself short or avoiding risks. It means making an honest appraisal of the limited knowledge, experience and understanding that we all bring to various situations.

It isn't possible to eliminate uncertainty. So the secret is to use an approach that capitalizes on it.

Our small island of knowledge is surrounded by a vast sea of the unknown. Once we accept this as investors - and as human beings - things tend to go a lot smoother.


Source: Spiritual Wealth

[winston]

“ Experience is simply the name we give our mistakes. ”
— Oscar Wilde

[winston]

John Neff Made Investors 57 TIMES Their Money By Dr. Steve Sjuggerud
Wednesday, August 31, 2011

"John Neff beat the market twenty-two times while posting a fifty-seven-fold increase in an initial stake – making Windsor the largest mutual fund in the United States…"

Do you want to learn how to make a fortune through investing?

I will tell you how today.

The great thing is, the BEST way to learn to make a fortune through investing is also the CHEAPEST way. I'm serious…

I've learned about investing every possible way. I've done each to the extreme:

• I went the academic route… getting a finance degree, an MBA, and even a Ph.D. in this stuff.

• I went the hands-on Wall Street route… as a broker, a research analyst, a trader for a mutual fund, and a hedge-fund manager.

• I went the boots-on-the-ground route… I've kicked tires from Iceland to China to Argentina, investigating opportunities.

I have learned in every method possible. Literally hundreds of thousands of dollars have gone into my investing education… from school tuition to world travel.

While I'm thankful for the experience, I can confidently say you don't need to do all that stuff.

The best investing education is also the cheapest education…

You must learn from the best.

It's easy to do this. And it costs you next to nothing.

Find the guys out there, like John Neff, who outperformed the markets for decades. And learn from them.

Simply read books by investing masters or books that are full of interviews with investing masters.

Learn from the guys who actually succeeded – not from textbooks or from journalists writing investing books. Stick with guys who really made money. For me, the key is that the investing "master" needs to have been successful over a very long period of time.

You have plenty of masters to choose from. Here are a few books from the masters that I learned from below. You can buy most of these books used on Amazon for next to nothing:

• Market Wizards (and the New Market Wizards) by Jack Schwager

• Reminiscences of a Stock Operator by Edwin Lefèvre

• One Up On Wall Street by Peter Lynch

• Investment Biker (and Adventure Capitalist) by Jim Rogers

• The Mind of Wall Street by Leon Levy

Once you've read these, you'll have an outstanding base of knowledge… a solid foundation. It doesn't take long to do this.

Then you'll have hundreds of years of experience (cumulatively) to draw from, as you decide what to do with your own money. With this knowledge, you'll be instantly better off than most anyone you know.

We have seen it all before in the investment world. And it's all in those books.

For example, the banks are in trouble today… But they were in trouble in 1991, as well. Investing master John Neff wrote about it in his book On Investing. You could replace "Citibank" in his story below with any major U.S. or European bank today:

Most investors feared for Citibank in May of 1991. Amid real estate problems galore, and on the heels of cleaning up disastrous loans to developing countries, Citi's prospects were bleak.

Billions of dollars had been set aside to cope with bad real estate loans… Other banks were recovering from similar problems.

At Windsor, after weighing Citi's situation carefully, we decided this was a good time to buy… We endured the slings and arrows, and the outcome eventually brought sweet vindication and very handsome returns.

If you want to become a great investor, learn from the greats. As you read, you'll find similarities (for example, all the Market Wizards but one used trailing stops). You'll want to adopt those behaviors. When you find different solutions to the same problem, go with what makes sense for you.

Once you've read enough from the masters, you'll start developing your own beliefs and convictions about what works in investing. And that is when you're on your way to making the big money… when you're acting with your own thoughts, based on your cheap "masters" education.

The best way to learn how to make a fortune in investing is not through day trading, or watching CNBC, or getting a college degree in it. The best way to learn how to make a fortune is to learn from those who've actually done it. It's cheap and easy, and it's the right way to do it…

So buy some of those books now, and get on your way to building that fortune.

Source: Daily Wealth

[winston]

7 Common Investor Mistakes by Jay Yoder

Of the mistakes made by investors, seven of them are repeat offenses.

In fact, investors have been making these same mistakes since the dawn of modern markets, and will likely be repeating them for years to come.

You can significantly boost your chances of investment success by becoming aware of these typical errors and taking steps to avoid them.


1. No Plan

As the old saying goes, if you don't know where you're going, any road will take you there. Solution?

Have a personal investment plan or policy that addresses the following:

• Goals and objectives - Find out what you're trying to accomplish. Accumulating $100,000 for a child's college education or $2 million for retirement at age 60 are appropriate goals. Beating the market is not a goal.

• Risks - What risks are relevant to you or your portfolio? If you are a 30-year-old saving for retirement, volatility isn't (or shouldn't be) a meaningful risk. On the other hand, inflation - which erodes any long-term portfolio - is a significant risk.

• Appropriate benchmarks - How will you measure the success of your portfolio, its asset classes and individual funds or managers?

• Asset allocation - What percentage of your total portfolio will you allocate to U.S. equities, international stocks, U.S. bonds, high-yield bonds, etc. Your asset allocation should accomplish your goals while addressing relevant risks.

• Diversification - Allocating to different asset classes is the initial layer of diversification. You then need to diversify within each asset class. In U.S. stocks, for example, this means exposure to large-, mid- and small-cap stocks.

Your written plan's guidelines will help you adhere to a sound long-term policy, even when current market conditions are unsettling.

Having a good plan and sticking to it is not nearly as exciting or as much fun as trying to time the markets, but it will likely be more profitable in the long term.

[winston]

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2. Too Short of a Time Horizon

If you are saving for retirement 30 years hence, what the stock market does this year or next shouldn't be the biggest concern.

Even if you are just entering retirement at age 70, your life expectancy is likely 15 to 20 years.

[winston]

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3. Too Much Attention Given to Financial Media

There is almost nothing on financial news shows that can help you achieve your goals. Turn them off. There are few newsletters that can provide you with anything of value. Even if there were, how do you identify them in advance?

Think about it - if anyone really had profitable stock tips, trading advice or a secret formula to make big bucks, would they blab it on TV or sell it to you for $49 per month?

No - they'd keep their mouth shut, make their millions and not have to sell a newsletter to make a living.

Solution? Spend less time watching financial shows on TV and reading newsletters. Spend more time creating - and sticking to - your investment plan.

[winston]

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4. Not Rebalancing

Rebalancing is the process of returning your portfolio to its target asset allocation as outlined in your investment plan.

Rebalancing is difficult because it forces you to sell the asset class that is performing well and buy more of your worst performing asset classes. This contrarian action is very difficult for many investors.

In addition, rebalancing is unprofitable right up to that point where it pays off spectacularly (think U.S. equities in the late 1990s), and the underperforming assets start to take off.

However, a portfolio allowed to drift with market returns guarantees that asset classes will be overweighted at market peaks and underweighted at market lows - a formula for poor performance.

The solution? Rebalance religiously and reap the long-term rewards.

[winston]

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5. Overconfidence in the Ability of Managers

From numerous studies, including Burton Malkiel's 1995 study entitled, "Returns From Investing In Equity Mutual Funds", we know that most managers will underperform their benchmarks.

We also know that there's no consistent way to select - in advance - those managers that will outperform.

We also know that very, very few individuals can profitably time the market over the long term. So why are so many investors confident of their abilities to time the market and select outperforming managers?

Fidelity guru Peter Lynch once observed, "There are no market timers in the 'Forbes' 400'." Investors' misplaced overconfidence in their ability to market-time and select outperforming managers leads directly to our next common investment mistake.