Starting out thread, hints, tips... anything really

[buns]

Your a kind man Shasta. However I slightly disagree with you handing off that book so soon.

I'm a huge advocate for anything Benjamin Graham, however think that book is a little to much for a newbie.

You easily forget what its like when first starting. This really hit home with me a while back as I did a complete circle with my investing thought. I started with all the Buffet, Graham books and didn't completely understand them, had to learn the hard way acting irrationally following price movements rather than value. Then went back and read them and fully understood everything.

I think this full circle thing happens a lot (in lots of disciples), as when people start something they always look for the easy way out or follow herd behavior. In this field that pushes you towards following general market sentiment and value companies using measures given to them which are mostly irrational or driven by price. The eager and untrained investor at this stage dosent even know this is irrational and probably won't doubt himself until he makes a loss. This is a critical point as it puts one at cross roads.

The typical paths are
1) Stop investing
2) Doubt your methods and seek change
3) Blame your failure on something or someone else.

As 1 and 3 are the easiest options these will typically be choosen, and in the long run will result in no gains from investing. I think option 3 is very common, as humans are very loss adverse. It's option 2 which gives that person the best chance in the long run, and with a little bit of reading they will realise the answer to this game is quite simple - it just takes a lot of hard work. Now at this point, one can be honest on whether the hard work is worth it, or whether they are smart enough to carry it out. If you don't do this, you enter a game where the odds are against you.

The smart will make money off you, thats how markets operate ('Mr Market' in the intelligent investor). Most of NZ love rugby, but most don't participate because they know they will get smashed. Investing is no different however many more are lured in, yet most get smashed.

Those Martin Hawes books are ideal for a newbie, they introduce the power of investing, and importantly explain all the asset classes and there risk/rewards. At first glance you don't think much of this, however understand 'the other option' is vital to understand your own discount rate/opportunity cost at which you need your chosen investment vehicle to exceed. I think this is the first thing one needs to understand before getting into valuation. You may get to this point and go no further, as I point out above you may work out that $800k savings at age 40 is ok - well you can do this risk free. So forget investing.

The intelligent investor is heavily built around this concept, or 'Margin of Safety' as Ben puts it. Without understanding it widely, you won't get full benefit from the intelligent investor.