How I Made 2 Million Dollars In The Stock Market...
 

... by Nicholas Darva.

Anybody read it and tried it? It was written in the 1950's. I read about a chapter of it at the bookstore. Highly entertaining.

Got distracted, set it down and now need to go back and buy it.

- Adam.


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Re: How I Made 2 Million Dollars In The Stock Market...
 

Sorry... I think his name was actually "Darvas".

Re: ?
 

Adam -

Ya' mean "entertaining" in the campy sense - or do you mean "entertaining" and "informative"?

If it's the latter, how could something that old apply in today's market - what with the advent of technology changing the landscape and all.

-Anon

Old investment techniques - that work
 

Hi Anonymous,

> If it's the latter, how could something that
> old apply in today's market - what with the
> advent of technology changing the landscape
> and all.

I mentioned not long ago that for me, the way I "woke up" first to financial knowledge was through researching stocks.

When I decided I wanted to learn about stocks, the first thing I did was go to a bookstore and flip through a whole bunch of books on stocks. I came across this interesting text book. In it, they reported on some researchers who had tested a whole bunch of methods against each other, to see which worked the best. They tested technical analysis, the method of Benjamin Graham, and so on. (I think this research was done in the 1980s.)

Which did best? Of the techniques they picked, the one that consistently beat the market was the approach taught by Benjamin Graham. His approach to analyzing and investing in stocks was published in 1949 in his book, "The Intelligent Investor".

Now... Benjamin Graham was one of Warren Buffett's teachers and mentors. Warren Buffett's approach to stocks can be said to be modified Benjamin Graham approach. Warren Buffett is known as the most successful stock market investor in history. Coincidence? I think not.

(Benjamin Graham's approach is better known as "Value Investing.")

When it comes to stock market analysis, there are a lot of silly theories out there which simply don't seem to work. Not only that, many seem to even be irrational, more like looking at a horoscope than doing rational analysis. That's why such a truly rational approach (like the Graham/Buffett approach) can still have a competitive advantage.

I don't know anything about the book Adam's asking about. (I've seen it in the book stores but I've never read it.) However, just because a book is "old" doesn't mean you should necessarily dismiss it. Many fund managers today swear by Benjamin Graham's approach, and to my understanding they consistently make above-average returns for their clients.

If you want to know some "proven" ways to profitably invest in the stock market, I suggest looking at "Selecting Stocks that Perform" by Richard Koch. He reviews 10 different methods that generally beat the market. (Value investing is one of those methods.)

- Dien Rice

Re: Old investment techniques - that work
 

Another book that you may want to check out is a book called The Brainwashing of the American Investor by Steve Selengut. (Don't worry, the worst part of the book is the title.)

His story is very interesting. Unlike most other famous investors, Selengut made his money in the stock market by buying and selling shares of stock in the same way the average investor buys and sells shares, and not by managing a mutual fund or investment company. He made his fortune and retired from his job at about age 35, and then he started his current investment management company. You can learn more about him from his company's web site: www.sancoservices.com.

His approach involves trading, but not technical analysis (thankfully). He's very big on three fundamentals: buy quality, diversify, and generate income. He runs his portfolio much the same way as a business; and he considers his shares to be "inventory." By and large, his approach has far surpassed any other that I've tried over the years.

I found out about him because I was looking for an investment strategy that was neither based on trying to time the market nor involved holding shares for extensive periods of time. It has worked very well for me and I get no compensation for saying any of this.

Best,
Phil

It's about what you look for in a book...
 

> If it's the latter, how could something that
> old apply in today's market - what with the
> advent of technology changing the landscape
> and all.

It all depends on the nature of the old content.

If the content is specific to that time period, or is contingent on certain conditions that exist then but don't exist now, then perhaps it isn't that relevant.

If the content is more grounded in theory, then it's more likely to be useful today provided the theory is sound.

The concept of "discounted cash flows" to value things -- stocks, property, bonds, housing loans -- has been around for a long time, but it is just as valuable today as it was whenever it was first conceived because it is a sound theory.

As Dien has pointed out, people still refer to "The Intelligent Investor" by Benjamin Graham, along with books like "Security Analysis" (1940) by Benjamin Graham and David Dodd -- recently reprinted I believe.

In the end, it's all about theory. And by theory I don't mean some wishy-washy idea that holds no relevance in the real world. I'm talking about truly understanding the underlying forces and mechanics at play.

If you pick up an investment book with the idea that it will tell you what to do, chances are you won't get a lot from it. If you pick it up with the goal of seeking out and understanding the underlying reasoning behind what's happening, then you're more likely to get value from reading it by being able to learn the lessons and adapt them to present circumstances.

- Thomas.




PM Capital Limited

Thanks Dien - great info! (DNO)
 

Thanks for all the great advice guys...but....
 

...what I meant by things changing is - hasn't technology literally changed the dynamic of the way the market responds and how quickly?

Hey, I don't know anything about this stuff - so I'll defer to your opinions on this ...

Anon

Re: Thanks for all the great advice guys...but....
 

> ...what I meant by things changing is -
> hasn't technology literally changed the
> dynamic of the way the market responds and
> how quickly?

> Hey, I don't know anything about this stuff
> - so I'll defer to your opinions on this ...

> Anon

Has technology changed how the market works? Well, my opinion would be yes and no.

The main change, as far as I can tell, is that there is now an abundance of information sources, and information travels further. If you're sitting in Sydney it's much easier to look at companies around the globe than it was 10 or 20 years ago because news is typically available online straight away and reports can be downloaded.

With such advances I imagine the time between when an unexpected event happens and it is reflected in the stock price is now near instantaneous, or at the very least would be faster than in 1940.

There are many books that look at investment theory or investment methods that are longer-term in nature though, in which technological advances probably do not have a big impact.

The books mentioned by Graham, for example, deal with "value investing" and the concept of intrinsic value.

To put it simply, it's the concept that stocks have some innate value that differs from the stock price. "Price is what you pay, value is what you get," in other words.

A lot of writing of his then may go into how he believes you should determine the intrinsic value of a stock. That information, if you believe in it, is timeless and technological changes don't devalue the message.

- Thomas.

Re: Thom - makes sense - thanks! (DNO)
 

The stock market - an addictive roller-coaster ride...
 

I love the stock market - it's a pretty exciting place. It can really get addictive (though it's good to keep a cool head). Sometimes it can be a bit of a roller-coaster ride - but that's part of it's charm... Most of my personal investments go into stocks.

(By the way, business can be exciting too. I still get excited whenever sales are being made!)

Thanks Phil for the recommendation. I looked up "The Brainwashing of the American Investor" by Steve Selengut on Amazon.com and it looks very interesting! I'll try to get a copy.

- Dien Rice


Great ideas for extra streams of income...

Re: The stock market - an addictive roller-coaster ride...
 

Thanks, Dien. Also, I hope I didn't come off as pooh-poohing Buffet or Graham. I think there's a lot of merit in their methods and I'm glad to hear that you've had success with them (I know many people have). I just wanted to throw out another approach which has worked well for me.

Yes, the stock market can be exciting, but overall, I think it is a bit of a slower way to make money. If having your own business is like having a financial "car," then investing is like taking a financial "bus."

Ok, enough rambling today. ;)

Best to you,
--Phil

> I love the stock market - it's a pretty
> exciting place. It can really get addictive
> (though it's good to keep a cool head).
> Sometimes it can be a bit of a
> roller-coaster ride - but that's part of
> it's charm... Most of my personal
> investments go into stocks.

> (By the way, business can be exciting too. I
> still get excited whenever sales are being
> made!)

> Thanks Phil for the recommendation. I looked
> up "The Brainwashing of the American
> Investor" by Steve Selengut on
> Amazon.com and it looks very interesting!
> I'll try to get a copy.

> - Dien Rice

Re: The stock market - an addictive roller-coaster ride...
 

> Yes, the stock market can be exciting, but
> overall, I think it is a bit of a slower way
> to make money. If having your own business
> is like having a financial "car,"
> then investing is like taking a financial
> "bus."

I agree. I'd say running a business and investing in stocks are not really in the same category.

For the most part, running a business is an active pursuit, much like a job, that takes up much of your time. Investing in stocks, on the other hand, is more passive (unless you happen to be a day trader or do it for your job, of course).

So with that in mind I think you'd expect to earn more from running a business.

If you're a "value investor" or use "fundamental analysis" then running a business and investing in stocks are linked, because these people value stocks by trying to value the underlying business, rather than predicting where stock prices will be tomorrow.

And if you develop skills in valuing listed businesses, then these skills transfer well to running your business in terms of assessing the value of new projects and opportunities you can take on or leave.

Ok, I too will stop rambling now. :)

- Thomas.

Re: How I Made 2 Million Dollars In The Stock Market...
 

> Anybody read it and tried it? It was written
> in the 1950's. I read about a chapter of it
> at the bookstore. Highly entertaining.

I read it and would recommend it. It's one of the classics.

As you read it, you'll see that his theory of buying and protecting with moving stop losses (boxes) is simple, and that the theory and idea CAN still be used profitably today.

However, you'll also read his story of investing from Canadian mining stocks to the far reaches of the world investing by the newspaper numbers only. And you'll see that the probability of doing it the way he did with a few huge (lucky) kills is unlikely.

Interesting but unwise in the time of dot bombs.

But like I said, worthwhile for you smart sowpubbers. No Elliot waves, fibonacci numbers, double bottoms, or retracement figures. Find what works for you.

Being a poor college student with an addiction to fast cars, I have a lack of money at the time or I could give you a more first hand real trading account, Adam. Wish I could. Hopefully soon.

> Got distracted, set it down and now need to
> go back and buy it.

You will have to go back and buy a copy!

-Erik

Re: That is a timeless classic
 

> ... by Nicholas Darva.
Much of it is valid today. a must read to any savvy investor. (along with Lefever book)




My Book Club

Re: How I Made 2 Million Dollars In The Stock Market...
 

For an explanation of 'Darvas boxes,' a major component of his system, visit gerryco.com.

This person, Jim Gerry, has put together a graphical analysis of how to form your own boxes and a page which will create them for you using yahoo's historical data.

You will still need to peruse the book to get an understanding of where this 'boxes' concept originated.

All the best
-ed
> ... by Nicholas Darva.

> Anybody read it and tried it? It was written
> in the 1950's. I read about a chapter of it
> at the bookstore. Highly entertaining.

> Got distracted, set it down and now need to
> go back and buy it.

> - Adam.




gerryco.com