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)