Beat The Market With The Best Investment Books

I do enjoy working with numbers, collecting numerical data and charting histories, very interesting stuff indeed. Thanks for the renewed interest. I've been tossing this around for some time now. This winter will make for a good educational period. :)K

@kathiem2 Trading skills can help you a lot even if you are investing for the long term. Having knowledge in the area of technical analysis can help you get outstanding results on your investments since you will be able to identify good entry points on the charts. Learning to valuate stocks and investments is very interesting if you like to work with numbers. This is discussed a lot in the book Security Analysis and in some of the Berkshire Hathaway Shareholder Letters. For people who do not want to get into stock valuation methods the best bet is to invest in a mutual fund or ETF that tracks the S&P 500 like IVV and SPY both which are low management fee ETFs. Some ETFs can be traded without paying commissions on many brokerage houses like TD Ameritrade. There are others that can be added to the mix like S&P 500 High Yield Index and maybe Russel Small Cap indexes. Bond ETFs can also help generate a good passive income but returns are lower.

Some people use the following formula to build their ETF portfolios: 100 minus Your Age is the percentage that goes into stocks and what is left goes to bonds. As the person ages his or her portfolio becomes more conservative and less risky.

Technical analysis can help you achieve better returns than most people that invest without looking at the charts. For example, investing in one of these ETFs every time the security hits support will be better in the near and long term than investing when securities are hitting resistance which is a common mistake many make. Many people decide to invest when they see prices rising instead of dollar cost averaging when securities are starting to bottom out or are hitting known support lines. So yes, trading knowledge can help you get better returns even when investing for the long term. Some value investing wisdom: the price you pay for an investment will determine the overall return. The higher the price the lower the return, the lower the price the higher the return.

The leap between investing and trading is exactly the area I need focus. I traded futures implementing a stop loss, couldn't imagine trading without one. As you said the protection of a stop loss is a thing of the past, it did give me comfort, I watched and graphed my charts getting out soon enough as I'm a stickler for detail. BUT the present economic times calls for a more passive income, as you mentioned, I like the way Warren Buffet thinks, a good rule of thumb.

Thanks for the helpful insights and it is great to get the recommendation of someone who's actually read, study and applied the principles.

@kathiem (Comment Continued...)
From these books my personal favorites are: The Intelligent Investor and Buffetology. They are excellent books that put a lot of things related to investing into perspective like the differences between trading and investing. Peter Lynch's books are also great reads filled with a lot of expert advice. I have read all these books except Security Analysis which I have yet to finish because it is more than 600 pages long and gets complicated from time to time.

I tend to stay away from high leveraged trading like Forex, and Futures. If the market gaps to the wrong side of the trade in Forex or Futures a stop loss can't save you and your capital can disappear in the blink of an eye, you can even end up owning money. It can be a rewarding business and I know many people make serious money trading but personally I am more inclined to the passive income side of things. Like Warren Buffet says: "The first goal is not to lose money". =)

@kathiem2 I do range rebound trading sometimes but I do it only when the market crashes and with shares I have been observing and researching beforehand. Most of the time I invest money using value investing principles and leave shares to run their course for some time until I think that the company is overvalued or an interesting opportunity presents itself, others I intend to keep and inherit to my family as long as the business remains profitable. This method is a lot less risky and can be a wonderful complementary project to an online business.

For example, using some of the income received from writing sites like this one to buy shares from companies that are very stable and that are very good businesses like Coca Cola, Wal-Mart, IBM and the like or just an index fund that tracks the S&P 500. You would be collecting dividends in addition to the money generated by your articles or better yet you can reinvest those dividends by enrolling in a DRIP program for some years. The end result is that as you continue to write more content and increase your earnings, your stocks are generating a passive income that keeps growing every year. Think of it as a double income stream that grows every year. It is a faster path to an early retirement as long as you ignore market fluctuations and avoid selling when the market crashes as it always does from time to time.

One of the advantages of investing some money every month is that your investments get dollar cost averaged which results in a lower cost basis. Over the years your capital can grow to huge amounts. You can also invest money in a tax advantaged account like a ROTH IRA. In the U.S. you can file your online writing earnings as self employment income so you can move money to your IRA and invest it. This method does not contribute to an early retirement but ensures a good one if you do not need the income that is generated by your shares for a long time. Balancing capital between bonds and stocks is also a good idea and is recommended by Graham and others to create a more stable and lower risk portfolio.

I was a commodities trader before the big recession. The economic landscape has changed drastically. I might pick up a few books, refresh my knowledge and consider getting back into the whole trading ventures game. Great article with very helpful and sound advice. :)K