(Part 3) Top products from r/investing

The answer, as usual is: it depends.

If you want to invest your money, then there's no better time than now. However, the implication is that when you invest that money you have to leave it sit long enough to do it's work.

At 19 and wanting to invest, you have time on your side. You need to be able to stomach volatility in the market and not get excited when your stocks rally for 30%, nor should you despair when the stocks plummet by 40%.

Traditionally speaking, the stock market averages between 6%~8% a year, which is much better than any savings account you're going to find. However, you shouldn't treat it as a savings account because volatility will almost certainly put you in a bad position to sell whenever you need the money most.

If you feel like you can stomach that volatility and turn a blind eye to both the rallies and collapses, then the stock market may certainly be for you. If you are NOT looking to place your money in good companies for a long period of time (10+ years), then it's my opinion that you are simply speculating... in which case you may as well go to the casino.

If at this point you have decided that you would like to invest in the stock market, you now need to figure out the degree of involvement you would like to dedicate.

If you're looking for a simple hands off investment, then you should just invest in an index fund such as VFINX, SWPPX, or QQQ.

Index funds closely track the performance of the market and charge minimal fees. They are pretty much totally hands off on your part, and are the Ronco of stock investing. Just set it and forget it, and enjoy your ride on the market.

A step above that are mutual funds. They actively try to beat indexes, but charge a fee to do so. There are mutual funds for any style of investing, and people tend to choose mutual funds that coincide with where they think success will lie. That means choosing foreign or domestic, stocks or bonds, and even individual sectors like technology, retail, energy, etc.

The world of mutual funds is vast, and provide an opportunity to beat the market, but it comes with a price. I'll leave the rest up to you to do your research.

Finally comes individual stock picking. Picking individual stocks is the highest risk, but also have the potential for the highest returns. Also, there are no fees except for the fee for purchasing your shares.

There is also a lot to this world, as I'm sure you know, but if this route interests you, then I would suggest you pick up a few books, beginning with The Intelligent Investor.

This book is, in my opinion, the best introduction out there to investing for long term wealth.

Finally, since you're so young and you seem to have an eye out for your personal finances, I absolutely recommend you read The Millionaire Next Door.

Good luck!

> They should be. Over time the drag it creates on your portfolio will be more apparent. The average investor is an idiot.

The drag on your portfolio returns as a result of decisions based solely on tax considerations will be greater than one where tax efficiency is just one of several criterion.

> Correct in principle but not completely true. The company itself can buy back shares in order to distribute profits back to shareholders in a more tax-efficient manner.

But then the timing on the buyback has to coincide with whether the shares are under, fair, or overvalued. If a company buys back its stock at an undervalued price, then yes, it is more tax efficient. If it does it at fair value, there is no net gain. And if buybacks are done when the stock is overvalued, shareholder wealth is destroyed. See: IBM, Pfizer. So not only do you have to wait for other shareholders to push the price up, but you have to trust that the company is buying back its shares at an advantegous price. That's a lot of conditionals, some of which will actually leave you worse off (buybacks at overvalued price) for the sake of a slightly lower tax rate.

> But dividend growth investing isn't a formula.

Point. But it is a simple strategy nonetheless.

> It's a rough set of guidelines. Picking stocks which will outperform an S&P 500 index seems like complete dumb luck aided by curve-fitting. All of these dividend growth bloggers never seem to include stocks which were great buys for the strategy 20 or 30 years ago but have since been delisted in a demonstration that the strategy can produce alpha.

There was recently a post either here or in /r/finance on an academic paper that showed over a 50 year period, dividend growers outperform high yielders, which in turn still out performed SP500. A growing dividend is typically a sign of strong financial health, for various reasons. Other works (i.e. here and here) show that dividend paying stocks do outperform the market.

Here is a random article I found about stock simulators.

How do you like to learn things? There are tons of books, podcasts and blogs about investing. Here are some popular ones or ones that I have read and used

• Books
  
  • The intelligent Investor
    
  • A Random Walk Down Wall Street
    
  • Your Money Your Life
    
  • The Richest Man in Babylon
    
  • I Will Teach You to be Rich
    
    
• Blogs
  
  • Stock Series
    
  • Mr Money Mustache
    
  • Mad FIentist
    
  • dozens of others, Google is your friend
    
    
• Podcasts
  
  • Money Tree Podcast -- pretty poor production quality but good general stuff.
    
  • There are tons of others, Google it.
    
    Warren Buffett famously/supposedly read every book in the financial section at the library by age 12--I think the important thing to take from that is you are still young and have tons of free time and aside from starting to invest as soon as you can (you can usually start as soon as you have earned income) you should be investing in yourself...getting good grades, figuring out what you want to do after high school, trying out businesses, learning marketable skills (e.g., coding, good writing skills, good interpersonal skills, good organizational skills, etc).
    
    Good Luck!

I see that Intelligent Investor by Graham has already been posted but that's certainly a good one. However it can be a bit dry for most readers and if you would prefer something a bit fresher I would read Deep Value by Toby Carlisle. He discusses and critiques Graham's teachings along with the strategies of other notable value investors such as Buffet, Icahn, Greenblatt and many others all in a more modern tone. It's been the bible for my own value investing strategies.

Other books to look into are:

• Dhandho Investor by Monish Pabrai (lots of simple strategies and examples for small risk - big payoff investments)
  
• Education of a Value Investor by Guy Spier (good for understanding the discipline and mental state of a good value investor)
  
• Michael Lewis books such as Big Short and Flash Boys (These are less for learning investing and more for generating your own interest in finance with some fantastic writing. It's also good for learning what the reality of the markets and Wall Street are.)

The reason why the Fama-French 3 factor and Carhart 4 factor are so prevalent is because people generally agree on these factors. Without going into history too much, the number of factors have grown over time from CAPM (1 factor) to Fama French (3 factor), to Carhart (4 factor). There are even more, but at some point, it starts looking like a "factor zoo".

After the success of Fama-French, and quantitative investment firms that use the approach like DFA and AQR, almost every finance program teaches this type of approach. This has influenced a lot of finance students, who themselves started to look for new factors. Some of the new studies try to find further nuances in existing factors, while others go off all new tangents, a fun one that comes to mind is a paper that tries to create a factor out of moon cycles.

We have so many factors now that academics are writing meta-papers describing the problem of there being too many factors to choose from.

If you want a nice summary of some pretty widely accepted factors, I would recommend a very accessible book called Your Complete Guide to Factor-Based Investing

No offense taken, although I am not sure communication went across on this one. I don't expect a return on commodities. They're volatile, but 50 years down the road, like most currencies, I'd expect them to retain some value. How much is uncertain, and it's not going to be the part of my portfolio that I expect to grow steadily.

Diversifying with indexes sounds like a good idea to compensate for the fact that I am best suited to evaluate a tech company's capabilities, and not so much other domains.

I'm just disappointed that you would tell me to stop researching and instead leaving me with the simplest of options when I want to put in the effort to learn the underlying concepts and mechanics of the markets and start doing sensible investments. I learnt my current profession by myself, reading books and creating my own projects, and it just happens that I'm now dabbling in finance, and if I happen to start liking it in the end as much as I like it now, it will surely end up more than just a side learning experiment.

If I'm not ready to invest, as you seem to mean, I won't do it right away. But some day, I will do it.\

NB: I'm currently reading this: http://www.amazon.com/Investments-Zvi-Bodie/dp/0073530700/ref=sr_1_1?s=books&ie=UTF8&qid=1398779011&sr=1-1&keywords=investments+9th

Should you know other academical (i.e. not opinion pieces at this time of my learning, cause everyone's got one) books that may help me, I'd be happy to know about them.

Stock and bonds are a good way for the middle class to "keep up" with the wealthy. To catch up, you most likely have to provide a good or service in a new and unique way and build a successful company out of it. The vast majority of millionaires earned a lot of their income from a private business. They some of them invested in securities.

There is a good book on this by Thomas Stanley, a professor that researches wealth, called The Millionaire Next Door. Here is the NYT displaying the first chapter for free. It's a good read, it will tell you a great deal about how people in the United States get and stay wealthy.

I'll give you some books to use as a starting point. You want to start out as generally as possible and then follow what interests you. Someone can give you a list of top books, but if they don't fascinate you enough to really dig in deep and reflect on them to sate your own curiosity, you'll just be scratching the surface. I don't care what it is, you can make money anywhere in the markets. So starting generally will help you find out what direction to go.

So, that said, these are the ones I'd recommend starting out with
https://www.amazon.com/Market-Wizards-Updated-Interviews-Traders/dp/1118273052
https://www.amazon.com/Reminiscences-Stock-Operator-Edwin-Lef%C3%A8vre/dp/0471770884
https://www.amazon.com/gp/product/1400063515/
https://www.amazon.com/gp/product/0684840073/
https://www.amazon.com/gp/product/0809045990/

Some less conventional ones I really liked
https://www.amazon.com/gp/product/1578645018/
https://www.amazon.com/gp/product/1422121038/

Chaos theory describes some properties that pop up again and again in markets. I really liked this one.
https://www.amazon.com/Deep-Simplicity-Bringing-Order-Complexity/dp/140006256X

I also highly recommend finding a few good books on behavioral investing, just to get acquainted with the common mistakes investors make (how you can avoid them, and how you can exploit them). I don't have a lot here because the books I read are outdated and you can find better. So one example:
https://www.amazon.com/gp/product/0470067373/

But in general reading about psychology will help you understand the world better, and that's always a good thing.
https://www.amazon.com/Flow-Psychology-Experience-Perennial-Classics/dp/0061339202

Investing without prior knowledge of the industry is inherently risky. It is important that you are not placing "bets" on these companies, but rather you are speculating. Speculating requires research and in finance provides a premium for taking on extra risk. Gamblers take on risk without the potential for extra reward. I have a solid (but in no way am I an expert) knowledge of the energy industry, so here are my tips:

1. Avoid oil sands companies (COS, SU) like the plague. There are a large amount of oil sands companies located in Canada, but the production and refining is not profitable in the current market. I believe the break-even point for oil sands is approximately $50 per barrel. West Texas Intermediate (WTI) crude is currently floating around $35, with low expectations for the future. As well as this, producing synthetic crude is notoriously bad for the environment if you are concerned with socially responsible investing.
   
   
2. Invest $1,000 in a combination of PWT, IMO, HSE, CVE, ECA, and CNQ. Do your research and figure out what companies have competitive advantages in their operations and decide why you believe they will be successful in the future. Most of the above are integrated O&G companies, so you will need to understand the upstream, midstream, and downstream segments. I am confident that a majority of O&G companies can be bought for cheap in the current market and will provide growth in the long run.
   
   
3. To hedge the risk from your exposure to solely the oil industry, invest $1,000 in a diversified ETF. See this list for examples. Again, you will have to do your research here to figure out what you want to be exposed to and what kind of returns you want.
   
   I understand that you want to experiment with investing, but this strategy will give you the opportunity to learn about investing while reducing your exposure to industry risk. Your single picks may lose money, but as long as you learn where you went wrong you are provided a net benefit. As short-term to medium-term investing requires finance savvy, I would recommend always holding over a long-term.
   
   Also, if you are interested in learning about the oil industry, I would recommend reading Oil 101, The Prize, and The Frackers.
   
   Good luck!

I'm in my early 30's and been asking myself similar questions with my portfolio. I've been asking myself:

1. What are factor returns (e.g. extra performance from size, value, etc.) likely to be in the future?
   
2. How much factor exposure can I get from my ETFs?
   
3. Will the extra return justify the extra expenses over a market-cap weighted fund?
   
   I've been checking out Portfolio Visualizer; factor regressions let you see how much factor exposure your funds provide, while factor statistics provides their historical returns. It's likely that future factor returns will be less than their historical average, but based on their persistence through a hundred years of stock market history factors are still likely to be present in the future. Ben Felix estimates that future factor returns will be 50% of the historical average, which is the starting point that I've used to estimate future factor returns.
   
   Berkin & Swedroe's "Your Complete Guide to Factor-Based Investing" is also a tremendous resource for information.
   
   If you've already checked these resources out, great! If not, maybe they can help you make your decision.
   
   To answer your questions:
   
   
4. I'd go with the first portfolio since it has statistically significant factor exposure to size and value factors. Based on historical factor returns, this makes it more likely to outperform over a 20-30 year investing timeline.
   
5. Assuming that future factor returns will be 50% of the historical average, the expense ratios for the all-value portfolio are reasonable. If you find yourself doubting whether the expenses are worth it, you could go for a middle ground and make a portfolio of cheap US factor funds plus a total stock market international fund. For example, you could go with IUSV (US large cap value ETF) and SLYV (US small-cap value ETF) and then VTIAX for international exposure. That would give you less factor exposure but also a lower price.

Do you have access to free printing by any chance? perhaps you can get an electronic copy and just print it?

I'm guessing that you're young, based on your talk about allowance. I don't recommend Intelligent Investor, as there might be some prerequisites that you are missing. The book is pretty accounting heavy terms, and you should have at least a basic knowledge of corporate accounting before reading it. Save this one for when you can look at all 3 financial statements and know what ever item on those statements mean.

You might this one to be more of an easier read: "The Little Book That Beats The Market". This one tries to get you to think about companies as businesses instead of tickers with a fluctuating price. You won't need any knowledge of corporate accounting for this one.
http://www.amazon.com/gp/offer-listing/0470624159/ref=sr_1_1_olp?ie=UTF8&qid=1394658640&sr=8-1&keywords=the+little+book+that+beats+the+market&condition=used

If you want to learn some corporate accounting, I recommend this one as it an easy read and catered to beginners. Also, it's $4 on Amazon so your allowance can go a long way.
http://www.amazon.com/gp/offer-listing/1416573186/ref=sr_1_2_olp?ie=UTF8&qid=1394658943&sr=8-2&keywords=interpretation+of+financial+statements&condition=used

I don't recommend Random Walk On Wall Street for your level. EMF is basically something that says the average investor cannot do better than the average investor (duh), in the grand scheme.

I'm not sure how /r/investing feels about this particular book, but being that I was new to how the more complex aspects of managing your money work, it helped me get an idea of what what trajectory I should follow and the steps to take.

I Will Teach You To Be Rich by Ramit Sethi was an easy, funny, and overall great read. It's aimed at people who know very little about managing their finances and/or investing.

If you want to get an idea for the format of the book, he does a lot of videos online about the same content in the book. You can find them here. They're all very easy to consume and understand and the book follows this same format for the most part.

As mentioned in this book:
http://www.amazon.com/Warren-Buffett-Interpretation-Financial-Statements/dp/1416573186/ref=sr_1_16?s=books&ie=UTF8&qid=1410454357&sr=1-16&keywords=investing+warren+buffett

These are some of the key indicators to look at.(You could obviously look at more) I look at these also and it really helps to paint a true picture of a company WHEN you use them and compare these to the same indicators of a competing company in the same space.(i.e Coca Cola vs Pepsi)

Income Statement

• 1. Gross Profit Margin
     
• 2. Operating Profit Margin
     
• 3. Net Profit Margin
     
• 4. Return On Equity
     
• 5. Retained Earnings
     
• 6. Diluted Earnings Per Share
     
• 7. P/E
     
     Balance Sheet Analysis
     
     
• 1. Cash & Short Term Investments
     
• 2. Long Term Debt
     
• 3. Current Liabilities
     
• 4. Working Capital
     
• 5. Working Capital Per Share
     
• 6. Current Ratio
     
• 7. Debt to Equity Ratio
     
• 8. Cash - Current Liabilities(do they have enough Cash to cover their current liabilities. A good company usually does)
     
     You also would want to look and see if they provide a dividend and have a history of increasing their dividends.
     
     When you compare these numbers from one company vs another - over say a 5-10 yr period - it really gives you a good analysis and the ability to see which company is doing better than the other.
     

Here's some advice you didn't ask for.

I retired early at age 54 in 2006. Had a military pension, life-long medical care, nice retirement accounts, owned a home, and so on.

Two things upset my calculus.

First, I didn't realize how boring it could be. And I'm a guy who's lived by the adage, "An educated man never gets bored waiting for a train." That's me. I had lists of things to do, books to read, hobbies to start, etc. But fundamentally it was boring, and after a couple of years I resumed working as a consultant, and now I'm back in graduate school.

Second, along came the 2008 crash. It did not have much of an effect on us financially, but that was just because we were luckily completely out of the market. It did, however, have a significant psychological effect. It made me realize that in the 30 or so years I hope to continue on, there's no telling what can happen. I mean, who ever dreamed the housing market would collapse? (A few people actually did, apparently.)

So I just toss it out there: don't burn any bridges. And by that I mean, don't get so completely divorced from work that you'll have a hard time getting back in the work force should you decide to do so. I was very, very lucky in that the stars aligned just right for my consulting gig, which led to other good things. But again, that was not planned for.

Anyway, good luck in whatever you decide to do!

Firstly, you are right to be paranoid. DO NOT enlist the services of a financial advisor. Their performance almost never justifies their fees in the long run. Also beware of high expense ratio mutual funds. Below are two good options. One requires some study (but perhaps less than you may fear). The second is very easy and hands-off.

Option 1: Sit in cash and learn about investing, then invest intelligently. *see details below

Option 2: If you don't want to take a bit of time to learn how to invest, open a brokerage account (Fidelity and Vanguard are both good). Put 80% of the money in a low expense-ratio S&P ETF (such as IVV or SPY) and 20% in a low expense-ratio short-term bond ETF (BSV). The S&P ETF will simply perform as the overall US economy does over the long term. The bond ETF acts as a sort of 'ballast' for the equities (S&P / stock market) portion of your investment. As opposed to long-term bond funds/ETFs, short-term bonds are less interest-rate sensitive. This will do better than most mutual funds long term. https://www.youtube.com/watch?v=mOS4wAsBnvM

With either option, you should be contributing to an IRA to the maximum allowed amount every year. Whether you use the money yourself or give it away, you will pay less taxes.

*Resources for learning to invest wisely (the much better option!):

https://www.ruleoneinvesting.com/podcast/

https://www.amazon.com/Essays-Warren-Buffett-Lessons-Corporate/dp/1611637589/ref=pd_sim_14_4?_encoding=UTF8&pd_rd_i=1611637589&pd_rd_r=49H5XWEBE322MGN21T9A&pd_rd_w=4BiWA&pd_rd_wg=h8HSo&psc=1&refRID=49H5XWEBE322MGN21T9A

https://www.amazon.com/Dhandho-Investor-Low-Risk-Method-Returns/dp/047004389X/ref=sr_1_1?ie=UTF8&qid=1524885124&sr=8-1&keywords=the+dhandho+investor

https://www.amazon.com/Intelligent-Investor-Definitive-Investing-Essentials/dp/0060555661/ref=sr_1_1?ie=UTF8&qid=1524885145&sr=8-1&keywords=the+intelligent+investor+by+benjamin+graham

If you're looking for somewhat of a comprehensive textbook, this has quite a bit of information you may be looking for. http://www.amazon.com/gp/aw/d/0073530700/ref=mp_s_a_1_1?qid=1415848966&sr=8-1&pi=SY200_QL40

As other users suggested, you may want to look into basic accounting / financial reporting as well. It puts some of the ratios into perspective and it's pretty essential for someone interested in finance. If you can get your hands on some CFA material, that could help as well.

hey I read that! Matt Simmons ended up being dead wrong about peak oil, but otherwise I enjoyed the book. But The Prize by Daniel Yergin is the king of oil books - it is brilliant.

http://www.amazon.com/The-Prize-Quest-Money-Power/dp/1439110123/ref=pd_bxgy_14_img_2?ie=UTF8&refRID=04AERX02B4996WQXBJA0****

"Common Stocks and Uncommon profits" is a great book on what to buy, when to buy, and when to sell. It's one of few investment books that's recommended by Warren Buffet. One of it's main features is a chapter with Fisher's 13 point "Scuttlebutt" method for investing in companies that are poised for future growth. His son Kenneth Fisher has recently stepped down (retiring) as CEO of his Investment firm.
http://www.amazon.com/Common-Stocks-Uncommon-Profits-Writings/dp/0471445509

There's a great book called the Triumph of the Optimists and there's an extremely curtailed summary of it available in pdf form online.

I'd recommend the full book

here's the pdf
http://www.econ.uniurb.it/materiale/2781_triumph_of_the_optimists.pdf

edit: here's the book
http://www.amazon.com/Triumph-Optimists-Global-Investment-Returns/dp/0691091943/

You are all wrong... :-)

The best book by far is "unconventional success" by David Swensen.

https://www.amazon.com/Unconventional-Success-Fundamental-Approach-Investment/dp/0743228383

Have you ever read Penman's Financial Statement Analysis and Security Valuation? He advocates for reformulating the balance sheet into operating and financial components, so that one can get a better sense of the company's operations. The traditional presentation of the balance sheet obfuscates this, but I think it's a really good way to uncover just how well (or poorly), a company is being run.

When you separate Apple's operating and financial components this way, the company actually has negative net operating assets; effectively, Apples runs a float that shareholders can invest elsewhere at whatever WACC they think they want.

Anyway, I have no dog in this fight, but Apple's operational might is formidable, and the massive returns they can earn on very little investment is kind of nuts.

My main point is that Penman is cool if you haven't checked him out.

Is there an affordable financial database I can use to run tests/models on? Been reading "What works on Wall Street" and would love to try and run my own queries against some kind of database to test out possible strategies.

But from what I've been able to find online, databases like Compustat are pretty crazy expensive. Am I getting this all wrong, or is there cheaper data out there that individual investors can use?

Only as much as seatbelts and airbags encourage bad driving.

Seatbelts won’t stop your car from crashing but they will help you, the squishy human. Similarly having some % of your investments in bonds and CDs won’t stop the stock market from crashing, but will help human beings make it through without selling their stocks. Especially if they lose their job, get hit with a surprise expense, or they or a family member gets really sick.

You can try to take the emotion out of humans, or you can accept them as they are and give them appropriate advice. Check out the book by the economist who won the novel price last year, Richard Thaler, Misbehaving: The Making of Behavioral Economics for more about the differences between humans and rational robots.

I read the following, in roughly this order:

• A whole lot of Investing for Beginners, lots of bite-sized articles that explain a huge breadth of topics in very approachable but detailed terms for beginners.
  
• The Intelligent Investor (the latest revision, annotated by Jason Zweig, who did an incredible job bringing each chapter into the modern day)
  
• Watch Prof. Aswath Damodaran's Corporate Finance lectures
  
• Watch Prof. Aswath Damodaran's Valuation lectures
  
• The Millionaire Next Door, by Drs. Thomas Stanley and William Danko
  
• The Most Important Thing Illuminated, by Howard Marks
  
• The Berkshire Hathaway Letters to Shareholders

I liked that book, but it is somekind similar to TII. What I remembred about that book is that a stock tend to be undervalued if the bonds pays the same rate, since the stock tend to have fewer investors who would invest assuming risk, they will prefer the bonds, but they overlook the stock potential growth. Off course, this is waaay oversimplified. And our market have P/E throught the roof now. Too much volability and speculation IMO.

I'm keeping my IPCA+ till the end of election and wait to make some good investment then. Maybe I'll hold some WEG stocks, since they are pioneering bus electrification in the country, they may get a spurge in the near future.

edit:grammar

Meus dois centavos,
Sucesso pra ti!

Before you directly jump to valuations you should be able to read the financial statements. How to Read a Financial Report is a great book to get you started.


Instead of reading the boring financial statements of all companies you need to focus on only those companies which are fundamentally good. That is where the service which we have created comes in (shameless plug) Fundamental Analysis and Stock Valuation simplified

Its in beta right now

Amazon

It's a book about behavioral economics. I just got past a point where he argues against efficient market and price-is-right by looking at closed-end funds vs the sum of the positions in them. Long story short, efficient price-is-right would dictate the prices be the same, but you can often get a closed-end fund that is cheaper than the sum of its parts. Moreover over time the delta tends to decrease, so someone could reasonably point at a deeply-discounted closed end fund and expect it to rise closer to parity with the sum of its parts.

An ETF that does this for you would be a great way for me with no time to get in on that action.

Are you serious? 00-01, 01-02, 02-03, 03-04, 04-05, 05-06, 06-07, 08-09, 09-10, 10-11, 11-12.

You're looking at very close points in time. Are you just trolling here, or is there a point to this ramble?

If you're looking for more information, please read through What Works On Wall Street, 4th edition. It's a good read for quantitative investing approaches.

I would definitely read Howard Marks.

Might be easiest in book form. Amazon.

I think this book would be invaluable

https://www.amazon.com/Will-Teach-You-Be-Rich/dp/0761147489/ref=sr_1_1?s=books&ie=UTF8&qid=1485217701&sr=1-1&keywords=i+will+teach+you+to+be+rich

And the guys web site

http://www.iwillteachyoutoberich.com

And this

https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds

And this

https://www.khanacademy.org/economics-finance-domain/core-finance

If you master this information at your age you will have compiled the basics that many people twice your age have no working knowledge of. I buy a copy of I will teach you to be rich for every 18 year old kid any of my friends have.

Some light reading to get you started on your way to be a quant:

Stochastic Calculus for Finance: The Binomial Asset Pricing Model

Stochastic Calculus for Finance: Continuous-Time Models

Stochastic Implied Volatility: A Factor-Based Model

Methods of Mathematical Finance (Stochastic Modelling and Applied Probability)

Pairs Trading: Quantitative Methods and Analysis

Alpha Trading: Profitable Strategies That Remove Directional Risk

The Encyclopedia of Trading Strategies

Evidence-Based Technical Analysis

Highly recommend reading Poor Charlie’s Almanack by Charles Munger. The book has amazing investing and business/life advice that’s worth more than $5000 especially to someone who is 19.


Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger, Expanded Third Edition https://www.amazon.com/dp/1578645018/ref=cm_sw_r_cp_api_i_KqsKDbEA638G9

I think that is more Peter Lynch's domain. I always thought that GARP was the stupidest acronym I ever heard I refused to read anything about it. Irrational, but whatever. Fisher might be more GAFP - growth at a fair price.

I am not sure why I am linking this, I am sure you have read it.

https://www.amazon.com/Common-Stocks-Uncommon-Profits-Writings/dp/0471445509/ref=la_B000AR9D8I_1_1?s=books&ie=UTF8&qid=1481431936&sr=1-1

Munger is more Fisher than Graham as well.

start here: https://www.amazon.com/Quantitative-Value-Web-Site-Practitioners/dp/1118328078. one of the better books on value investing IMO

A good follow up book would be quantitative value http://www.amazon.com/gp/aw/d/1118328078

I will just suggest you to see an inflation graphic from the 70s. Back then, the dollar was the reserve currency of the world...


There is an awesome book called "This time is different" it goes on showing several times in history when people thought that debt/easy money was ok and backfired resulting in inflation, bank runs, or sovereign defaults.

But who knows, maybe this time really is different and the US can keep printing money to pay debt without any consequences.

The first place to start is with The Prize (https://www.amazon.com/Prize-Epic-Quest-Money-Power/dp/1439110123) to get a sense of historical context.

In the long-term it seems like rebalancing leads to higher returns.
I can't find the precise info I mentioned in the book through Amazon reader, so it may have been a different book. Have a look here: http://www.amazon.com/dp/0743228383/ref=rdr_ext_sb_ti_sims_2#reader_0743228383

https://www.amazon.com/gp/aw/d/0078025311/ref=mp_s_a_1_2?ie=UTF8&qid=1481139916&sr=8-2&pi=SY200_QL40&keywords=Stephen+penman&dpPl=1&dpID=51qgSXra6oL&ref=plSrch



Good reading.

https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640

Good book. This Time Is Different: 8 Centuries of Financial Folly

I'm currently reading the Misbehaving by Richard Thaler. It's a very engaging read. He has a nice writing style.
https://www.amazon.com/Misbehaving-Behavioral-Economics-Richard-Thaler/dp/039335279X#

(I just want to preface that I'm not a pro at this)

I think there might be a slight misunderstanding as to what a quant does, what algo developer does vs. what you seem to be interested in. Quants usually try to price derivatives or develop risk models. Although some algo promammers can be quants so there is some overlap, algos usually refer to High frequency trading which is very difficult and requires a lot of capital and knowledge that really isn't found in books (traditionally algo trading didn't refer to HFT but to trade execution such as vwap, iceburg stuff etc). You seem to be more interested in whats known as systematic trading.

Here's some resources you should check out:

Woodsheddar

Evidence based technical analysis

Bootstrap testing

I have some more info somewhere about pairs trading/cointegration, and statistical methods.

Thank me later:
https://www.amazon.com/Triumph-Optimists-Global-Investment-Returns/dp/0691091943

Have you read this book? It talks a lot about the various errors that cause backtesting to produce better results than reality. Worth a look.

> understanding mortgage backed securities

The Big Short

Less that $20 on Amazon right now (not an affiliate link, I'm not trying to hawk anything)

https://www.amazon.com/Unconventional-Success-Fundamental-Approach-Investment/dp/0743228383

Barbarians at the Gate

The Box

And obviously The Big Short

There's a book out there called How to Read a Financial Report.

I think the majority of people in this sub need to read this book

Great Books

• Peter Lynch: One Up On Wall Street
  
• Joel Greenblatt: The Little Book That Still Beats The Market
  
• James Montier: The Little Book of Behavioural Investing
  
• Richard Oldfield: Simple But Not Easy
  
• Phil Fisher: Common Stocks and UnCommon Profits
  
  Video Tutorials
  
  
• Khan Academy
  
• Yale University / Robert Shiller
  
• the rather basic ones at our site

This is a complex subject. Here are a couple of books, though you might not need the 2nd one (I'm not sure what's involved in an education in Economics).

Valuation

How to Read a Financial Report

PDF Warning - The Investment Checklist

https://www.amazon.com/Triumph-Optimists-Global-Investment-Returns/dp/0691091943

This book has pretty graphs of 100 years of various investment returns that drives the point home.

Put a little bit of money each month in a low cost index fund and never sell. The second part is very hard because it requires psychological discipline. The market will go down by 40% or more in a single year a few times in our life time. Invest some money in a gym membership and work out everyday to build discipline through stress. Pick up a combat sport to experience the difficulties of being rational under stress. Go backpacking alone so you can experience being rational under solitude. These things will always make you live longer, so you can have more time to spend money rather than dying early.

Basically returns on risky assets grows faster than wedges but the rich never just get richer. This is because it is very difficult, if not impossible to maintain composure during a market crash. People always sell out at the bottom and buy at the top. Passive investing is very difficult. Example, education enrollment increase during recession while fund outflows increase. People always do the wrong thing at the wrong time. This is why wages is a much better source of income for most people.