New Investors: Study

***FOR anyone who is JUST a subscriber, I would recommend becoming a member and downloading the Wix app. This community is just getting started.


There are a lot of new investors this year, I get many DMs on stocks to own and where the next "big investment" is. As much as I enjoy throwing out stock ideas, there are a few key areas I want new investors to study and read about. I think new investors should start with the basics, read a few books before just jumping into rapid growing names not understanding the business model, where they get their revenue from, etc. A few books I would recommend that are simple and to the point:

  • Beating the Street, Peter Lynch

  • The Advantage, Patrick Lencioni

  • The Millionaire Next Door, Thomas J. Stanley and William D. Danko

These books have shaped the way I think, and analyze situations and investments.


Below are just a few terms I feel like investors should know and understand right off the bat..


Efficient Market Theory (Hypothesis):

This essentially states that the current share price at any given time, reflects all information available, and any alpha generation is impossible. How much of this do I believe? For the average investor, that has not been studying markets day in and day out, able to be quick & dynamic, read consistently and find new ideas.. My $.02 is to buy some indexes and once you get that nice nest egg, start to branch out by analyzing 1-2 stocks at a time. It is not an easy business. Majority of people are better off buying indexes/dollar cost average and then checking back 30 years later, just my opinion.


Risk-Adjusted Returns:

Everyone posts their "returns" for the year, but what are your risk-adjusted returns? The adjusted return takes into account the degree of risk you are taking, in order to achieve that return. "Risk" is defined as the risk-free investment, U.S. Treasuries. We can look to Sharpe ratios and Treynor ratios as well. At the end of the day, this shows us if the risk was worth the reward. Listed below is my 5-Year Risk-Adjusted Alpha.


Time-Weighted Returns:

Time Weighted Returns are my go-to, because it breaks up whether money was added or withdrawn from the fund. Now, I contribute to my Roth IRA every year, and max it out, the account is well into the triple digits now and thats as far as I will speak on that. My returns I post from Fidelity are Time Weighted to clarify for anyone who was asking.


Sunday Reading links:

https://www.wsj.com/articles/stocks-say-covid-recovery-is-nigh-bonds-tell-a-different-story-11606572182?mod=markets_lead_pos5

https://www.wsj.com/articles/the-stock-market-and-derivatives-are-sending-different-signals-11606473003?mod=markets_lead_pos2

https://www.wsj.com/articles/the-economy-is-still-vulnerable-trade-could-be-a-refuge-11606575720

https://www.barrons.com/articles/ford-can-be-fixed-why-its-stock-could-double-51606511745?mod=hp_LEADSUPP_1


I am reading Roblox S-1, I think this a huge opportunity in a sticky gaming ecosystem. Hoping to have write up as soon as possible..


Happy Sunday.




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