Charlie Munger Summary

Charlie Munger SummaryThe Complete Investor

You want to be the best? Then learn from the best. Because, after all, “learning from the success and failure of others is the fastest way to get smarter and wiser without a lot of pain.”

No wonder the guy who said that is one of the best: Mr. Charlie Munger, Warren Buffett’s personal partner. And, Tren Griffin’s book is all about him and his worldview!

Who Should Read “Charlie Munger”? And Why?

If we presented you with a summary of a biography of Michael Jordan, then obviously it would have been a book we’d recommend to future basketball players and current sports buffs.

Consequently, a book about Charlie Munger is, most obviously, a book about wannabe investors. But, it may be also interesting to students of investments strategies. As well as to those who are curious to learn how one can earn so much money by simply investing.

About Tren Griffin

Tren GriffinTren Griffin is a senior director at Microsoft. Before that, he was a partner at Eagle River, a private equity firm which invests in tech and telecommunications startups.

Griffin is and the author of few well-received books, such as “The Global Negotiator”, a book dedicated on building strong international business relationships, and “A Dozen Lessons for Entrepreneurs.”

He also writes for https://25iq.com/.

“Charlie Munger Summary”

Charlie Munger is the vice president of Berkshire Hathaway – which, if it doesn’t ring a bell straight away, is Warren Buffutt’s multibillion conglomerate.

In other words:  Charlie Munger has a lot of money. To be more exact: he’s one of the 2,000 or so living billionaires, with a current net worth of almost 2 billion dollars!

Now, that’s a lot!

And if you want to learn the secrets behind his success – this is the book for you!

Unassumingly titled “Charlie Munger,” Tren Griffin’s 200-page analysis of Charlie Munger investment strategies boils down to something painfully simple: if you aren’t investing into something you know, your story of success is nothing more but a story of luck!

So, invest in the things you know best!

Now, how can you do that?

First of all – by reading. And reading a lot! Both Munger and his partner Warren Buffett spend about four fifths of each of their working days reading almost anything they find interesting. Just like possibly every great person you hear about, they weren’t born geniuses. They became such – by absorbing information, by fact-checking it, and by thirsting for some more all the time!

But, what interests you more is probably not how they got to be so smart, but how they got to be so rich.

Interestingly enough, the answer is, if not the same, pretty much related. Because Munger and Buffett were reading so that they can know where to invest. And because, when it comes to investing, they are intelligent investors.

Namely, firm believers in security analyses and value investing.

As Charlie Munger explains, the logic is fairly simple. You invest only in what you know. That’s why he has three baskets of investment opportunities: In, Out, and Too Tough.

The first one is for the opportunities they know enough about to invest in; the second about those they know nothing about; the third – about those that seem good on the face of it but are yet too tough for them.

That’s what we call reality-check. And what you lack if you want fast stocks and fast money. A lesson from the best: there’s no such thing.

What there is are four rather simple ideas Munger shares with Warren Buffett.

First of all, you must treat a share in a business as if you’d treat the whole business. Buy it – only if you’d buy and run the company. Value it as much as you’d value the company itself.

Secondly, buy shares as you buy chocolate: on discount. This will give you a margin of safety, i.e., you probably won’t lose money, even if you don’t win it in the end.

Thirdly, always stay on the safe side. Or, in other words, disregard the behavior of that bipolar creature, Mr. Market. Don’t try to beat him. And the best way to do this is by not challenging him at all!

Which brings us to the final advice: if Mr. Market is irrational, you don’t need to be. So, stay as cold as ice. Choose investment opportunities with your head – not with your emotions!

And in order to do this, cultivate traits such as patients and courage. “Don’t just sit there: do something!” is a completely wrong philosophy when it comes to investing. The point is, quite contrary, to site and wait.

And even go boldly against the herd mentality – you know, where no man has ever gone before!

Key Lessons from “Charlie Munger”

1.      Meet Berkshire Hathaway: It’s a Giant!
2.      Investing Is Not a Mysterious Art: It’s as Simple as 1-2-3… and 4
3.      Be an Intelligent Investor: Read as Much as You Can!

Meet Berkshire Hathaway: It’s a Giant!

Do you know that Berkshire Hathaway was, in fact, a textile manufacturing company? And that Warren Buffett bought it when its business was declining, so that he can fire a guy who undercut the initial offer to buy his shares? In fact, buying the company was Buffett’s worst trade!

Sixty years later, the company is the third largest public company in the world! It owns GEICO, the fast food restaurant chain “Dairy Queen,” “Fruit of the Loom,” “NetJets”… – you name it! And it has shares in “American Express,” “Coca-Cola” and “Apple”!

The guys who did that: Warren Buffett and Charlie Munger.

Investing Is Not a Mysterious Art: It’s as Simple as 1-2-3… and 4

Both Buffett and Munger are considered sages of investing. However, they claim that they owe everything they have to worldly wisdom and a fairly simple investment strategy: Benjamin Graham’s value investing.

It’s based on a simple premise: only buy what you know. And it’s built around four principles.

First of all, there’s no difference between buying a share and buying a whole company. Secondly, when you buy – buy at a discount. Thirdly, stay on the safe side. And finally, be rational.

Or, in other words, don’t buy Berkshire Hathaway to fire a guy! Warren Buffett says that you would have earned 200 million dollars more otherwise!

Be an Intelligent Investor: Read as Much as You Can!

Benjamin Graham’s most famous book is called “The Intelligent Investor.” And Charlie Munger has taken this quite literally. To him, reading is everything: he reads about 80 percent of the day. That’s exactly how he knows where to invest. And even more: how to differentiate between herd mentality and a Giffen good.

Oh, you don’t know what that is?

Well, educate yourself a bit!

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“Charlie Munger” Quotes

I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart. Click To Tweet Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley? Click To Tweet Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day. Click To Tweet If you want to get rich, you’ll need a few decent ideas where you really know what you’re doing. Then you’ve got to have the courage to stick with them and take the ups and downs. Not very complicated, and it’s very old-fashioned. Click To Tweet If something is too hard, we move on to something else. What could be simpler than that? Click To Tweet

Our Critical Review

“Charlie Munger is, arguably, the world’s best investor. His ‘worldly wisdom’―a latticework of understanding separate disciplines―is a powerful way to achieve superior investment results. Without it, success in the market―or anywhere else―is a short-lived fluke.”

You know who wrote that?

Robert G. Hagstrom, the author of one of the best books on Charlie Munger’s partner, Warren Buffet.

So, a book which unifies and neatly structures Charlie Munger’s investment philosophy should be a delight for all those interested in finance, right?

It is. Of course it is.

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The Total Money Makeover Summary

The Total Money Makeover SummaryA Proven Plan for Finance Fitness

Do you sometimes feel that, no matter what you do, your financial situation never improves? Well, Dave Ramsey has the solution for you. A simple plan of seven steps he likes to refer to as “The Total Money Makeover.”

About Dave Ramsey

Dave RamseyDave Ramsey is an American author and businessman. He is the host of the econd most listened-to radio show in history, “The Dave Ramsey Show.”

He is the author of numerous bestsellers, such as “EntreLeadership,” “Financial Peace,” “More Than Enough,” and “Smart Money Smart Kids.”

See more at https://www.daveramsey.com/

“The Total Money Makeover Summary”

If you have a decent job, a car and a house, you’d probably think twice before casting a second look at a book like this.

Dave Ramsey says: do it at your own peril.

Because financial difficulties sometimes come step by step, sometimes suddenly. Either way – it’s better if you’re prepared for them in advance.

The absolute best way to do this is to avoid debt at all costs – and at all times! Ramsey says that about three fourths of the Forbes 400 companies believe that staying debt-free is the best way to becoming wealthy.

And if they can do it – why shouldn’t you?

After all, increasing wealth is nothing more than earning more than you spend constantly.

However, let’s just say, for the sake of the argument, that this advice arrives a bit late for you. Is there some way to turn your financial situation around?

Of course there is! Dave Ramsey calls it “The Total Money Makeover” Plan. And it’s as short as seven steps!

Step #1: Begin an emergency fund.

Ramsey is pretty illustrative: “Start with a little fund to catch the little things before beginning to dump the debt. It is like drinking a light protein shake to fortify your body so you can work out, which enables you to lose weight.” If your household income is greater than, say, $20,000, then your emergency fund – which is for emergencies only! – should be $1,000. (Aim for twice as little if you earn less than $20,000.)

Step #2: Start the debt snowball.

First, list all of your debts. And then, with a “gazelle focus,” start checking them one by one. But, don’t start with the big ones! The idea is to build a momentum by paying them one by one, with the smallest one first.

Step #3: Finish the emergency fund.

In about a year and a half or two, you should succeed in moving from step 3 to step 4. By now, excepting the mortgage, you should be free from debts, and with at least $1,000 in your emergency fund. Focus on improving that number. Don’t buy a house until you finish this step.

Step #4: Invest 15% of your income in mutual funds.

The emergency fund has to be liquid (i.e. you must be able to use it at all times). And it is only at step #4 that you are allowed to invest some of your money for retirement. And some means 15% of your income. The answer to “where?” is “mutual funds.” That’s what the intelligent investor would do, after all.

Step #5: Save for college.

As far as Dave Ramsey is concerned, if you should go into debt to get your kid to a private college, you can’t justify that decision with quality. It’d be better to get him or her into a state school. If you don’t want to do that – then save! But, apply for scholarships – even if you have the money.

Step #6: Pay off your home mortgage.

Finally! The biggest debt of all! Two things concerning paying it off. First of all, don’t take a longer mortgage. Because, if the law doesn’t force you, you won’t make the extra effort to pay the mortgage earlier. And secondly, when you do it – you’ll be among only 2 percent of all Americans.

Congratulations – it’s time for the cherry on the top!

Step #7: Build wealth!

Not much to say there, right? Except maybe a clarification when you’ll know that the time for Step #7 has come. Allow us to quote Ramsey: “When your money makes more than you do, you are officially wealthy.”

Key Lessons from “The Total Money Makeover”

1.      You Are Not Financially Secure
2.      If You Haven’t Gone So Far – Don’t Go into Debt
3.      Become Wealthy in Seven Steps

You Are Not Financially Secure

Whatever you’re thinking, unless you’re making millions, you’re probably not financially secure.

Why?

Because many things happen on a daily basis. In fact, “Money Magazine” has estimated that over a period of ten years, about 80 percent of Americans will experience a major problem. It can be a car accident, unexpected pregnancy, or the loss of a job.

Be prepared!

If You Haven’t Gone So Far – Don’t Go into Debt

The best way to prepare yourself for the worst – is to never allow yourself to go into debt. Yes – that means credit card debt too.

In fact, according to the American Bankruptcy Institute, almost 70 percent of the people who file for bankruptcy do that due to credit card debt problems.

Become Wealthy in Seven Steps

No matter how horrible your financial situation is, there are seven simple steps to go from rags to riches. You just need some discipline and a determination to follow them through.

The seven steps are: begin a $1000 emergency fund; start paying off your debts from the smallest to the largest; build upon the emergency fund; start investing 15% of your income in mutual funds; save for college; pay off your mortgage; and, finally, become a millionaire!

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“The Total Money Makeover” Quotes

We buy things we don't need with money we don't have to impress people we don't like. Click To Tweet For your own good, for the good of your family and your future, grow a backbone. When something is wrong, stand up and say it is wrong, and don't back down. Click To Tweet Change is painful. Few people have the courage to seek out change. Most people won’t change until the pain of where they are exceeds the pain of change. Click To Tweet You must walk to the beat of a different drummer. The same beat that the wealthy hear. If the beat sounds normal, evacuate the dance floor immediately! The goal is to not be normal, because as my radio listeners know, normal is broke. Click To Tweet I tell everyone never to take more than a fifteen-year fixed-rate loan, and never have a payment of over 25 percent of your take-home pay. That is the most you should ever borrow. Click To Tweet

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The Millionaire Next Door Summary

The Millionaire Next Door PDFThe Surprising Secrets of America’s Wealthy

You want to someday be a wealthy person who’ll live in an affluent neighborhood and drive a Rolls Royce?

Nice dream you have there! But how can you be sure that you’re doing the right things to turn it into reality?

Well, join Thomas J. Stanley and William D. Danko to meet “The Millionaire Next Door” and learn a trick or two.

Who Should Read “The Millionaire Next Door”? And Why?

Judging by its title, “The Millionaire Next Door” may sound like one more in the long line of think-and-grow-rich one-advice-fits-all books. And if you add to this the fact that, actually, it is just one more book in a series of related similar studies by Stanley – which extends the “Affluent” series (“Marketing to the Affluent,” “Selling to the Affluent,” “Networking with the Affluent”) and includes “The Millionaire Mind” and “Millionaire Women Next Door” – you can be excused for thinking right off the bat that you may be better off without ever opening this book.

However, you’ll be wrong!

Thomas J. Stanley is a serious financial theorist, and “The Millionaire Next Door” is everything the think-and-grow-rich books aren’t. in fact, at one point, the authors even explicitly state that they are offended by authors who say something along the lines” Just buy my educational/study-at-home kit, and your new business venture will be a success.”

Because, in Stanley’s and Danko’s opinion, such things just don’t exist. And “The Millionaire Next Door” is more of a sociological study than a get-rich manual. Using real-life data and examples, it analyzes the habits of the wealthy and wheedles out their common attributes, practices, and ways of life. So, the book, in essence, should be much more interesting to social scientists who study affluent people than the regular Joe, right?

Well yes – and no.

Because if it’s its wealth of real-life cases which makes “The Millionaire Next Door” a social scientist’s wet dream, it’s the conclusions which give the book its popular appeal. After all, if you investigate the habits of a thousand millionaires and see what they have in common, you can always reverse engineer the equation.

But, “The Millionaire Next Door” will not be attractive merely to people who want to adopt the lifestyles of the rich and famous to become part of them. It’s also about the rich and famous. So, if you are one of them, this book may feel like a great helping hand in your struggle to hold on to your money and your status.

About Thomas J. Stanley and William D. Danko

Thomas J. StanleyThomas J. Stanley was an American business theorist and author of seven bestselling books.

Among them: “The Millionaire Mind” and “The Millionaire Next Door.” He died in an accident caused by a drunk driver in 2015.

Find out more at www.thomasjstanley.com.

William D. DankoWilliam D. Danko is the co-author of “The Millionaire Next Door” and a Professor of Marketing at the School of Business at the State University of New York in Albany.

He has also co-written “Richer Than A Millionaire” with Richard Van Ness.

“The Millionaire Next Door PDF Summary”

You may think that becoming a millionaire is something rather impossible. However, in “The Millionaire Next Door,” Thomas J. Stanley and William D. Danko reveal that it’s not even difficult.

You just need to follow a certain set of rules.

Start with separating the facts from the fiction. Ousting the fantasy of the luxury-loving Gatsby who spends thousands of dollars in a single day is step one of the “crack the code to wealth” mission.

Simply put, the majority of millionaires are actually modest.

That’s how they became rich in the first place, in fact. For every 100 millionaires who are reckless, there are at least 120 who are careful with their budgets!

Saving for retirement and avoiding to spend money on things you don’t actually need is such a commonsense strategy because it has worked for many.

In fact, self-made millionaires are not in it for the money in itself; they just want to be financially independent.

And financial independence doesn’t mean driving a Rolls Royce. It means being able to maintain your lifestyle even after you retire.

Think of it this way: even if you manage to earn a million dollars, buying a Rolls Royce will cost you about a third of that. And, as Shaquille O’Neal would tell you, buying three cars in a day may even result in a call from the bank!

Millionaires, however, are usually much more clever.

First of all, they don’t live in a status neighborhood and would never buy a Rolls Royce to be the center of attention. Instead, they usually spend their money investing.

Moreover, investing the Warren Buffet way. In other words: only in spheres, they understand.

One mistake millionaires can sometimes make is spoiling their children.

This results in some devastating statistics: almost half of the wealthy Americans send their adult children at least $15,000 yearly!

The problem, however, runs much deeper. These adults don’t know how to take care of themselves, because, as children, they were catered to and mollycoddled.

So, they usually become the irresponsible millionaires. The self-made ones – know full well that money doesn’t grow on trees. And that, as they say, “money saved is money earned.”

the millionaire next door summary

And, in general, all of them share these seven traits, or as the authors of this book say, “common denominators.” No point in beating around the bush anymore: here they are – and in the words of the authors.

So, what do the wealthy do to become wealthy?

1. They live well below their means.

2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.

3. They believe that financial independence is more important than displaying social status.

4. Their parents did not provide economic outpatient care.

5. Their adult children are economically self-sufficient.

6. They are proficient in targeting market opportunities.

7. They choose the right occupation.

Key Lessons from “The Millionaire Next Door”

1.      If You Want to Get Rich – Just Spend Less Than You Earn
2.      Status Items Are for Showoffs
3.      Calculate if You’re a UAW, AAW or PAW

If You Want to Get Rich – Just Spend Less Than You Earn

There’s a formula for success, and it’s fairly simple: “a penny saved is a penny earned.” Or, in other words: if you spend less money than you earn, your net worth will increase over time.

And if you plan it well enough, by the time you reach your retirement age – you may be a millionaire even on an average income.

Status Items Are for Showoffs

Buying status items is a big “no-no” for most self-made millionaires. After all, if you’re spending your money on something you don’t need, how are you going to earn the money for the things you need it?

In “The Millionaire Next Door,” Thomas J. Stanley and William D. Danko reveal that many unassuming millionaires are probably living around you. They just don’t show it – because they have found smarter ways to use their money than on designer clothes and expensive cars.

In fact, half of the millionaires surveyed by Stanley and Danko spent less than $400 on their last suit, $235 for the last wristwatch they purchased, and no more than $140 on the last pair of shoes. Few of them were gourmets eating caviars and drinking high-quality Bordeaux wine. As a matter of fact, when Mr. Bud, one of a group of examined millionaires, was offered the latter one, he replied quite wittily that he merely drink “scotch and two kinds of beer – free and Budweiser!”

Calculate if You’re a UAW, AAW or PAW

There’s a simple formula to calculate if you’re on the right path to becoming a millionaire. Multiply your age by your annual salary and divide the result by ten.

If you’ve saved less than the amount you’re getting, you’re an Under Accumulator of Wealth (UAW); if you’ve saved about the same, you’re an average accumulator of wealth; finally, if you’ve saved twice as much, you’re a prodigious accumulator of wealth (PAW).

So, in practice, if during the last 12 months, you’ve earned $30,000 and you’re about 50 years old, by now, you should have saved about $150,000 to be an AAW.

If you’ve saved more than that – congratulations! You’re doing quite a good job!

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“The Millionaire Next Door” Quotes

Whatever your income, always live below your means. Click To Tweet Good health, longevity, happiness, a loving family, self-reliance, fine friends… if you have five, you’re a rich man… Click To Tweet Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline. Click To Tweet Many people who live in expensive homes and drive luxury cars do not actually have much wealth… Many people who have a great deal of wealth do not even live in upscale neighborhoods. Click To Tweet If you’re not yet wealthy but want to be someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income. Click To Tweet

Our Critical Review

“The Millionaire Next Door” fully lives up to its appealing subtitle: “The Surprising Secrets of America’s Wealthy.” Because the moral of the book is indeed quite astonishing and even counter-intuitive. Namely, that the wealthiest around you may be the ones least suspected to be wealthy. Those who do seem affluent and prosperous, on the other hand, are, quite probably, only temporarily wealthy.

So, another paradigm shifter! Who would have seen this coming? Apparently, it doesn’t mean that one is not wealthy if, instead of a Rolls Royce, he/she drives a “Toyota”; in fact, it may be the other way around: not driving a Rolls Royce may be the common-sense indicator that a person is on his/her path to becoming a millionaire!

However, as Nassim Nicholas Taleb explains in the eighth chapter of “Fooled by Randomness,” Stanley and Danko somewhat miss the main point. “I see,” Taleb writes, “no special heroism in accumulating money, particularly if, in addition, the person is foolish enough to not even try to derive any tangible benefit from the wealth (aside from the pleasure of regularly counting the beans).”

In other words – what’s the point in earning money if you don’t use them to indulge in your favorite habits? Money should not be an end in itself but means to achieve some other end. And what if that end is a Rolls Royce? Well, then, don’t you think you’d be happier as a poor driver of a Rolls Royce, than a rich one driving a “Toyota”?

Yes, we think so too.

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A Wealth of Common Sense Summary

A Wealth of Common Sense SummaryWhy Simplicity Trumps Complexity in Any Investment Plan

Let’s face it: as far as most people are concerned, the simpler a plan is, the less credible it seems. However, most of the algorithms of life are fairly simple. And, according to Ben Carlson, the same holds true for investing.

Hence, if you want to be the next Warren Buffett, what you need is not some complex strategy, but “A Wealth of Common Sense.”

About Ben Carlson

Ben CarlsonBen Carlson is a chartered financial analyst (CFA) and the Director of Institutional Asset Management at Ritholtz Wealth Management.

He has written two books so far, the second of which is “Organizational Alpha.”

You can read more from him at http://awealthofcommonsense.com/.

“A Wealth of Common Sense Summary”

For some reason, we tend to give complex ideas unwarranted credibility.

Why?

Because, simply put, if it’s simple, then the obvious question is “why everybody doesn’t do it?” Just think of Monty Python’s “Meaning of Life.” When at the end of the film, they finally reveal what it is, we learn that it’s nothing very special.

But, how could it be? So many books and millions and millions of pages have been written to uncover it. So, how can it be so simple?

Well, why shouldn’t it be? Who says that it has to be complex?

The same applies to investing too.

You may have heard of many complex strategies on how to get rich (usually, in fairly short period of time), but the simple fact is that most of them are either for already rich people or work from time to time because of luck.

Because, every investor is different and, consequently, every investing strategy should be different as well.

Consequently, don’t expect Ben Carlson to put yours down in writing. In fact, he states clearly that any investment strategy should begin with a personality test – and he can’t make that one for you. However, expect him to give you few common-sense advices which will be applicable in any case.

First of all – the three don’ts.

And the most important among them: never – ever – enter the world of investing with an expectation to get rich in a relatively short time. The simple fact is – that almost never happens. There’s no such formula, no shortcut to instant success.

Don’t believe anyone who tells you anything differently.

Secondly, don’t be overconfident! We can’t predict the future, and the same is true for the markets. The intelligent investor knows this and tries to find a safe strategy which will make him as independent from market fluctuations as possible.

And the third “don’t”: don’t follow the herd. If everybody does something – it’s probably the wrong thing. Because, then, everybody would have been rich, wouldn’t it?

Now, that we summed up the three don’ts of common sense investing, let’s have a look at the three dos.

First of all – be emotionally intelligent. High IQ has nothing to do with being a good investor. Managing your feelings does.

Which brings us to our second point: stay calm and invest. The reason why some people can perform well under pressure is that, unlike you, they are still rational even then.

Finally, be wary. Or, as Warren Buffett would say – don’t invest what you don’t understand. No matter how tempting it looks like: see don’t #3 for that.

Key Lessons from “A Wealth of Common Sense”

1.      Want to Invest? Take a Personality Test!
2.      The Three Don’ts of Investing
3.      The Three Dos of Investing

Want to Invest? Take a Personality Test!

If you want to invest, you shouldn’t forget two general truths. First of all, every investor is a story in itself. And secondly and consequently, that there can’t be one applicable-in-all-situations investment strategy.

So, before embarking on your investment adventure, a good common-sense idea may be to take a personality test. So, you can find out whether you’re a trend follower, risk taker, short-term trader or what-not?

Then, develop your strategy accordingly.

The Three Don’ts of Investing

However, no matter which strategy you choose, there are three common-sense don’ts of investing you must take into consideration.

First of all, don’t expect to get rich in a short period of time. Because, that will almost certainly not happen. Secondly, don’t be overconfident. Because, nobody knows what will happen on the market. And, finally, never follow the majority. They are probably wrong.

The Three Dos of Investing

Of course, there are three common-sense dos as well. And these are even simpler and as important to follow.

Firstly, be emotionally intelligent and try to manage your feelings well. Secondly, stay calm and don’t stress out when the stocks (inevitably) fail. Finally, be wary: don’t invest in anything you don’t understand.

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“A Wealth of Common Sense” Quotes

It’s amazing how easy it is to do worse by trying to do better. Click To Tweet Investing doesn’t have to be about beating others or beating the market. It’s about not beating yourself. Click To Tweet One you start to take the market’s movements personally you’ve already lost. Click To Tweet Only invest in active strategies or factor tilts if you are prepared to do worse for the possibility of doing better. Click To Tweet Diversification is the best way to admit you have no idea what’s going to happen in the future. Click To Tweet

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Get a Financial Life Summary

Get a Financial Life Summary

Personal Finance in your Twenties and Thirties

It is never too early for saving. It is time you read our Get a Financial Life summary and start investing for the future.

About Beth Kobliner

Beth Kobliner

Beth Kobliner is a writer, a contributor to the New York Times, and a former a staff writer at Money magazine

“Get a Financial Life Summary”

If you have so far tried to save money many times but without much success, you share similarities with most people.

However, living like that should not be an option.

There is no better time “to get your financial life in order” than now.

And to do that, you can look at the following seven steps which will help you in your quest.

First, get health insurance.

If you do not have it, a single health problem can take you to the verge of bankruptcy. If your company does not offer it, buy it yourself.

Second, reduce your debts.

The interest rates on some of the loans are far greater then what you would get if you invested the money. So, put all spare cash into reducing your debts.

You can do this by either paying it off entirely, if you have big savings, or you can refinance it, by transferring money from high-interest debts to ones with lower interest rates.

Third, start saving for retirement early.

As we already said, the best time to start saving is now, while you are still young.

Next, reduce your banking costs, such as ATM and checking account fees. Some banks do not charge them if you have a minimum balance.

Furthermore, save up for emergencies, before you think about investing.

A good rule of thumb is saving enough money that could cover your expenses for the minimum of three months, in case you experience a setback.

After you do this, it is time to become an investor.

To reduce your risk consider joining a mutual fund. Just make sure it is one with low expenses and that you embark on this journey wisely.

Lastly, reduce your taxes, by calculating if you can save money by moving from standard deduction to itemizing your deductions.

Key Lessons from “Get a Financial Life”

1.      “The Debt Rule”
2.      “The Housing Rule”
3.      “The Savings Rule”

“The Debt Rule”

Your total incurred debt should never exceed 20% of your annual salary. Of course, student loans and mortgage payments should not be calculated as part of it.

“The Housing Rule”

Never spend more than a third of your monthly salary on housing. If you live in a big or an expensive city, you may consider moving in with roommates to succeed obeying this rule.

“The Savings Rule”

Savings are a serious matter, and you should treat them as such. They are just as serious as your bills.

Save at least 10% of your pay each month. Some months, when you feel you can handle it, put away 15%.

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“Get a Financial Life” Quotes

Many people in my generation - those now in their 20s and 30s - do not expect to live as well as their parents. Click To Tweet Be forewarned that you’re likely to come across people who’ll tell you you’re too young to lock up your money in a retirement savings plan. Ignore them. Click To Tweet Saving isn’t easy for most people, and putting aside a fixed amount each month seems like an impossible task. Click To Tweet One reasonable approach might be to put about half your holdings into stocks, one-third into bonds and the rest in money market funds. Click To Tweet The good news is that there has never been a better time to get your financial life in order. Click To Tweet

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Currency Wars Summary

Currency Wars Summary

The Making of the Next Global Crisis

The world is consistently in the midst of “Currency Wars.” Take a look at the three wars that we have gone through.

About James Rickards

James Rickards

James Rickards is the senior manager of the New York City-based merchant bank – Tangent Capital Partners and is an advisor of government agencies on global finance.

“Currency Wars Summary”

Currency conflicts occur on an assortment of fronts, yet they, for the most part, they start inside a domestic economy.

A country is enduring high joblessness, low development and decreased demand can choose to devaluate its currency to support its exports and drive demand.

Yet, in an undeniably interconnected global economy, such moves would wind up harming that nation’s trading partners and welcoming countering like “tariffs, embargoes and other barriers to free trade.”

By no doubt, currency wars can turn ugly.

Nowadays, the US faces various threats from “rival nations and transnational actors such as jihadists,” which include biological, chemical and Internet-based attack systems, as well as financial weapons.

The risk of fiscal assaults provoked the Pentagon to build up a war game to mimic a global financial war and to investigate how such battle could undermine the US.

The players included Wall Street experts, international strategy specialists, Department of Defense staff members and military personnel.

The gathering met in late 2009 of in a secluded research center close Washington, DC, to plot the primary financial war game in US history.

The members partitioned into contending groups and scripted locale-specific objectives and political moves.

Utilizing notes and blueprints, players scrimmaged over gold, currency and cash supply.

They created different scenarios.

This game yielded a pivotal disclosure: Even in case of an effective assault on the dollar, the US claims enough gold to survive a financial war.

Key Lessons from “Currency Wars”

1.      Currency War I (1921-1936)
2.      Currency War II (1967-1987)
3.      Currency War III (2010 –)

Currency War I (1921-1936)

Toward the end of World War I, combatant countries in Europe confronted enormous debts.

World countries soon looked for a return to the gold standard they relinquished amid the war.

Strategy makers concurred that the US dollar would keep up a settled value relationship to gold, and that nation could hold the American currency as an intermediary for gold reserves.

This did not take care of the issues: Cycles of currency devaluations went from nation to nation.

Currency War II (1967-1987)

The second global currency war began in 1967 as the US government budget wavered under the twofold weight of the Great Society antipoverty program, a domestic social agenda, and the Vietnam War.

Inflation took off, and the estimation of the dollar started to slide relative to gold.

Currency War III (2010 –)

The 2007 worldwide fiscal crisis started the cutting edge period’s third currency war, which began in 2010 and nobody knows where and how it will come to an end.

Apparently, this war’s stakes are substantially higher since the geographic outcomes go past particular trade issues to the core of the global fiscal framework.

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“Currency Wars” Quotes

Today we are engaged in a new currency war, and another crisis of confidence in the dollar is on its way. Click To Tweet The fact that a currency collapse has not happened in a generation just implies that the next crash is overdue. Click To Tweet When the dollar collapses, the dollar-denominated markets will collapse, too. Panic will quickly spread throughout the world. Click To Tweet If the dollar falls, America’s national security falls with it. Click To Tweet Gold is not a commodity. Gold is not an investment. Gold is money par excellence. Click To Tweet

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The Disciplined Trader Summary

The Disciplined Trader SummaryDeveloping Winning Attitudes

Human history carved a new mentality that is driven by a hunger for either food, success, love or motivation.

The Disciplined Trader” gives a few thoughts on improving your trading skills and reducing the chances of a potential loss.

About Mark Douglas

Mark DouglasMark Douglas is a trade expert, who gained a lot of experience while traveling the world.

“The Disciplined Trader Summary”

Trade is an ancient way of satisfying the needs by exchanging the goods you possess for either money or other pleasures. The world instigates a new mindset that is no longer based on routine and superficial beliefs. Successful trading requires more than just know-how and communication skills.

The capitalist regime and democratic rule stimulate free markets that influence the world economy. Acting in a specific way is no longer regulated, the banks and international funding organizations insist on enforcing a fair competition. Trading has been a part of the modern civilization and continued to support the prosperity.  

Traders are independent masters of their own little world. As a trader, you must be self-sufficient and a smooth talker who is not afraid of making mistakes.

The market price varies according to the external reality. The ability to make compromise distinguishes prominent from mediocre traders. In truth, the market price is defined by neither traders nor banks. It’s merely an outcome of the supply-demand ratio. To confront monopoly, we must allow the market to regulate the price and consequently improve the economy.

Aversiveness to risk is only natural because the threat of potential losses is overwhelming in every trade. For instance, gamblers can much more easily calculate their chances of winning than traders. Their knowledge about each transaction or exchange is often based on intuition.  

After the transaction is being completed, traders unlike others, analyze their “shrewdness” and the outcome deriving from it. Losers hope for a quick turn of events to compensate for the loses. Winners are always on the lookout for new possibilities in the open market.

  • Traders must not be driven by emotions because in such regards the decision-making ability is affected.
  • Trading blindness occurs when a merchant refuses to acknowledge bad decision-making and accept loses.
  • Don’t rely on past strategies, whatever worked yesterday may not be suitable tomorrow.
  • The market has nothing to do with right and wrong – The market is a force, that’s it.
  • Your beliefs and thinking patterns create your reality. Don’t allow superficial occurrences to destroy your chances of winning.
  • Memories are a subtle form of energy that can affect anyone’s behavior.

Key Lessons from “The Disciplined Trader

1.      The mind affects your decision-making
2.      Memories can be dangerous
3.      No one is responsible for neither your failures nor successes

The mind affects your decision-making

It’s evident that we live in one world, shaped in billions of ways. Our minds create a new sense of reality that forms an inner environment and develops a mental shield against any potential threats.

Don’t forget that you are not supposed to become a slave, but the master of the house.

Memories can be dangerous

Often, we come to a conclusion based on some previous events. It’s not advisable to rely too much on what has happened; it’s best to use current assets to control the situation.

Beware of all hidden dangers that may generate severe financial loses.

No one is responsible for neither your failures nor successes

It is you who is accountable for designed a strategy under which you will operate on the market.

Make sure you invest in expanding your knowledge, but never neglect your intuition when it comes to making the final decision.

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“The Disciplined Trader” Quotes

Much of what we experience of the outside environment is shaped from the inside. Click To Tweet Any new knowledge comes from those who question the status quo and have a willingness to go beyond it and a willingness to accept the next answer. Click To Tweet Once you know what traders believe about the future, it’s not that difficult to anticipate what they are likely to do next, under certain circumstances and conditions. Click To Tweet Losing all my possessions was a complete life-altering experience, an experience that taught me a lot about the nature of fear and the debilitating effects it has on a person’s ability to trade effectively. Click To Tweet Furthermore, I discovered that my mental framework was structured to avoid losses at all costs and in my desperate attempts to do so, I actually created them. Click To Tweet

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The Way to Wealth Summary

The Way to Wealth Summary

“The Way to Wealth” is a short essay by Benjamin Franklin, first published in 1758, and later translated into many languages and reprinted in many countries.

About Benjamin Franklin

Benjamin FranklinBenjamin Franklin, one of the founding fathers of the US, was an author, a statesman, a revolutionary, author, a scientist, a firefighter, and chess master. He is a signatory of the Declaration of Independence and the US constitution.

“The Way to Wealth Summary”

“The Way to Wealth” discusses many different topics, such as idleness, procrastination, and trust.

For Franklin, time is golden. It is your most valuable possession.

Whatever time is given to you-you can never get back. So, spend it wisely.

Every day should be a step toward your goals. Do not waste your time by idly thinking about your dreams, since “he who lives upon hope will die to fast.”

Franklin advises people to rise early, to work hard. Activity, according to him, keeps you well and healthy.

Related to the topic of time is the problem with procrastination.

We all procrastinate, but it is essential that you tackle all your important tasks now, because you cannot foresee the future and the obstacles it may bring.

You have to understand that “one today is worth two tomorrows,” and live according to this wisdom.

Wasting your time worrying about your problems does nothing for you – only makes your issues grow.

Instead of just thinking about it, work hard, and everything will get resolved easier.

When you are not working, try to wake the feeling of shame within you, so it can always alarm you when you start procrastinating.

Procrastination is much more common when it comes to challenging tasks.

However, if you wait longer, it is not going to resolve itself. The more you slack off, the more work piles up.

So, tend to your task every day, and in the end, you will see excellent results.

In every job you do, you get to choose whether you are the mule or the plowman.

If you are a mule, someone guides you, if you are a plowman, you have to plow every single day.

Do what is yours to be done, and pay attention to your workers and what they do.

Show your authority and guide them in the right direction. Do not give unconditional trust, since trusting too much can destroy you.

So, keep your eye on the job and make sure you do not neglect any of its aspects.

Key Lessons from “The Way to Wealth”

1.      Work Hard and Use Time Wisely
2.      Early to Rise
3.      Attaining Leisure Time

Work Hard and Use Time Wisely

Spend time wisely. Make sure that every day is a step toward your goals.

Early to Rise

Wake up early and tackle your most important tasks. Stop procrastinating and spending your days idly.

Attaining Leisure Time

If you are a diligent worker, you will be able to finish your tasks efficiently and attain some leisure time. But even in your rest-period, do something useful.

Lazy people will always wish for this time and never truly get it.

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“The Way to Wealth” Quotes

An investment in knowledge always pays the best interest. Click To Tweet The people heard it, and approved the doctrine, and immediately practiced the contrary. Click To Tweet Vessels large may venture more, But little boats should keep near shore. Click To Tweet If dost thou love life, then Do not squander time, for that is the stuff life is made of, as Poor Richard says. Click To Tweet Beware of little expenses; A small leak will sink a great ship, as Poor Richard says; and again, Who dainties love, shall beggars prove; and moreover, Fools make feasts, and wise men eat them. Click To Tweet

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Hedge Fund of Funds Investing Summary

Hedge Fund of Funds Investing SummaryAn Investor’s Guide

As its subtitle states, “Hedge Fund of Fund Investing” is a guidebook for investors interested in this fairly new type of investing. And it does a pretty good job both as an introduction and as a manual for specialists even ten years after its publication.

Illustrated with neat graphs and charts, “Hedge Fund of Fund Investing” explains what FOFs are, what are the risks and benefits of using them, and how you can use them to get richer – particularly if you are already rich!

About Joseph G. Nicholas

Joseph G. NicholasJoseph G. Nicholas is both the founder and the chairman of HFR Group, LLC. The conglomerate encompasses Hedge Fund Research, one of the world’s leading providers of hedge fund data, HFR Europe, an advisory service, and HFR Asset Management, a FOF management company. Nicholas has authored two other books, “Investing in Hedge Funds” and “Market-Neutral Investing.”

“Hedge Fund of Funds Investing Summary”

If you are interested in investing – or merely want an alternative pension plan – you’re probably already aware of what a hedge fund is. However, there’s a big chance that you know a little – or nothing at all – about hedge fund of funds.

And that’s where Joseph G. Nicholas’ “Hedge Fund of Funds Investing” comes in handy. When it was published in 2004, it was the first of its kind. And, a decade later, it’s still one of the best.

But, to pick up where we left off.

In a way, a hedge fund of fund (FOF) is to a hedge fund the same a hedge fund is to a regular investment fund. It is an investment strategy which attempts to circumvent the obstacles an investor may face while trying to find the best hedge fund. (After all, there are way too many now, aren’t they?)

How?

By simply pooling multiple hedge funds under the same hat. So, double the investments, double the risks, double the adventure. And, of course – double the possible returns.

But, also – let’s not forget – double the necessary expertise!

So, what do you need to start right away?

Well, you need to have some money. In fact, a lot of it! You see, FOF investments can easily reach as high as $10 million per investor! So, basically, “Hedge Fund of Funds Investing” is only for a selected amount of people.

However, that selected amount of people knows its fair share of investing strategies, from the 101s to some of the best-kept secrets. So, why would they risk it with a hedge FOF?

Well, as usual, they won’t. The key to a working FOF is finding a good FOF manager. Because that’s the only way, you can be sure that it won’t be another money-down-the-drain story!

And good FOF manager constantly analyzes the downsides and the upsides of the all of the hedge funds available before combining the right ones. It seems that they are doing quite a good job because so far, hedge FOFs have shown a great success.

And, yes, that means returns even in a state of crisis!

There’s a caveat though. FOFs are a lot less transparent than hedge funds. In other words, once you give your money to the FOF manager, you don’t know where he or she will invest it.

That may be a bit scary, but – hey, let’s face it: you don’t win big without taking a risk or two.

Or ten million, for that matter.

Key Lessons from “Hedge Fund of Funds Investing”

1.      What Is Hedge Fund of Funds Investing… in Few Words
2.      Hedge Fund of Funds Are Less Transparent – But More Successful
3.      You Have to Have Money – to Make More Money

What Is Hedge Fund of Funds Investing… in Few Words

To quote Joseph G. Nicholas a “fund of funds is a pooled vehicle for investing in multiple hedge funds.” So, it’s a multi-manager investment strategy, aiming to provide investors with a ready solution to all their hedge fund headaches. To put it in even plainer words – if you’re having a hard time choosing the right hedge fund, combine them! And that what hedge FOF is!

Hedge Fund of Funds Are Less Transparent – But More Successful

Now, it it’s pretty difficult to navigate through the sea of hedge funds, why should it be any easier to combine them?

Well, it’s not!

That’s why you’ll need a good FOF manager. But, you’ll also need to trust him, because, once you’ll give him your money, you won’t have a direct relationship with the hedge funds they’re invested in. However, don’t worry: it seems that, with the right manager, hedge FOFs are not a risky investment!

You Have to Have Money – to Make More Money

Of course, the prerequisite is money. And, as we said above, a lot of money. Because, the minimum investment is, say, about $100,000 – but it can go up to $10 million! You don’t need an average with such high amounts, but Nicholas gives you one: about $1 million. We guess the lesson is: if you have that much, you’ll be able to make a lot more with a hedge FOF.

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Quotes

The goal of this book is to provide investors who are new to the hedge fund industry with a practical guide to understanding and evaluating funds of funds. Click To Tweet The fund of funds is a pooled vehicle for investing in multiple hedge funds. Click To Tweet The minimum investment restrictions mean that building a diversified portfolio of hedge fund investments requires considerable capital. Click To Tweet Hedge funds differ from traditional mutual funds in the range of allowable investment approaches, and the goals of the strategies they use. Click To Tweet Hedge funds and funds of funds have very similar investment structures. Click To Tweet

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Security Analysis Summary

Security Analysis Summary

Do you want to learn a thing or two about securities from the father of security analysis himself?

Then read on to get a glimpse of what you can expect from “Security Analysis.”

Who Should Read “Security Analysis”? And Why?

“Security Analysis” has been in print continuously ever since it was first published in 1934. This alone witnesses this book’s relevance.

Numerous investors have made fortunes basing their investing practices on Benjamin Graham and David Dodd’s principles of value investing.

Even the legendary Warren Buffett calls this book his Bible.

We recommend “Security Analysis” to all investors who want to work on their investing-craft as well as to students of financial history.

About Benjamin Graham and David Dodd

Benjamin GrahamBenjamin Graham passed away in 1976, but until today his theories remain relevant. He was the founder of the value school of investing, a co-author of several books on finance and investing and is considered the father of modern security analysis.

David Dodd was an assistant professor of finance at Columbia University in New York City.

“Security Analysis Summary”

Security analysis is a process of deciding which securities would be good investments.

What is a sound investment anyway?

It is an investment which keeps the principal safe, and on top of that delivers a return.

Any kind of investment that does not meet these two conditions is not an investment, but speculation.

Market analysis, unlike security analysis, tries to forecast the action of the market, or the prices on individual securities, without looking at facts about different companies.

There are a few types of market analysis.

One of them, called technical analysis, uses past market values to forecast future prices.

The other one uses indices of external economic activity, that has influence over the prices of the securities.

However, experience has shown that none of these market analysis is valid. In fact, the only thing they do is promoting speculation over fact-based investments.

A term you should know about when it comes to security analysis is intrinsic value.

It is “an elusive concept. In general terms, it is understood to be that value which is justified by the facts…the assets, earnings, dividends, definite prospects, as distinct…from market quotations established by artificial manipulation or distorted by psychological excess.”

Investors are not able to calculate an intrinsic value for particular security since there are too many variables involved.

However, a careful study can end up in a conclusion if the price the market puts is proper.

Traditional economics divides securities into two categories: stocks and bonds.

However, this division is inappropriate since it accentuates the form of the security, instead of focusing on its purpose and safety.

A better classification can be done by grouping securities in three groups: fixed value securities, including preferred stocks and high-grade bonds; variable-value senior securities, consisting of preferred shares and speculative bonds; and common stocks.

Now, you should not mix the soundness of the bonds with their form. The security of the bonds comes from the issuer’s financial strength.

Granted, no industry, and hence no company is depression-proof. However, there are two factors that make a company resilient in hard times:

  • A dominant size within its industry
  • Sufficient earnings to cover its bond interest by a large margin

Companies that do not meet these conditions are not a right place to invest in, even though the bond may seem very attractive.

Preferred stocks are a mix between the instability of common shares and the limited return of bonds.

These may sound like unwanted characteristics, but preferred stocks can be safe investments as well. They only have to meet the safety requirements of bonds that we mentioned before.

You will notice that following these requirements and searching for investments that have these characteristics will limit your choice of investments.

This, you need to consider, as a positive sign.

Income bonds are also called adjustment bonds and should fulfill the same criteria as preferred stocks.

Guaranteed issues are placed somewhere between preferred stocks and bonds. Investors should do the same as they would do with bonds: examine the guarantor’s financial soundness.

Remember that there is no such thing as a permanent investment.

Of course, there are always exceptions to the rule, so although you should stay away from many of the preferred stocks and bonds that do not meet the criteria, you can consider purchasing some of them, since you will buy them at a discount to their artistic value.

However, make sure that the company is not selling at a discount because it is not financially stable.

Now, common stocks are much more speculative than other securities.

So, when investors decide to purchase common stocks, they can decrease their risk by portfolio diversification.

When investing in common stocks analyze the following vital factors:

  • Dividend rate
  • Earnings
  • Asset Value

Key Lessons from “Security Analysis”

1.      The Three Functions of Security Analysis
2.      Questions an Investor Should Ask Himself When Purchasing a Bond
3.      Criteria for Purchasing Speculative Senior Securities

The Three Functions of Security Analysis

  • “Descriptive function.”
  • “Selective function.”
  • “Critical function.”

Questions an Investor Should Ask Himself When Purchasing a Bond

  • Is the value of the company’s business more than the value of its debts?
  • Can the company meet its financial obligations even in the worst-case scenario, such as a recession or depression?

Criteria for Purchasing Speculative Senior Securities

Some senior securities come with privileges that make them tempting:

  • “Convertible issues.”
  • “Participating issues.”
  • “Subscription-warrant issues.”

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“Security Analysis” Quotes

The fact that no good bonds are available is hardly an excuse for either issuing or accepting poor ones. Click To Tweet Needless to say, an investor is never forced to buy a security of inferior grade. Click To Tweet An institution with securities of its own to sell cannot be looked to for entirely impartial guidance. Click To Tweet Safety does not reside in titles, or forms, or legal rights, but in the values behind the security issue. Click To Tweet There is very little altruism in finance. Click To Tweet

Our Critical Review

Many things have changed since the 30s when “Security Analysis” was first published, however, the concept of investing in companies that are undervalued has stayed the same.

This book explains investment basics and gives a glimpse of the times when policymakers were still learning the lessons that the Great Depression had to offer them.

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