HN Explorer

Ask HN: How did you learn about stocks and the market?

150 points by n13 ↗ HN
I find it really hard/confusing to understand stocks and the market from the investing perspective. I'm a beginner in this domain. So, I keen to learn about it so that I can understand the technical details too. I did a search and found out that everybody is recommending "The Intelligent Investor" by Benjamin Graham. I'm kind of person who likes to watch videos, so I also found couple of courses (paid) on Udemy but those aren't good and just wastage of money. I also found that Investopedia is an excellent resource. It contains a lot of good tutorials [0], guides [1] and videos [2].

You might have already learnt what I'm trying to. What's your story? It would be really nice if you can also share the resources that proved really useful to you.

[0] http://www.investopedia.com/university/stocks/ [1] http://www.investopedia.com/university/ [2] http://www.investopedia.com/video/

159 comments

[ 3.0 ms ] story [ 225 ms ] thread
moshiasri
Well the real question here should be how much pain can you bear to learn the process. Because the term stocks and market covers a big area, you have to select a more specific domain, like bonds,derivatives, stocks, commodities or forex and the learning curve is steeper than the traditional processes like coding or design, plus there is capital involved, if you are a newbie i would advice you to start with "Paper Trading" and read a lot of books.

Do not enter the market, right after you finish a few courses, you will just be chewed up and spit out, and find a book called "A Complete guide to Day Trading" by "Markus Heitkoetter" it is plain and simple with lots of examples, and put "the Intelligent Investor" away for six months at least, that is a good book but is not for now.

I Started three years back when i was in engineering final year, and went on to get the certification as a derivatives and equity trader from the regulatory body.

Good Luck

n13
Thank you so much! I'll look into that too.
moshiasri
Your Welcome my friend, if you need any further info regarding the stock market, fell free to ask, i will be glad to answer. :)
n13
Thank you! HN doesn't have any option to follow but that's ok. I do have a question for you - Does newsletters/pro accounts (costs around $199/yr) like Motley Fool, Morning star of any help, or those are just sham?
moshiasri
Well they are not a sham, but they are not very help full either.

look in stock market information is an asset,but if the news is out on any news service, it has already been used and all you are getting are the left overs.

Instead of getting glued to the newsletters or pro accounts or even a business news channel, i would advise you to improve your technical analysis skill, because that way you can understand the market movement in real time, and you do not have to worry about being feed some misguided or hoarding news, and you can see the trader sentiment to understand the mood, and movement of the market. and use the news service as an extra source in decision making, plus you need to learn how to read between the lines or in this case listen to what is actually being said. most of the time you will be amazed by the difference between what has been said and what was the actual case.

And then there will be days when you would just have to sit back and not buy/sell even a single contract at all, and days when you will go bananas by the sheer volume to transaction or market volume.

make your own trading rules, and strategies and then stick to them. dont just give up at the first instance.

1123581321
Not a joke: I communicated 60 minutes each way for a year and thought about all the ways you could know which lane would travel faster than the other, and when.

For information to input into that way of thinking, I got in the habit of reading primary sources (Fed PDFs, company announcements, etc.) as much as possible. At the time I had a subscription to a service that aggregated primary sources in the sectors that interested you. That service has pivoted a few times since then and is now useless for gaining a real information advantage.

Edit: yes, commuted is what I meant. :) Leaving for posterity.

aerovistae
(I think he meant "commuted" 60 minutes each way??)
flying_kangaroo
tbh I read it as "commuted" anyways. The human brain is quite the work of art.
1123581321
Haha! Yes, it's funny how a longer, incorrect word goes unnoticed. Thanks for catching it.
mdorazio
Probably not helpful to you, but I originally learned from my grandpa when I was in middle school. He was quite the stock market investor and broke down for me the way the market worked at a basic level so that I could understand. However, I didn't really learn about the fundamentals of the market and the basis of all the derivatives/options/leveraged investments, etc. until I took an Investments class in college.

What's your end goal here? Do you just want to be able to make some good personal investment choices, or are you trying to be a day trader or algorithmic investor? The materials will be different depending on your intended path.

In any case, I definitely wouldn't pay for a class. There are more than enough free materials out there like this MOOC from Stanford GSB: http://online.stanford.edu/Stocks_and_Bonds_Fall_2014

pstrazzulla
I started when I was a kid with my brother as we wanted to make money for some reason and learnt very slowly over years.

Don't read The Intelligent Investor, it will just put you to sleep. Realistically, you shouldn't be picking stocks on your own. You should just be putting money into ETFs that track the market and can help you diversify your holdings cheaply.

Look up a few of the key terms in investopedia like stock, bond, etf, etc. Then, either create your own ETF portfolio via an online brokerage account, or go with a robo advisor like Betterment.

Good luck!

galfarragem
IMHO investing is more an art than a science. It's a chaotic game that can be played with several focuses and sets of rules but always with the same goal: make money by predicting his evolution. Which focus is better? I don't think there is one, at most, it depends on your personality, investing time frame, amount of money to invest and how much time do you want to spend.

The best actionable advice I heard from somebody making a living from it, paraphrasing:

"Imagine you are a mouse. Investing is to learn how to steal the cheese without being caught."

kdamken
I'd recommend http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Lari...

I've recently been trying to learn more about investing and this book has been right on the money.

Basically, the advice is don't buy individual stocks, you can't pick them and outperform the market consistently. Instead, get an index fund or ETF that tracks the whole market, like https://personal.vanguard.com/us/funds/snapshot?FundId=0085&.... Vanguard is the best for index funds as they have the cheapest expense ratios.

If you want to learn more about the basics of economics, which are important as well, I've enjoyed this lighthearted youtube series - https://www.youtube.com/playlist?list=PL8dPuuaLjXtPNZwz5_o_5...

chad_strategic
I read the intelligent investor and then went an got an MBA.

I would recommend building a business / start up or teaching yourself programming. Over the long term you will make more money.

eorge_g
"A Random Walk Down Wall Street" is THE book I recommend for accessible framework on the different strategies people approach the stock market and investing.

http://www.amazon.com/gp/product/0393352242

Edit: WSJ Review: “Talk to 10 money experts and you’re likely to hear 10 recommendations for Burton Malkiel’s classic investing book.”

swah
A good book to stop trading!
jmcgough
Seconding this. If I could have all of my friends read a book after graduating college, it'd be this one.
companyhen
I'm on page 200 of this book. Didn't know much about investing beforehand, good read so far in my opinion.
yonibot
This was my intro as well, and I've already recommended it to a number of people.

Malkiel believes in investing over gambling/speculating. That means trying to obtain market returns rather than trying to beat it, using very-low-cost funds like those offered by Vanguard. A great place to read more about this philosophy, when you finish Random Walk, is the Boglehead's forum.

gmu3
I'd recommend this as well. It's obviously an old classic but I read it a few years ago and was pleasantly surprised how updated the author has kept it.
yannickt
Random Walk is great. My favourite books on personal investing are: - "The Four Pillars of Investing" by William Bernstein - "A Random Walk Down Wall Street" by Burton Malkiel - "All About Asset Allocation" by Rick Ferri

If I had to recommend _one_, it would be Four Pillars. The first part is a bit more intellectually "challenging" than Random Walk, but ultimately does a better job (IMO) at backing up the author's ideas on personal investing with data.

Random Walk covers all the major bubbles in history, and does an excellent job at breaking down asset allocation per age range in the later sections of the book.

All About Asset Allocation was very useful to me in developing a long term investment plan, and deciding what asset classes to include in my portfolio.

I refer to each book at least once a year.

ascendantlogic
Growing up my father had a subscription to BusinessWeek, which for some reason I took a healthy interest in reading back in the 80's.
jacko0
I was a total novice, I got a copy of The Naked Trader, read it on the bus and now have made quite a lot of profit using the easy to understand tips.

https://www.amazon.co.uk/The-Naked-Trader-Anyone-Trading/dp/...

typetypetype
How have your personal returns compared to the total market return?
Jaruzel
Aha, glad I scrolled down, I was about to suggest this book also. It's the only one I've read where I actually remembered the trading tips the next day. It's got a very easy style, and good for the total novice.

I never got as far as actually playing the market though...

sharemywin
Keep putting your money(about 10% or more if you can swing it) in a good index fund and ignore it for 40 years. There's a good chance you'll do about as good as 50% of the stock market investors(or more counting fees lost) and you can do something more productive with your time.

Stock market investing reminds me of that insurance commercial with the fishing pole. "you gotta be quicker than that..."

If you want a better investment spend it on educating yourself... or something where you can have inside advantage like your own company.

arielweisberg
This is my opinion as well. It's possible for more agile traders to consistently make money year after year. It's just fraught and you won't know until after the fact whether you have what it takes. You could also do well for a very long time and then lose those gains.

People tend to trumpet their winnings and not their losses and a shocking number of people don't actually know their rate of return.

I recommend Four Pillars of Investing by William Bernstein (http://www.amazon.com/The-Four-Pillars-Investing-Portfolio/d...). It has a lot of overlap with Malkiel's book and I recommend both of them.

Until you have read at least one of them I recommend you not start investing. The Intelligent Investor is a little optimistic and in later editions even Benjamin Graham admits that maybe active investing is not the greatest idea for most people.

protomok
+1 for Index investing - also called passive investing, couch potato investing etc. It is so simple and elegant I can put it in code:

    // Decide asset allocation based on risk tolerance.   E.g. 75% Stocks / 25% Fixed income
    set_asset_allocation(risk_tolerance)

    // Determine which index you want to track. E.g. 25% Canada (TSX)
    // 25% US (S&P500), 25% Developed World (MCSI EAFE)
    select_funds(list_of_funds)

    // Set up automatic purchase plan so your account automatically purchases the funds bi-weekly or monthly.
    enable_auto_purchase(name_of_financial_institution)

    while (alive && working)
        
        // Live and not worry about investments. Instead focus on coding, knitting, cow tipping, etc.
        live(1 year)
        
        // Buy/Sell more units of your funds to return to desired asset allocation
        rebalance()
    done

    retire()
And if history repeats itself you will outperform the top money managers >50% of the time. Check this PDF for the active money managers VS index fund historical results: http://ca.spindices.com/documents/spiva/spiva-us-yearend-201...
brianpgordon
And there are services now which automate this. For a management fee (generally 0.025%/year) you can set up automated recurring deposits, choose a risk tolerance, and let the algorithm continuously rebalance your portfolio automatically in a tax-efficient way. Just click some nice big friendly buttons and enter your information and forget about it, and watch your portfolio grow (or drop, with the market).

I work at a startup (https://www.sigfig.com) that does this, and lets you view in-depth information about how your portfolio is performing through rich charts and tables on our site and mobile apps. Our competitors (https://www.wealthfront.com/ and https://www.betterment.com/ among others) offer a similar service with slightly different value props.

There's really no excuse anymore for not signing up for something like this. It's insanely easy and ridiculously cheap. Like, maybe an hour to set up with zero paperwork to send in, and a tenth of the cost of an active fund.

aforarnold
The services you mentioned only for US, or anyone can access it. For example EU citizens can also open account and set periodic investment?
crazypyro
Are you sure about that management fee number? Your company's website differs.
n13
Thank you! I'll definitely want to look into this. Just wondering what's the average rate of return provided by these services.
SteveNuts
Where's a good place to buy index funds, and how can I set it up on an automatic deposit?
ultramancool
You can buy ETF-based index funds (Vanguard, iShares, SPDR, etc) via most brokers as they're listed on major exchanges.
streblo
You can do this through your normal brokerage. Just pay attention to the fees. ~$10 per trade is normal, but many brokerages will offer reduced or no fees for certain ETFs or mutual funds.
jkyle
> There's a good chance you'll do about as good as 50% of the stock market investors(or more counting fees lost)

A naive response may be "well, then. I'll invest in the other 50%...".

It's important to note that no one, to date, has shown they're capable of predicting who which survive, which fail, and which beat the markets. And if such a person or persons exit that can do so they're sure as hell not sharing it with you.

Another223
Random Walk and Intelligent Investor as already mentioned are great books. I'd put Common Stocks and Uncommon Profits (Philip Fisher) near the top of my list and I enjoy the Value Investor podcast (John Mihaljevic).

If your interest is more the short-term movements, and less investing based on price and intrinsic value, then I'd suggest branching into economics and psychology. The Little Book of Behavioral Investing (James Montier) is excellent.

I think the best way to translate what you're reading to a practical application is a paper portfolio. I wouldn't recommend single-stock selection for your $ portfolio, but researching and following stocks that you pick will make you more aware of the market. As with learning anything, document your decisions (what, when, why) and use that as a feedback loop to improve.

tcoppi
Read "Trading and Exchanges: Market Microstructure for Practitioners (http://www.amazon.com/Trading-Exchanges-Market-Microstructur...)

This will give you an idea and maybe whet your appetite about how markets and trading actually work, and all the reasons people use markets. From there you can work towards learning more about actually developing trading strategies more complex than buy and hold.

kirpekar
Easy:

The Bogleheads' Guide to Investing

A Random Walk Down Wall Street

You will know 99.9% of what you need to know.

imgabe
When I first started I read The Wall Street Journal Guide to Understanding Money and Investing [0]. It's probably a bit dated now, but if you're just starting it gives a pretty good overview of the basic terms like what is a stock, a bond, options, futures, put, call, stop, limit, short, etc.

Another similar book is How To Read the Financial Pages[1]. Again, probably a little dated, but I don't think much of the terminology has changed.

I would still recommend index funds for the best returns, but if you want to follow the financial news it helps to understand the lingo.

[0]http://www.amazon.com/Street-Journal-Guide-Understanding-Inv...

[1] http://www.amazon.com/Read-Financial-Pages-Peter-Passell/dp/...

tomc1985
Self-taught. Still learning. I'm avoiding books and trying to draw my own conclusions by watching the market.

One thing I have learned is that most of the other people talking about the market are full of shit. There is so much misinformation and red herrings that it feels like seasoned investors WANT newbs getting lost in the spiderwebs.

znebby
Since we're recommending books, Peter Lynch's "One Up On Wall Street" [1] was a very informative and interesting book.

Peter Lynch ran Fidelity's Magellan fund from 1977 to 1990. He avergaed a return of 29.2%, increasing the value of the fund from $18M in 1977 to $14B in 1990.

His philosophy is to invest in what you know, and that the market misses things that everyday people can notice just from going about their life. I think his advice worked a little better before the age of the internet, but it's still a very solid and easy to read book.

[1] http://www.amazon.com/One-Up-On-Wall-Street/dp/0743200403

lowglow
[Deleted]
bsilvereagle
Anything you upvote shows up in your profile under "saved stories" or "saved comments".
lowglow
Ah, I did not know that, thanks!
blabla_blublu
Used to watch my dad come back from work and stay glued to the television tracking the tickers. I used to help him keep track of a few stocks as well. Slowly got interested and picked up some random book that explains the stock market terminologies.

The #1 takeaway from the book is "Before you buy the stock, give an elevator speech with facts(data-driven) and reasons as to why this stock is going to be a good buy."

Turns out a lot of my investments don't stand this test!

fauigerzigerk
The problem is that there are pros and cons to every stock. Weighing them and getting the timing right is incredibly difficult though.

So if someone makes an elevator pitch for some stock, what I would be asking is why these pros are going to outweigh these cons.

And that's where we're back to square one where everything is just opinion and ituition, albeit better informed, which has to count for something.

I'd like to add some sort of quantitative discipline into the mix. And I mean something that has some statistical credibility.

hluska
You've received some excellent answers here. I won't reinvent the wheel, but I will add one small detail.

If you're interested in learning about the stock market, it's also helpful to get a good primer on financial accounting. You don't have to be good enough to actually do a public company's financial statements, but it's helpful to have enough of an understanding that you can look at a company's quarterly report, compare it to past periods and get a good sense of how things are going.

I can't think of an accounting primer that is good for this, but I studied accounting in University so I may be biased. So, if I were you, I'd:

- pick five or six public companies you are interested in.

- read their annual reports.

- Google terms you don't understand.

vibrio
i came here to say this. i'd recommend getting a used accounting book and/or Schaum's guide to have on a shelf as one reviews financials. Also, when i narrow the field down to a small group of companies to evaluate and pick from, I often buy a few (sometimes very few, 5-10) shares. The habit originates from the old days when the positions would get the hard copies of the Filings (k's and q's) sent to me-- but that was the 1990's. Now I find that it keeps me committed and focused into looking at the companies so i can either dump the shares or expand the position.
eldavido
The stock market exists at the intersection of a few academic subjects.

One is economics. This is a social science, like psychology, and deals with human beings, and why they act the way they do: why prices go up and down, the effect of regulation and policy, supply and demand, etc. Economics is the bedrock underlying any market because ultimately, markets are made up of people. It's sort of like how math underlies all of programming -- you don't often use it directly, but it's the intellectual foundation of all market behavior.

To learn economics, get a basic micro textbook or listen to Russ Roberts' EconTalk. It's an outstanding scholarly podcast once/week with a huge range of topics including environmental regulation, financial market behavior, food and cuisine, and the effect of law on public welfare.

The second major discipline is finance. In a nutshell, finance is all about trading flows of money, and how that's priced: if you promise to pay me tomorrow, how much should I pay you today? What is a 10% interest in a company worth? Part of finance is "corporate finance", which is "I have a company, how should I fund it" and the other part is "financial economics", which deals with markets for stocks/derivatives/options etc. and how they're priced and traded. Finance is built on economics, because the whole reason financial markets exist is to facilitate the reorganization of money/capital to better align with peoples' preferences: saving vs. spending, borrowing vs. investing, etc.

The third major discipline is business management/analysis. You'll learn this if you work anywhere for a while: how companies operate, why people are hired/fired, etc.

Mostly, just take it in a little at a time, be curious, and pay attention to the markets. Read the news. For instance, there's a lot of discussion about what the Fed will do, raise vs. lower rates. Why does this matter? How will it affect output (how much is produced), securities prices, and firms decision to invest (build stuff) vs hold cash? What will the effect on the housing market be? Will mortgage rates go up or down? Try to fit this into a conceptual model of how the world works, and refine it over time.

EDIT: Accounting, especially tax, is also important. Accounting is the basic language of business. If you want to understand the words people on TV/news are using, like "non-GAAP" or "gross margin" or "restatement", learn a bit of accounting.

Nano2rad
This is the best answer. You have to know the factors influencing the market. If you are strong in at least some subjets you can spot the opportunities. If you know about economy, you could benefit when the economy is growing and it could benefit almost all companies. If you know economy is weak, you can short, just as an example. Other factors like market, management, managers, consumer behavior, govt policies, foreiegn policy, technology, raw material, rent, trading laws, stock exchanges, accounting etc. will help. Read business magazines and dailies but dont believe everything. But whatever you do, there is chance of failure. So if you are in market read Fooled by randomness and Black Swan. Investing rules from the masters say there is really no rules. You can be daytrader, long-term investor, options and futures, stock picker, index trader, etc. Actually, each style suits personality.