Posted on December 30, 2012 at 1:33 pm UTC
Teaching people about investing generally comes in two flavors: plain-vanilla, simple prosaic stuff or text-book-heavy chocolate which is either too complicated or too boring to digest.
Simple books tend to lack the rigor or pragmatism that investors face. Investing is hard and a general investing overview is typically insufficient to help investors facing tough decisions: like selling into a fiscal cliff or avoiding home or Internet bubbles.
On the other hand, definition- and formula-driven books also lack a real-life approach to investing. Instead, books like these are good for classroom settings or MBA-on-the-job training.
Sneaking in the complicated stuff while engaging the reader
James Berman’s new book, Lessons from the Lemonade Stand, uses a common metaphor to teach the basics of investing: the lemonade stand (Joel Greenblatt used a similar one in The Little Book that Beats the Market.
By abstracting out the “hard” stuff about investing and focusing on the most simple of businesses, Berman (a finance prof at NYU and an investment advisor) is able to gradually introduce more complicated concepts without overwhelming the reader with jargon.
Really, Lessons from the Lemonade Stand encompasses much of an introductory finance curriculum in book form that reads, well, more like a book of fiction than one on investing.
The difference between traders and investors:
The difference between investors and traders is almost religious in fervor. Ironically, both have the same goal: to make money. But each approaches that task in a different way. At first glance, investors hold stocks for the long term while traders buy and sell stocks on a short-term basis. But the distinction is more philosophical. INvestors view stocks for what they are: pieces of paper that grant ownership in a company. Traders view stocks as gambling chips” things to be bought low and sold high regardless of what they actually represent.
The wise lemonade stand investors spends some time learning the ins and outs of taxes. Unfortunately, the tax code is outlandish in its complexity. But it’s yours. And if you want to hold onto your gains, you better know the basics.
Price vs. Value:
In the real world, just as in Lemonville, everything has both a price and a value. Understanding the difference is the key to success. A stock’s price and value are often far apart.
Continue Reading »
Posted on December 23, 2012 at 1:45 pm UTC
2012 was in many ways uneventful for those of us looking at the investing tools space.
Maybe it was general yawning at the stock market and less participation/caring about investing.
Or maybe it was because little capital flowed to new, innovative investment tools this year (a few existing companies like Betterment raised money).
That said, many of the existing investing tools in the marketplace are maturing. Products are getting easier to use and in general, gaining in popularity.
Here’s a group of 12 tools (you’re welcome to add more below) that I believe were worth your attention this past year (I’ve interviewed many of the founders of these companies on my podcast). They are a smattering of new tools (like SmartAsset) and older ones (Lending Club just celebrated its 5th year anniversary) that keep getting better with time.
Curious as to what you think — full disclosure: I was an early hire at Seeking Alpha and still own woefully too few shares and I’ve consulted to Wall Street Survivor and Lending Club.
Top 12 investing tools of 2012
(in no particular order)
- SmartAsset: So smartly designed and so necessary, it’s a shame SmartAsset didn’t launch years ago. It’s like a Web 2.0 financial calculator that provides personalized advice to help answer the most common of financial decisions like “should I rent or buy?“.
- QuantBlocks: QuantBlocks is a cool and powerful platform to help design and test quantitative trading strategies. The best part is that it doesn’t require any programming expertise. It’s just drag-and-drop simple.
- Seeking Alpha Pro: Recently launched, the price-point (around $200/mo) and the quality of the research on Seeking Alpha Pro makes it primarily for professional investors. Of higher quality than general posts on SA, Pro is intended to raise the bar of Seeking Alpha’s exclusive content and cement its role as the open destination to head online for stock research.
- Wall Street Survivor: Wall Street Survivor is the investor’s CodeAcademy. It’s designed for beginners and intermediate investors alike. WSS provides very specific, action-based missions for learning the ins-and-outs of investing.
- Motif Investing: Motif Investing is a platform for idea-driven investing. If you’re looking to create a low-cost portfolio of stocks around a specific idea, Motif is pretty interesting.
- SprinkleBit: SprinkeBit has bold goals and that’s to provide a one-stop-shop for younger investors. It combines the social sharing and learning with a brokerage platform.
- Reading the World: Russel Redenbaugh’s new newsletter is based upon decades of experience with policy-driven investing. It examines big macro trends and how government/economic policy impacts such movements.
- OurCrowd: There are a lot of crowdfunding platforms waiting for the JOBS Act to really hit but OurCrowd is already up and running and funding some top Israeli startups. For accredited investors only, investors can build a startup portfolio with increments as small as $10k.
- Lending Club: The peer lending network just celebrated its 5 year anniversary and $1B in assets. Together with smaller competitors, the peer lending industry is underwriting about $100M in loans every month now. LC Notes are becoming de rigeuer in diversified income portfolios (where else can you find high single digit, low double digit returns right now?).
- Estimize: Crowdsourcing really works and that’s true for earnings information. Estimize has shown that it’s frequently more accurate than Wall Street when it comes to financial estimates.
- StockRover: StockRover is a financial data portal that was built by a techie investor for others like him. If you enjoy deep diving into the data and doing great stock screens, StockRover is really powerful.
- Kivalia: Investors with assets in retirement accounts get the short end of the stick. They lack good advice. Kivalia is changing that with an advice layer on 401ks that tells investors what and when to buy — down to advice on which mutual funds they should own.
What tools/platforms did you enjoy this year? Let me know.
Posted on December 11, 2012 at 1:27 pm UTC
Bonnie Foley-Wong is an entirely new type of investment advisor.
Bringing together an integrated investing decision-making process that includes tapping into your emotion, intellect, and intuition, Bonnie helps investors take positions in private companies.
Join Bonnie and I for a very engaging conversation that will help you discover your own motivations for investing and hopefully provide some amazing introspection.
Listen to the FULL episode
About Bonnie Foley-Wong
Bonnie is the chief investment innovator and pollenator, founder of Pique Ventures.
Continue Reading »
Posted on November 27, 2012 at 12:58 pm UTC
By most account, the M&A process is fundamentally flawed.
Incentives aren’t aligned — from advisors to bankers to CEOs. All want more M&A, not more successful deals.
This week’s guest on Tradestreaming has created a crowdsourced model for investors to help predict the next successful merger and acquisition. Arye Schreiber, founder of Merjerz, has created what he feels is a better model to align incentives, encouraging fundamentally more successful M&A activity.
And investors can be first to know.
Listen to the FULL episode
About Arye Schreiber
Arye is the founder of Merjerz. His previous experience has been in corporate law, advising multinational companies on M&A.
Continue Reading »
Posted on November 25, 2012 at 12:25 pm UTC
Well, my Tradestreaming Hedge Fund rebalanced last week. The portfolio (access details here) is up almost 20% YTD, handily beating the S&P500 which is up a bit over 12% on the year.
I sold $MIC and $PCLN, two stocks that I’ve owned for the bulk of 2012. $MIC was a big winner and $PCLN had been as well, until it gave back much of its gains in August.
So far in 2012, I’ve made 17 trades. The portfolio is based upon the research I published in Tradestream Your Way to Profits and mimics certain strategies of 12 top hedge fund managers. It’s not as simple as merely aping top hedge funds’ trading — certain hedge funds replicate differently than others.
For example, investors may begin to approximate Warren Buffett’s returns by buying his largest holding while Pershing Square’s Bill Ackman may replicate best by buying his newest holding.
Anyway, couple more details about the Tradestreaming Hedge Fund Guru Portfolio
- 70.6% of trades profitable
- 0.622 correlation with S&P500
- Sharpe Ratio of 1.743
For more details, check out my strategy on Collective2