I have often been asked in my investment class what book should a beginning investor read to improve investment knowhow. Here is my booklist.
These are books that I feel are written by authors who are not only gifted in this pursue of investing but are also willing to share with us their wisdom.
There are classic that I am reluctant to throw away and they include titles like The Intelligent Investor, A Random Walk Down Wall Street, The Little Book That Still Beats The Market and Winning The Loser's Game. My bookshelf is stack three-level high on many of these books that I am reluctant to throw away.
So here are my recommendation organise in three categories:
Category 1: Highly Recommended
The Intelligent Investor by Benjamin Graham
The Little Book that Beats the Market by Joel Greenblatt
Winning The Loser's Game by Charles D Ellis
Warren Buffet's Annual Letter Archived at www.berkshirehathaway.com
The Essays of Warren Buffett by Lawrence A. Cunningham
Margin of Safety by Seth A. Klarman
According to the Merriam-Webster dictionary, to be empowered means having the knowledge, confidence, means, or ability to do things or make decisions for oneself.
When is the last time you feel the true meaning of the word "empowerment"?
For me, I felt it many times in my life. For example, the first time that I learn to ride a bicycle, the first time that I learn how to swim and the first time that I got my driving license. Those were skills that I pick up that I will make me experience life in totally new ways. I know I could go to different places. I feel a sense of hope and real accomplishment. Most of all, I gain confidence in doing it. And the more I engage with the skill sets, the better I become.
Just a few weeks ago, I was reminded again how empowerment looks like. My son just finished his PSLE examination, and like all kids in this generation, he likes to play with his mobile phones. My wife and I are concerned that he is simply spending too much time on the mobile phone....
"Life is like a multiple-choice question; sometimes, the choices confuse you, not the problem itself." ~ Anonymous
Have you ever attempt a test in a multiple-choice question format? Do you notice that those who finished the test early tend to be the one that ace the test? You might be one of them at some point in your life. When you are competent in the subject tested, the answer jump at you. You will find the test effortless. And yet, within the same test itself, there are probably others who took a bit longer and still come out failing it. Same test, but the knowledge level differ quite a bit. There are some investment skills here that we can learn from the MCQ test. The most important skill is that of working the odds and thereby making better choices.
Let's say you attempt a question with four choices, and only one of them is correct. The odds are one in four that you will choose the right answer. That is assuming that you know nothing about the subject.
But once you know...
With better awareness comes better choices. Better choices lead to better results.
The above sounds like the quote from Spiderman -- With more power comes responsibility.
The Better Awareness - Better Choices - Better Results quote, I learn it from my superhero, Robin Sharma. I first read about it in the 5 AM Club, and I realise that it applies to living our life to the fullest as well, not just to investing.
Let me share an incident on how this would apply in the investing context.
In early 2012, I met a prospect in my office who was looking to invest in my discretionary investment account. The client has been a civil servant her entire life and has just retired at age 55. She has withdrawn her CPF savings, sold her freehold landed property and had an initial sum of $2.4 million to invest. We did not have a conversation on whether there is a need for her to invest. She was business-like, there were no small talks, the discussion straight away was about the return. Specifically, she...
The most common question that I get in my speaking involvement at various conferences in the region is: “What is your view of the stock market for the next year?”. It never fails to amaze me how often this question is asked time after time. And then there is the reporter’s request for a quote on what I think explained today’s movement.
The blunt reply is “I do not know, and your guess is as good as mine.” That sounds arrogant. But I am candid here. In truth, I am not trying to keep any secret to myself. All that I am saying is that nobody has the answer.
I would even go to the extent of saying that the chimps in the zoo have a good chance of being right as the “savvy” professional. The stock market is complex, confusing, not to mention perplexing, puzzling and unfathomable. This is a theme that I will keep coming back to. And because it is so complex, and nobody really has the answer. There will always be people who proclaim...
By Puah Soon Lim
Today’s post is going to be about a question that I receive from one of my student at the recent weekend class at the SGX Academy. It concerns the CCC and its impact on a company’s liquidity. Specifically, this is the question that she asked:
“My calculations of the cash conversion cycle for Coy A is 179 days and for Coy B is (-74 days). Does a negative number indicate more liquidity? In this case, is Coy B more liquid than A?”
She did a calculation for CCC and for Company A, it is 179 days and for company B, it is a negative 74 days. She asked “Does a negative number indicate more liquidity? In this case, is Coy B more liquid than A?”
I feel that this is a good question to answer and I am going to answer it in this blog post. You may also write to us at this address and if we feel that this is a good question to answer, I will feature it in my blog post.
Just to give all of you a heads up, I have given two...
By Puah Soon Lim
Today I want to talk about learning. It is a subject that I am very passionate about. When I was growing up, I have difficulty learning. Particularly when I was in primary school. I failed all of my subjects and I have trouble staying focus and I was easily distracted.
Naturally, I have nightmares about taking an examination. Some of those early nightmares stay with me till today. I still have anxieties attack in my sleep when I have dreams about going for an examination even though those days were long past me. I studied hard in my schooling years but I realized that knowledge doesn’t stay with me when all that I do is studying for an exam by rote learning and not through understanding.
I have already returned a large portion of what I learn to my school teacher and lecturer over the years. But I am someone that embrace lifelong learning. I am still having joy discovering new things, learning new things each and every day. At the moment, I am...
By Puah Soon Lim
To test my student's understanding of the price-to-book ratio in one of my investment classes called the “Building Blocks for Value Investing” held at the SGX Academy, I asked the class to guess if a stock's price to book valuation is better to be below one or greater than one. Most of them were able to guess correctly, but when I asked them to explain why they categorize a stock's P/BV < 1 or P/BV > 1, all of them have a hard time explaining the rationale. This is a ratio that is more complex than it looks.
For those who are keen to test your take on this ratio, the eight companies that I used in class are the following:
Singapore Telecommunication Ltd
By Puah Soon Lim
Today’s post is a fairly new development. It became popular during the dot-com bubble in the year 2000. I have received a lot of question on this one from newbie investors as well as the more experienced ones.
There are actually some academic researchers that purportedly claim that this is the single most important ratio in the valuation of a business. My view is that it is just one additional tool that investor should have in their arsenal. Both Warren Buffett and Charlie Munger have expressed their dislike for this number during the years leading up to the dot-com bubble.
I will start off by explaining the numerator first.
In the numerator, we have the Enterprise Value (sometimes also referred to as total enterprise value), primarily it is looking at valuing a company from the perspective of both the equity holder and the bondholder. If you are familiar with the concept of market capitalization, you are halfway there to...
By Puah Soon Lim
I was part of a panelist on an investment forum organized by Moneysense and SGX recently whereby we were asked a very profound question, and I thought it makes sense to make this the theme for this week’s blog post.
The question was: "What do you think is the biggest threat to your portfolio?"
The replies from the other panelist focus mainly on the economy, but when it was my turn to speak, my reply generated a lot of laughter in the room.
My answer was: “What do you see is the biggest threat to YOUR portfolio?....YOU"
Although it generated waves of laughter in the room, I told the crowd that I am dead serious about what I just said. I explained that most investors think that it is most crucial to keep in touch regularly with the market and stay ahead of the curve to perform well. It is often assumed that knowing what is happening right now is the single most important thing that an investor must do...