Book: The Best Investment Writing: Selected writings from leading investors and authors (Vol. 2)
Author: Meb Faber
Publisher: Harriman House Ltd.
Where to buy: Amazon
Price: Hardcover $23.46, Kindle $15.11
Who it’s for: Investors interested in reading “the best writing from the smartest people” who are basically smart folks who managed billions of dollars of money for other investors.
More specifically: Those interested in improving their own portfolio and investing results as well as those curious about financial planning.
Key investment insight: The trick to good investing is not longer about obtaining information but to select what is relevant and tune out everything else.
Why we like it: It’s a thought-provoking compilation of 41 short essays and writings that open a reader’s eyes to the many facets of investment research and stock price projection techniques. From writings on market conditions, risk and return, investment portfolio strategies, pricing and valuation, behavioural bias and beyond, there’s lots to learn on several topics.
Favorite essays: “Waiting for the Market to Crash is a Terrible Strategy,” by Samuel Lee, “Skis and Bikes: The Untold Story of Diversification,” by Adam Butler, Michael Philbrick and Rodrigo Corillo, as well as “Portfolios in Wonderland & The Weird Portfolio’ by Corey Hoffstein.
Best read: Samuel Lee’s “Waiting for the Market to Crash is a Terrible Strategy.” In a nutshell, Lee shows how putting cash to work in the market only after a crash has been a terrible strategy, far worse than buying and holding. Lee provides six different scenarios of the “buy and after a crash” theory and shows in all cases how they strategy has failed. “As strange as it sounds, you would have been better off buying when the market was going up and selling when it was going down, using a trend-following rule.”
Some valuable insights into: The four pillars of retirement income, the truth about cryptocurrencies and why $1 trillion will flow into Chinese stock markets.
Final tip: If you liked this volume, consider buying Vol. 1 of the series, available on Amazon.
Excerpt – Introduction
The signal in the noise…
While most of the public is not familiar with the term, if you’re reading this book, there’s a fair chance you are.
The phrase has its roots in the scientific and engineering communities, the etymology referring to the signal-to-noise ratio, which is a measure that compares the level of the desired signal to the level of ambient background noise. If the noise is too loud, the signal itself is lost.
Over the years, the term has become more popular within the investment community. It can refer to market trading signals—think stochastics, trend lines, or relative strength indicators—but it has also come to take on more metaphorical significance: the truth distinguished from the surrounding fluff.
Of course, there’s a challenge. How does one accurately know what’s the signal, and what’s the noise?
Yahoo Finance is a popular website that provides investment information. Among the stock quotes and financial data, there’s a tab called “Conversations.” Here, any internet user logged into his or her Yahoo account can post a comment or opinion about a respective stock. I just clicked on the first stock I saw on Yahoo’s website—J.C. Penney—and looked under the Conversations tab. At the time of this writing, there are 16,254 posts.
They cover the entire spectrum, ranging from seemingly-logically-sound reasons to buy J.C. Penney’s stock immediately… to seemingly-logically-sound reasons to dump every share you own. But what’s what? Which of these posts is the signal and which is the noise?
In my introduction to the first volume of The Best Investment Writing series, I highlighted this challenge. There are myriad investment “experts” out there, screaming their opinions at us with utmost certainty. Of course, many times, these opinions represent diametrically opposite perspectives, leaving the average retail investor baffled as to the right direction.
As serious investors, we need a better way. The Best Investment Writing Volumes 1 & 2 represent our efforts to address this need. You’re holding a collection of essays written over the last few months by some of the brightest, most successful figures in investing. Collectively, they manage hundreds of billions of dollars, are the most respected thought leaders of the investment universe and are dedicated to improved investment market performance for their clients and themselves.