Over the past several years I’ve been hired to doctor, edit and even downright ghostwrite a few books about money or business matters. Because business, investment and finance are not my strong points, I generally turn to (brick and mortar or virtual) bookstore bookshelves for advice.
Just the other day I came across a guide to beginner’s investing written by Walter F. Wild, former president of the Hawaii Psychological Association. Dr. Wild’s a psychologist who is also an MBA.
Although my personal investment life is pretty much non-existent and I’m not currently working on a related project, the fact that a psychologist/MBA wrote this book intrigued me enough to read parts of it.
The subject of Winning Investment Decisions is compelling, but the description isn’t exactly riveting reading:
A psychological and financial perspective on investment strategy and the reality of market behavior. This groundbreaking book offers a unique perspective on the opportunities, dangers, and false representations facing the investor, by combining a view of both financial and psychological realities. It provides the essentials of investing and reveals ways to protect and increase hard-earned savings under one’s own direction, with neither the expensive drain nor possible unreliability or malfeasance of professional advisors. Sad tales of encounters with the markets are legion. Crashing financial losses, gradually depleted savings, growth forgone, fear, anger, depression, and suicide are needlessly commonplace. One may glimpse how to build one’s savings with ease and serenity, for it is not that difficult.
Well, that last sentence is hopeful. I’d probably never use the words “ease” and “serenity” in a sentence with “savings.” Also, I’m pretty sure that suicide over investment losses is not “needlessly commonplace.”
But I really liked the fact that the book was written buy an expert in both psychology and finance. My observations lead me to believe that the psychology and the cold reality of the investment racket rarely get combined to the little guy’s advantage. In fact, investment firms use psychological techniques when they market their financial products to said little guy.
Judging from the excerpts, I think Dr. Wild’s book is pretty challenging reading. But if you can get past the language, it does offer the beginning investor some essential underlying advice such as avoiding short-term trend analysis and prediction, and investing for the long term (especially if you’re not an expert), because you most likely won’t predict accurately.
Can’t argue with that.
I wanted to send this book and Sensible Stock Investing to a (still) wealthy friend of mine, but she probably won’t read them. She has the habit of buying when the market or individual stock is already really high and selling when she sees her stocks, or the market in general, about to crash-land.
It’s so frustrating. I’ve heard her complain about the market for over two decades—even though I own no stocks, she’s never neglects to tell me about her latest coups or failures.
Even I, non-investing novice that I am, know you’re supposed to: buy low (and then, of course, hopefully sell high). And if you buy low and you can’t sell high, then simply hang onto your stock for the long term. What am I missing?
All you investors out there can laugh at my simplistic advice. But a couple years ago I “book-doctored” an investment book by a pretty successful investor and author and he gave me the same advice. He told me that buying low (taking into account some compounding factors, naturally) and knowing what “high” actually means is the essence of smart investing.” In other words, timing.
I’ve got a question prompted by my admittedly limited understanding of what’s going on economically in the U.S. Who’s to say most stocks or even paper money is even going to be worth anything down the road? I keep flashing to those old images of people in the Former Soviet Union burning rubles to keep warm.
Here’s my back-seat driving investment advice, especially for my lovely but delirious buy/sell/buy/sell friend: “If it’s too good to be true, it’s too good to be true”. Unless you sell your soul, you probably won’t get rich quick, so don’t even think about it.
Photo by Svilen Milev.
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Last reviewed: 8 Nov 2011