Hello everyone, welcome to Yuanjie reading. Recently, due to the epidemic, I have been quarantined for several days, so I have also delayed changing the text. Today I bring you a new book called "Walking on Wall Street" by Burton. Marchir, also translated as McGill' one. Professor Marchier is a well-known professional investor and an economist who has served on the U.S. Presidential Council of Economic Advisers, dean of the Yale School of Management, and a director of the boards of several Fortune 500 companies.
"Walking on Wall Street" is a classic book in the investment world, nearly 40 years after its publication, it has been at the top of the investment book list, and we are reading the 11th edition of the original book this time, which shows its popularity.
Wander through Wall Street, 11th Edition
The author said that this book is a personal investment guide, the book uses easy-to-understand language, for everyone to introduce a large number of theoretical methods, from traditional fundamental analysis to technical analysis, and then to a variety of modern new investment techniques, such as portfolio theory, "smart β" strategy; in addition, the book uses a lot of space to tell the history of the famous investment bubble and speculative frenzy, so that investors can learn from history, more wise to invest; third, the author believes that the book on the life cycle of people of all ages investment guide, Will be a major feature of this book, because reading these contents, is equivalent to you to find a professional financial advisor to do a family financial planning, this alone, is enough to make you read the book value for money.
The "stroll" in the title of the book refers to random strolling, which is a widely accepted theory in the investment community, which refers to the past history can not predict the future, applied to the stock market, that is, stock prices are unpredictable. This theory also appears in many other investment books that we have read. Because the stock market is unpredictable, ordinary people simply cannot beat the market, and it is futile, even counterproductive, to pursue the pursuit of exceeding the average return of the market. I don't know if you remember that in "Money, 7 Steps to Create Lifetime Income", John, the founder of the Pioneer Fund. Borg said: Ordinary investors can get the same return as the market average as simply holding index funds, and thus beat 90% of professional investors. This is also the main point that the author wants to make in this book.
When it comes to investment, most people think that stock speculation, buying funds, speculating in foreign exchange, etc. are investing, in fact, investment in a broad sense refers to all money-related behaviors, that is to say, when you put money in the bank, or in Alipay, or just in your pocket, this is "investment".
Investing is something that requires effort
The purpose of investment is to preserve and increase the value of our money, and the three behaviors listed above have not achieved this goal, of course, because of the existence of inflation, the "thief", so that our money has quietly disappeared. Most people don't realize the erosion of our wealth by inflation. As an example in the book, from 1962 to 2014, the average inflation was about 4% per year, but during this period the price of chocolate bars rose 20 times, while the price of newspapers rose 49 times, and inflation that seemed to be moderate was huge under the influence of compound interest.
I often see such a question: I have 2 million (or other figures), if I deposit in the bank, is it enough for the pension? Most of the answers below will be calculated, to the bank's existing deposit interest rate, not enough to live later, but often ignore the impact of inflation, this 2 million, 20 years later, or 30 years later, how much purchasing power is left?
Therefore, without understanding investment, we can only watch our wealth slowly melt away by inflation!
But --
However, investment requires effort, and to add an adjective to this effort, it should be "ten thousand efforts".
If not investing will make your wealth disappear little by little, blind investment may make your investment quickly disappear. There is no shortage of such examples in our lives, the well-known Mike Jackson, the boxing king Tyson, they created a huge fortune through their professions, but they quickly squandered it when they turned around, and the reason for this is because of random investment, because consumption can't spend all that money.
So, for any sensible person, neither of these situations is what we want, and we need to be, as Graham puts it, a "smart investor."
As mentioned earlier, the author believes that markets wander randomly and that we cannot predict the future by studying historical performance, and he goes so far as to say that a stock chosen by a monkey throwing darts at random will perform as well as a stock carefully selected by a professional. This has attracted a rebuttal from professionals in the investment community, whose weapon of rebuttal is the usual use of two asset valuation methods.
These two methods, one is called the solid foundation theory, also known as the "rock theory", the theory is that every asset, whether it is a stock or a house, it has an intrinsic value, investors can analyze and study, calculate this intrinsic value, and then buy when the price is less than the intrinsic value, sell when the price is greater than the intrinsic value, and thus obtain profits. Obviously, this is Graham's theory of value investing.
Value investing
Regarding the calculation of intrinsic value, in the book "TheOry of Investment Value", the author Williams proposed the concept of discounting, that is, converting future money into current money. For example, if the interest rate is 5%, next year's 1 yuan, converted to 0.95 yuan now, if it is 1 yuan after 2 years, it is converted to about 0.9 yuan now. He believes that the intrinsic value of a stock is equal to the discounted present value of all future dividends. This theory was then carried forward by Fisher and Buffett and became the current DCF, which is the discounted cash flow valuation method.
It can be seen from the theory of solid foundation that when a stock has more dividends, the higher the dividend growth rate, the greater its value. Therefore, professional investors, to judge the value of a stock at present, is to determine what the company's long-term growth rate is, and how long this appreciation can be maintained, which inevitably mixes the expected factors for the future and causes the final result to become subjective.
Another theory is called the "Castle in the Air Theory", which was proposed by Keynes, who believed that the stock market is mainly affected by human psychological factors, that is, as long as you can be one step ahead of others in the market, buy before others are optimistic, and sell before others are pessimistic, you can get rich returns. He does not believe in any value, he believes that the true value of an asset is equal to the price that others are willing to pay. This is the famous "Bo Silly Theory", as long as you are sure that there are people behind you, then it does not matter whether its current valuation is 30 times or 50 times, it is worth buying.
air castle
This theory has also won many supporters, such as robert eloquent author of "Irrational Prosperity". In his book, Shearer points out that in the late 1990s, the frenzy of cyber and tech stocks could only be explained from the perspective of popular psychology. Nowadays, behavioral finance is also becoming popular, and it has become very important to study the influence of human psychological factors in investment behavior.
Next, the author takes us and details the crises in history, the tulip fever of the 17th century, the South China Sea bubble in the 18th century, the new stock fever in the 1960s and the "pretty 50" fever in the 1970s, then the stock market crash in 1987, the Japanese bubble and the Nasdaq bubble, etc., which makes us immersed in reliving history and truly feeling the fanaticism and ignorance of the public in investment.
This part is reserved for tomorrow.
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