#2: Beat the Market Pt. 2 - Understanding Momentum, The Intelligent Investor, Speculation, Bitcoin, Succeeding at work

This week I'm releasing the next installment of my Simple Strategy to Beat the Market (if you haven't read part 1 yet, you can read it here).

Beat the Market (Part 2) - Understanding and Using Momentum Investing

Momentum in finance has been described as the "premier anomaly". In regular person speak, that means the PhDs (and Nobel Prize winners) haven't figured out why it still makes money despite the market being "efficient". It's an annoying reality that conflicts with elegant theory.

Read Part 2 to learn about the evidence for and issues with momentum, why it works, and the brilliant idea of dual momentum.

The Intelligent Investor by Benjamin Graham (Investing Book Review)

The Intelligent Investor is the classic text on value investing, and author Benjamin Graham is its father. The Revised Edition features a preface and appendix by Graham’s top protégé Warren Buffett (who says it is “by far the best book on investing ever written”), and helpful commentary by Jason Zweig to explain and contemporize the writing.

While the specific examples are dated, I was struck by how timeless Mr. Graham’s insights and wisdom on the markets are. Companies come and go, but human behavior does not change. It’s worth the grind.

Key takeaways

  1. Don’t have a relationship with Mr. Market if you cannot face his manic-depressive mood swings with equanimity.
  2. Investing with a margin of safety protects investors against large and sudden losses of wealth.
  3. “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”
  4. Treat investing like a business – analyze the fundamentals, crunch the numbers, and approach it rationally.
  5. The best company can become a bad stock if its stock price goes too high, while the worst company can become a good stock if its stock price is low enough (unless it goes to zero).

Intrigued? Read the full review and top highlights.

Worthwhile reads

When Everyone’s a Genius (A Few Thoughts on Speculation)

"The end of a speculative boom can be inevitable but not predictable. Unsustainable things can last a long time. Identifying something that can’t go on forever doesn’t mean that thing can’t keep going for years." - Morgan Housel

Why I’ve Changed My Mind on Bitcoin

"'But Nick, Bitcoin doesn’t have any intrinsic value!' Well, guess what? Neither does gold which has a $10 trillion market capitalization! So if you want to argue against Bitcoin on intrinsic value terms, then you have to argue against gold too. Because both the price of gold and the price Bitcoin are based around one thing and one thing alone—belief. The belief that these assets will have value in the future." - Nick Maggiulli

Smarter, Not Harder: How to Succeed at Work

"The most successful people I know have one thing in common: they are masters at eliminating the unnecessary from their lives." - Shane Parrish