Make 435% per annum on your money and other fairy tales
About a year ago I decided to see what books were available on investing and share trading on Amazon. There were hundreds, many making outrageous claims like:
‘In all honesty, investing is relatively easy as long as you know what you’re doing. Fortunately, you already have this book (32 pages), and it will teach you everything you need to know to get started in the world of investing.’
‘Investors will be comfortable with a monthly return of say 10% for instance, but traders will always want more, say 15%.’
‘Day trading provides you with freedom, flexibility and the money that you need to take care of your family while working 1 to 2 hours per day.’
I have been in the markets all my life and there is nothing easy about them. When I read the above comments, they made me angry. After all, 15% per month is 435% per annum. Crazy! The greatest investor the world has ever known, Warren Buffet, has an average rate of return of 23% per annum, and there is only one Warren Buffet. I have a huge financial library but am told, ‘you already havethis book (32 pages), and it will teach you everything you need to know to get started in the world of investing.’ My disgust with the typical investment/trading books available on Amazon motivated me to write a series of ‘realistic’ books about the stock market, the first two of which will be FREE if I ever release them. The first one is titled Stock Market Basics for Newbies: Part 1: Preservation of Capital. Predominantly it is about RISK.
The big problem with writing ‘realistic’ books about the stock market is that they are boring. My efforts to date have been boring to write and I’m sure they’ll also be boring to read. I sent Part 1 to my stockbroker who said, ‘No one will read it. It’s tiresome. No one wants to be told how to preserve their money. Everyone wants to know how to make a motser. Why don’t you write something like, Double Your Money in a Year? You’ll sell a heap of copies.’ I told him that was just the type of book I was trying to expose to which he replied, ‘Even if it’s FREE, no one will read your boring stuff.’
I don’t intend to release Stock Market Basics for Newbies in its present form, and instead, will try and work out some way to make it more interesting. If I can’t, I’ll scrub this project and go back to writing fiction. I’d welcome suggestions.
In the meantime, if you see promotions for stock market books claiming you’ll be able to retire in three years, whatever you do, don’t hit the buy button. Secondly, if Wells Fargo is offering you 1.5% on a term deposit, and Fastbuck Finance Inc. is offering you 12%, you can be certain that your capital is at significantly greater risk with Fastbuck than Wells Fargo. The higher the return the higher the risk. It is invariably greed and those few extra points that lead to investors incurring large losses. A 12% return is not attractive after you’ve just lost 100% of your capital.
I’m sorry I don’t have any bargain books to recommend. However, I recently reread Mario Puzo’s The Godfather after first reading it twenty-five years ago. What a book! What a writer! I loved the movies, but the book is better.