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HEY! DID YOU KNOW…

 

  • The median age in the U.S. is 36.8
  • The median income in the U.S. is $51,939
  • The average 401k match is $1 for $1 up to 6%

A 36.8 year old investing 10% of their $51,939 income with a $3,116.34 match:
With just average stock market returns of 10% would have $1,114,479.31 by retirement.

Join 7,200+ other readers who have learned how anyone, even beginners, can easily make this desire a reality. Download the free ebook: 7 Steps to Understanding the Stock Market.

IFB30: Quotes of Wisdom from Baupost Group’s Seth Klarman

Welcome to investing for Beginners podcast I’m David Ahern, and we have Andrew Sather here as well tonight. We’re going to do a review of an article that I came across from a blog that I read on a daily basis.

It’s called the Acquirers Multiple, and it is owned by a gentleman named Tobias Carlisle. He’s a very very amazing writer, and he’s written some great books. And he has this blog that he’s a member of that one of his authors that work for him writes some great articles.

The article that I came across I shared it with Andrew a couple of weeks ago, and we both liked it, and we thought this would be a great opportunity for us to talk a little bit about a gentleman named Seth Klarman.

We’ve talked about him a little bit in the past before, but this article that was written kind of outlines 13 tips on how to find bargains. Seth Klarman if you’re not familiar with him has written an amazing book on the margin of safety, and it’s unavailable more or less. You can buy an Amazon I believe for a cool thirteen hundred dollars a book if you wish.

Apparently, he did not release a lot of copies of the book and so it’s very very rare and hard to find I was fortunate enough to be able to find it. I read it through the professor of the local college had it, and the finance professor was kind enough to allow me to borrow it to read it. Andrew and I are going to kind of pick and choose through the tips that the gentleman shared in this article.

It’s a commentary from the collected wisdom of Seth Klarman, and it’s a compilation of quotes from the by Baupost Group founder Seth Klarman.

He writes an annual letter just as Warren Buffett does, but it’snot available to the public. It’s usually only available to his you know the people the insiders the people that invest in his fund.

What we will learn in today’s episode:

  • How to find a Margin of Safety
  • You need to do your research to find great companies
  • Be patient and wait for your pitch
  • Buy low and sell high, look for fear and greed in the market
  • Don’t try to time the market, look for your value and buy with a margin of safety

So I’m going to read a couple of the quotes and talk a few minutes about them and then Andrew is going to do the same. I also will link to the article in the show notes for this episode so that you will be able to find this article and read through them as you wish and find some things that you might like.

The first one that I came across that I liked was

“great investments don’t just knock on a door and say buy me.”

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IFB29: Betrayal by Recency Bias and Other Psychological Factors

recency bias

Welcome to the Investing for Beginner’s podcast I’m Dave Ahern, and we have Andrew Sather. Tonight we’re going to talk about investing with your brain we’re going to talk a little bit about how your thoughts can affect the decisions that you make when you invest.

Charlie Munger is one of my big heroes, and he has written many great articles, speeches, a few books about biases and tonight we’re going to talk about some of the more common biases and Andrews going to go ahead and start us off by talking about the recency bias.

Andrew: yeah so obviously we’re all human beings, and something I love to preach constantly is how the stock market is very emotional.

We got fear, we got greed, and it’s because it’s made up of all these people and there are some common psychological aspects that we as human beings all share that as investors that can affect the way we behave.

Many of times we’re not aware that this is things that are influencing our decisions. So, if we can kind of cut that off at the beginning before it can negatively affect it can help our performance recency bias this is the idea that something that just happened is more likely to happen.

An obvious example of this is when you see trend followers, and you know they see a 1-month chart and it just has the price going straight up.

The recency bias would say that you know as an investor you expect that stock to continue that trend or you may have the stock that’s been flat for like two years because you see that this price is moving. And the price has nothing to do with the value of the business what’s going on in the business. We’re not digging into the financials

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IFB28: To Pay or Not to Pay, for Investment Services?

 

investment services

Welcome to episode 28 of the Investing for Beginners podcast. In today’s show, we will discuss Andrew’s eLetter and whether or not you should pay for investment advice.

To pay or not to pay for investment services, is the title of our show tonight. Andrew recently had an email subscriber write him a note asking him questions about his service and how it would be of benefit to him.

The format tonight will be Andrew answering the questions on air, and we will have a short discussion about them.

  • We are all consumers of online products
  • When we find value, the price becomes less of an issue
  • Sometimes it is great to have a mentor to help guide
  • Value investing has been proven it’s the way to go
  • Paying for financial services, when you receive value for it can be beneficial.

So, I am going to read the letter, and then Andrew will offer his responses.

Dave: The letter starts “At $29 a month, that’s just under $14,000 per subscriber for you, you and Dave discussed how much needs to happen to overcome a transaction fee with a stock purchase and focus a lot on percentages.

But you seem to have a reverse opinion on the subscription. If someone follows you for 40 years, at $150 a month with a goal of one million dollars, they will be $14,000 short after the subscription. That would equate to 2812 transactions.

What’s the plan to overcome that? I love your guy’s show but find my mind contemplating things like this. And I in no way intend to think that you shouldn’t charge for your services. After all, you’re a professional, but wouldn’t it be more prudent to charge a percentage of growth or somehow correlate it to the actual value earned?

It’s the biggest problem I have with anyone in this industry. They all want to help, but they want money up front and require blind faith.

Brian.

All right Andrew, what are your thoughts on that?

Andrew: Yeah, I love the question, if one person is taking the time to write this out. You know at least ten people or more probably have this question in their mind. I think it is a great thing to ponder.

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IFB27: 6 Unconventional Investing Principles for Beginners

 

investing principles

Welcome to episode 27 of the Investing for Beginners podcast. In today’s show, we will be discussing six unconventional investing principles. These are ideas that Andrew has come up with that help you with some of the more difficult emotions related to investing.

These ideas are sometimes hard to implement, but when you are aware of them, it does make it easier to make a conscious effort to be more diligent about correcting our thinking.

  • Let go of the results
  • Don’t sign up for deals stacked against you
  • Always build your power
  • Don’t rely on one stock
  • Don’t take pessimism too seriously
  • Lose the ego

Andrew: Again I am going to talk about some principles today, and there is some good mindset stuff in here, and it’s not anything I’ve seen talked about in books or online. It’s just some stuff that came to me, trying to look from a mastery perspective and how some things and some experiences I’ve seen.

How can we kind of draw that in together and organize into useful tips?

For number one:

Let go of the results.

I think this is a mindset trap, where you see a lot of beginners particularly get into this. Everybody is, so results-focused and wanted to buy a stock and have it double it in a year. They want to get in on the next AMD, Amazon; they want just to have money and make that money grow very quickly and be able to realize those profits very quickly.

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IFB26: Combining Earnings Yield and the Return on Capital Formula

return on capital formula

Welcome to episode 26 of the Investing for Beginners podcast. In today’s show, we will discuss the return on capital formula by Joel Greenblatt. The Magic Formula is a great formula that helps identify companies with a low P/E ratio and a great return on capital. This show will continue some discussion of numbers and formulas, so for those of you that are not fans of math, we will break it down into the easiest forms that we can so it doesn’t overwhelm you.

What we will learn today:

  • Breakdown of the Magic Formula
  • Defining earnings yield
  • Defining return on capital
  • How the Magic Formula works
  • Finding a strategy that works for you

Andrew: This is a formula that is very value investing based and Joel Greenblatt, he is a fund manager who has had a ton of success with this formula. He saw a lot of success, made a bunch of people a lot of money. Then went out and wrote a book laying this formula out, and how he picks stocks.

Very reminiscent of my Value Trap Indicator formula, except he obviously has a much longer track record than I do. In the sense that there are these specific rules and basic equation that is based on pure financials.

He took that magic formula as he calls and he put it in a book called “The Little Book That Beats the Market.” Ended up being a best seller and went on to do well. I know he had a period where he was making 20 or 30 percent return per year for decades. Crazy returns recently haven’t been as strong as it was in the past.

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