Thomas Nelson Email (book recs)

Hi Devin

I don’t want you to think that I believe stock analysis, selection, and timing are a worthless activity. I just think it’s very hard to use such activities to “achieve consistent above average returns”, as you indicate. For most casual investors (most of us), this pursuit is not likely to obtain these results, and is likely to hurt returns, given the costs of trading. Only those who are full time experts close to the market are likely to achieve the kinds of returns you indicate, and even then it’s hard. Bear in mind one can certainly achieve above average returns by taking on above average risk, but to get higher returns for the same risk is difficult, especially in markets that are deemed semi-strong efficient.

On the issue of “diversified mutual funds”, I would agree that index funds (a subset of diversified mutual funds), are a good way to go for the core portion of a portfolio. These funds are typically no-load and extremely low expense ratios (see Vanguard). You mention SPR, which is an ETF, and that is fine. However, usually it’s cheaper to use the index mutuals than the ETF when you’re making regular periodic investments, because the mutuals have no charge with each investment, while the ETF will have a broker fee each time.

Here are my recommendations for reading:

The Psychology of Investing by John R. Nofsinger

The Little Book of Common Sense Investing by John Bogle

Yes, You Can Time the Market by Ben Stein and Phil DeMuth

Investment Valuation by Aswath Damadaran (a big technical valuation book)

Take care and good luck,

Tom