26 Things I Learned From Old Books on Investing

If you're interested in learning about investing, the best way to start is by reading the classics. This is what I spent the last few weeks doing (in some cases, rereading them), and I can't say enough about the trove of wisdom that's been shared over the years by the greatest speculators and investors in history.

Perhaps most interesting are the themes that recur time and again. Beginning with the years before the Civil War, when the stock market was formalized, it seems the history of investing has been on a single, continuous loop; the names of the characters change, but their roles and the underlying plot remain the same.

When I say "classics," I'm referring to five books in particular:

  • Fifty Years In Wall Street by Henry Clews, the "Sage of Wall Street" in the decades after the Civil War.
  • Reminiscences of a Stock Operator, a "fictional" work that is in fact a thinly veiled biography of Jesse Livermore, the "Boy Plunger of Wall Street" who won and lost half a dozen fortunes during the Gilded Age.
  • Baruch: My Own Story by Bernard Baruch, a Wall Street legend who was later a central player in many of the greatest international political developments of the 20th century.
  • The Intelligent Investor by Benjamin Graham, the father of modern value investing and, perhaps most notably, the inspiration behind Warren Buffett's original investment philosophy.
  • Common Stocks and Uncommon Profits by Philip Fisher, the father of modern growth investing who, like Graham, served as a central influence on Buffett's latermultifaceted approach to investing.

What can we learn from books like these that have stood the test of time? While I catalogued countless lessons reading through them, the 26 pieces of wisdom shared below are, in my opinion, the most important:

1. History repeats itself on Wall Street.

2. Investing is not easy (and those who say it is are generally self-serving). You need to know what you're doing.

3. You have to be humble.

4. Beating the market is very hard.

5. The market is unforgiving and parcels out rewards based on objective, not subjective, criteria.

6. In other words, the stock market isn't there to oblige you.

7. Never trusts forecasts.

8. Always expect the unexpected.

9. Always be prepared for a downturn.

10. Don't try to identify market tops and bottoms. It isn't possible.

11. Don't buy hot stocks or invest in IPOs.

12. When it comes to investing, you are your own worst enemy.

13. This is why temperament is more important than intelligence.

14. As a result, it's critical to insulate your decisions from your emotions.

15. Focus instead on the objective facts.

16. And think for yourself.

17. In other words, don't rely on tips or "inside" information.

18. Or on the financial media.

19. Instead, focus on finding great companies.

20. As a corollary, don't invest in mediocre companies.

21. When you come across an opportunity, don't be afraid to act.

22. But when you do act, do so judiciously.

23. When building a position in a stock, however, don't do it all at once.

24. Always keep a cash reserve in order to exploit unexpected opportunities.

25. And take advantage of time, which is the individual investor's greatest ally.

26. Finally, you have to recognize and study your mistakes (even though most people don't want to admit them).

The article 26 Things I Learned From Old Books on Investing originally appeared on Fool.com.

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