Category: How to Start Trading – Beginners

Forex is the area to focus on

Forex Educational Series – Part 2

6 min read

by Hans Stam, A Forex trader

The terminology of trading Forex

When I first started showing interest in trading, I might have been where you are now, so I will go back a long way to put myself in that place again and try to help you.

The first obvious attempt was going for stock trading and I didn’t have a clue what I was looking at.

After I had done a course on stock trading I soon got stuck on terminology.

Also, I figured out very quickly, stock trading was not for me.

At the end of the course I was getting really good grades, but in real life that didn’t do much for me as I simply did not have the money to buy stocks in masses and get something of real value back. Back then I had to go to the bank and buy stocks, but the commissions were very high and it wasn’t really worth the effort.

The other problem I had was I did not understand the language traders used, so in my writing, I will try to explain every step so you can follow this series with ease.

First, I will try to explain trading to you, before going to set up an account and trading platform, as that is a totally different story.

Options vs Forex

When I figured out stock trading was not for me simply because I did not have the money, I soon found out about trading options.

The big plus of trading options was that you didn’t actually buy the stocks, but you bought a contract to buy these stocks at a certain price.

Think of it as getting an option to buy a house, it simply means the house is being taken off the market for a while because there is a potential buyer.

Now I was able to trade at leverage. Instead of buying 100.000 shares hoping they would go up to sell them again against a profit, I could buy a contract to buy at current price and keep that option for say 3 months, if the price went up I could still buy these shares at the previous price and make an instant profit.

Instead of actually buying and selling these stocks or commodities like oil etc. the put and call options that were being traded.

The contracts were much cheaper than buying the actual stocks or commodities, but the negative to me was that if the stock went against the option, the option was worthless.

Why would anyone buy a contract that would allow them to buy a stock at a higher price than they could at the current price? If that happened, the money to buy the option was gone.

So back to Forex. Again, forex trading is being done using leverage. But this time, although you may lose some of your money, it’s always worth something.

Closing out your position (your trade) will still have some value even if the other currency went down. That’s when I knew, Forex will be the area to focus on.

Bull and Bear Market

You might have seen this before, and you probably have.

Think of the bull of Wall Street, or the phrase bullish or bearish markets.

Maybe it seems irrelevant to write about this, but once you are looking at a chart, it’s good to see of the Pairs go up or down.

When the market is heading upwards, we call that a bullish market. When it’s heading down, it’s called a bearish market.

The way to see this clearly, think of it like a bull that takes you on his horns and throws you up in the air, as where the claw of a bear crashes you down.

Explaining Pairs

In our previous example, I used the pair EUR/USD.

But how about Base and counter currency?

In this example, it’s simple to understand you can buy the Euro against the Dollar.

But what if I want to buy the Dollar against the Euro, I don’t see that pair anywhere?

That’s correct, so instead of buying the Dollar, you will now Sell the Base currency, the Euro.

That also explains the next bit of terminology, Buying the Euro (EUR/USD) now becomes going LONG, and buying the Dollar now becomes going SHORT on the pair EUR/USD.

Simply put, Long is buying, and Short is selling the Euro against the Dollar pair (Where in fact you are buying the Dollar as the counter Currency of the pair)

Analyzing the market

As you may have read in the previous article, there is a difference between trading and gambling.

So what makes the difference? And why are traders not agreeing with each other on where prices will go?

The final judge is the market itself, and sometimes you are right and sometimes you’re wrong.

To make sure you are more right than wrong, you would want to try to analyze what the market is going to do based upon what other people think.

Although, there are analyses of the market, even so, if everyone would disagree with the projections and still went another way, the market as the judge would rule that the price would head towards supply and demand.

Unfortunately, that doesn’t happen often in real life. If you’re interested in reading more about this, Google George Soros and see what he did.

The majority of traders will try to analyze based upon two different types of analyses, Fundamental or Technical.

Knowing that other traders have the same information, they will very likely try to figure out what most others decide to do based on the presented information and go along with the flow.

Fundamental vs Technical in Forex

Fundamental analyses, in a nutshell, are more or less analyzing where the market will go based upon the news and events that happen around the world.

It’s possible the influence of these analyses are very high, high enough to even close the markets temporarily. Think of an event like 9-11 or a war for example.

More common in this type of analyses are reports that are presented publicly like unemployment rates or elections etc.

Whatever the news is, usually this is affecting the market greatly and prices will go up or down rapidly, sometimes in seconds.

Once the move happens, you probably are too late already because of the speed, so many will preset orders in case the market goes up or down fast, others will already have the trade open based upon their expectations of what will happen with certain rates like unemployment.

Technical trading Forex

…is something completely different.

When trading based upon technical indicators, many will look for patterns in all kinds of shapes and sizes.

There are many tools to use, think of moving average price waves based on the last X numbers of price values.
Others are Elliott waves or Fibonacci for example.

Also, support and resistance levels are used a lot. When a price is trying to go upwards, it often happens it will try to break a ceiling, bounce back, and have another attempt to breakthrough. Once that happens often, a resistance level is forming. Other traders will see that too, and will most likely trigger a lot of buying orders once that level is broken which is a self-fulfilling prophecy as it will go up because others will buy in that direction which supports the move.

The support level works the same, the difference here is that it supports the lower side of a move.

So the difference between Gambling and Trading basically is that you can try to analyze what most traders will do and go along with that direction.

If you made it this far, you really seem dedicated to learning! Well done!

When you need mentorship, please contact me by clicking here.

Is there another way?

In short, Yes.

We’ve been over Emotions, we’ve been over Analyses. So basically I need to be a robot?

No, you don’t, you can be a vibrant human being and still get very good results.

In fact, it doesn’t have to be difficult at all, but it does require a bit of money to do it right.

I’ll say it out loud, it will take between $5.000 – $10.000 to get started, so a few hundred doesn’t really get you very far with this option.

If you want to know more about this option, please contact me here and I’ll set it up for you.

What is PIP?

For consumers, the best-known decimal is in cents.

For example, if the rate EUR/USD is 1,12 it means that 1 Euro is worth 1,12 Dollar.

It would be very difficult to trade on that decimal.

So in trading, we add a few numbers behind the comma and start trading in PIPs.

PIP (Price Interest Point) Although some have other versions, it’s the point on the market.

1 PIP equals 1/100 cent on the dollar.

Example:

1.1200 to 1.1300 equals a price change of 100 PIP’s and that equals 1 cen

1.1200 to 1.1201 equals a price change of 1 PIP…

But wait, there are more digits when I’m trading?

Correct…

When you see 1.12000 to 1.12001 that’s 1/10 PIP So we call that a Pipette.

Hopefully, this is a simple way to understand how that works.

Demo Trading

The best way to start learning is to open an account and start demo trading. You can do that by clicking here.

Those account with real live numbers are FREE to use, and most will be temporarily but on request, most brokers will extend the trial period.

It might be overwhelming at first, but the good part is, you can get to learn how it works, and you can see directly if you make or lose money.

By the time you are ready, you can open a live account, and start trading for real.

Be aware, going live is really different!

The main difference is, you can refresh your demo, where on a real account your money is gone when you lose.

I have seen people trade on a demo and all seemed reasonable, but when they switched to a real account their balance went south.

The most common difference I noticed was the demos were being traded without much stress in comparison to live-accounts.

It didn’t really matter if this was about thousands of dollars or a few dollars; the tension was just making traders fail a lot quicker on the live account.

Most common mistakes were taking profits way too early, and experiencing fear of loss which totally ruined their trades.

Although some brokers do have their tricks, it’s usually something you can figure out and workaround, but the human factor makes trading more difficult than you may think for most people.

Many also think it will not affect them until they realize they too are human.

Artificial Intelligence (A.I.)

Many of us are aware of Alexa, Siri, and other A.I. which to a lot of us is very intriguing.

For us Forex Traders this is the future.

If you want to experience A.I. which checks your trading and gives you advice on where to focus, you can try that out for free by clicking here.

What you will need is a Free demo account or set up a live-account by clicking here.

This A.I. does not give you strategies, but it makes you aware of the risks you are taking, and if you are doing well or where you need to improve.

If you are struggling to get a good score, and need to perfect your strategy, wait until upcoming articles where I will explain how to create a strategy of your own.

This is not like the trading robots you may have heard about, as I believe you always will have to keep a close eye on your trading instead of letting whatever robot take your decision from you because to a robot it doesn’t matter if it is blowing your money away or not. And of course, we don’t want that to happen.

We will go through more valuable information coming very soon!

Hopefully, you appreciate the value offered to you on this website, stay tuned!

Best Regards,

Hans Stam

risk disclosure

27th May 2019
Forex – What is it – The Differences and Similarities With Other Tradings

Forex Educational Series

by Hans Stam

As a Forex Trader, I would like to create a series of short explanations about how this market works. What are the pros and cons etc?

My aim is to make this as clear as possible, so you can follow the process step by step.

What is Forex?

Forex (FX) is the abbreviation for Foreign Exchange.

When you travel to another country, you may want to exchange your local currency to the currency of the country you’re traveling to.

At the bank or airport, you can exchange your money into the currency used in the country you are heading.

The exchange office works with an exchange rate, depending on the current value of both currencies of a “pair”.

A Pair is, for example, a euro against a US dollar which would be the EUR/USD pair, where the EUR is the base currency, and the USD the quote or counter currency.

EUR/USD – Base / Counter

At the end of your trip, you like to exchange the remaining funds again, back to your currency.

Again, the exchange rate can be changed as it is constantly changing.

So it could be very possible that you will get more value back compared to when you first exchanged it, or a lot less value.

The excitement of Forex trading

This exchange can make or lose you money, and that is very interesting to investors, especially the part where the trader can make money of course.

Just like stocks, currency can be traded on the Market, and you don’t have to go to an exchange office to do it.

So what makes Forex different from trading stocks?

First of all, you don’t have to find a buyer for the trade you are holding, you can close the trade any time you want and instantly get the current value credited back to your trading account.

The second main difference is, leverage!

For instance, the broker gives the trader a 1:100 Ratio with your broker, which means you can trade 100 times the value you pay for.

An example would be trading the Pair EUR/USD and you would buy 10.000 Euro’s, the broker will then take 100 Euro’s locked in your account while you trade the exchange rate over 10.000 euro.

It’s easy to understand you can make far more profit over 10.000 euro, than over 100 euro.

When the market goes your way

Now, when the market goes your way, and close the trade to take the profit, you get the initial 100 euro credited back into your account. So all that happened was that you win or lose the price difference from where you entered the trade to where you closed the trade over 10.000 euro.

It’s logical that when you take profits over 10.000, you make a high percentage on 100 initial deposit.

This goes both ways, so it can be risky, but the rewards can also be a very nice ROI (Return on Investment)

If you like to find out more about how you can enter this market, please visit my page.

Can you really make a living trading the Forex Market?

That is a question I’m getting a lot, so I will try to give some clarity.

The exact percentage of the people who really make a consistent profit is low.

Some speak of a top 5% and that is going as low as a top 1%.

What most traders will agree on is that the number is low whatever that percentage might be.

So how come many people are still trading this market and how come so many are struggling?

The first answer on to why so many people still have an attraction to this market is that it’s possible to make a lot of money really quick, on the other hand, they can lose it just as fast.

But in the end it is very simple, you either are right in the direction your trade will go, or not.

I will elaborate in later articles some more about market directions, but this is the basis of all trading.

The trader buys or sells at a specific price, hoping the counter currency will have a positive price change for their trade.

Forex isn’t the same as gambling

Some traders are hooked on the possibility of great profits, and you could compare it to Las Vegas Casinos, and it can be very addictive.

So that it the why people keep on trying, it’s like gold fever or putting your money on Black or Red in a Casino.

Second, why are so many people struggling with this fairly simple way of trading?

The biggest reasons are emotions and lack of knowledge which basically makes it like gambling.

The lack of knowledge speaks for itself, but how about emotions?

Many struggling traders have fear of loss and get excited too quickly when they are winning.

It’s usually when people are doubting a strategy they bought or came up with themselves and experience fear of losing.

When they see the trade going against them, they let the trade go really deep, but when the trade finally goes their way, they can’t wait to take the profit and have that excitement produce an adrenaline kick.

The strategies can be altered

Often strategies are altered, without really knowing why, but if they had that strategy a bit different on the last trade, then their loss would have been profitable in their mind, forgetting the trade would probably have been closed well before it matured.

Hindsight trading has been used a lot with this type of trader, and that doesn’t count.

The top percentage of the traders who make a consistent profit have learned to do things differently, and it would be wise for traders to have a mentor who knows where the pitfalls are.

Also, it is typical for this kind of gambling trader to put in a few hundred dollars, while in reality, the minimum should be at least $5.000 just to have a buffer.

Once a trade goes against the direction desired, it will need some breathing space. The bigger the buffer, the longer you can keep the trade open.

Fact is, you will not lose a trade until you take the loss, or when you run out of margin. So part of that is a decision, the other part financial.

If you like to find out more about strategies or have specific questions, please visit my page.

I hope this short explanation has your peaked interest, and it is clear to you how the basics work.

In the next article, I will go deeper into some facets of trading the FX Market and its terminology.

Make sure to bookmark this page, and come back to read more soon.

24th May 2019
How to invest in a mutual fund

4 min read

To invest in a mutual fund, you can buy into a mutual fund through a mutual fund company, bank, or brokerage firm (similar to stocks).

Typically, funds are either equity funds (investment in stocks), fixed income funds (investment in bonds), or money markets (kind of like cash).

You will have to consider what is the minimum threshold for investing in the mutual fund. Because different funds have different investment minimums.

Also, you will have to decide if you want to invest in a load or no-load fund.

This means you will either be paying commission or not. But regardless of if you invest in a load or no-load fund, you’ll still be paying some fees. So, you have to factor that in when deciding.

And, it is really simple to invest in a mutual fund.

You simply determine the amount of money you’d like to invest in a mutual fund over the phone, online, or in person. There are so many options today.

Online brokers generally often offer more diverse selections. However, you will have to open an individual retirement account.

There are several expenses to account for. Like, transaction fees accumulated when investing in a mutual fund, early redemption fees if you wish to sell a fund in the first 60 to 90 days, and expense ratios that are a percentage of your investment.

You can make money off of your mutual fund by selling it for more than you paid for it. Or through a variety of distributions like dividends or interest that can be paid out throughout your investment. However, most mutual funds will reinvest dividends for you unless you specify otherwise.

Can money invested in mutual funds be lost?

We will try to keep it simple. If you have invested only in mutual funds, theoretically the money can be lost.

Reasonably – it depends.

Well, investments are time unstable. So, at some period, your portfolio can hit the loss.

But over the long period in time, the odds of losing your money are close to null.

Yes, there might be accidents like some major market breakdown which could destroy your collected profits notably. But, in most cases, it is for a short time and markets would recover and your investment too.

Let us explain.

During the 2008 financial crisis, the fall in stock prices led to near 50% decline in the portfolio value of many people nearly throughout the world. Many people had panicked because this was a huge story. But, inside a one year, the portfolio value jumped back to its 100%. So, if some investor was really holding till today, it would be extra up 50–60% at least. In short, the possibilities of losing in the long-term are very small when investing in mutual funds.

Take a look at this chart:

Let’s do some math.

You invested $100 and holding it for 10 years earning 15% CAGR = $404.5.
You remember from the previous lessons: CAGR is the compound annual growth rate (CAGR).

Some breakdown in the 11th year decreased prices by half – $202. But, this is still a return of 7.3%.

The risk, if you are forced to sell here is not reaching your financial intentions and considerably it will influence your habits if you are retired.

But what we can learn from the history of the present business world? The value of assets has jumped back to healthy from the critical after the great depressions.

One note more. Instead of focusing on the systematic investment plan (SIP) a better choice is a focus on the systematic withdrawal plan (SWP). That’s the point where you begin to take out your money from risky assets. You are close to your goal and place in secured assets.

So, the chances of not reaching your financial aims are reduced.

The note: Mutual fund investments are subject to market risk.

You have to keep this in your mind forever when investing in mutual funds. There are no investments without some risk associated with it.

Missing or getting the money depends completely on the investment period an investor picks.

We will show you how it looks in one more chart. We aimed out the period of big crisis 2008, in the red circle.

For example, you invest $1,000 for a day or two. If the stock market slips the preceding day, the value of your $1,000 will surely not appreciate.

Also, if you invest the same amount for a week and the market is in a downtrend throughout that week, the invested money will not yield any profit.

If you choose to stay invested for a year or more than that, though there is no guarantee, there is a possibility that your $1,000 may go up as a long-term investment horizon is always likely to give better results.

In other words, you won’t lose all your money.

Money can be lost mostly due to wrong timing.

When the market is bullish, people invest aggressively. When the market corrects, people get scared and they take out money when the market is down or sideways.

Say, investing in stocks through mutual fund route is a safer way to putting in money in the ever-volatile stock market. In a mutual fund, your investments are managed by professionals, who ensure the protection of your capital.

Past trends have shown that usually mutual funds are profitable giving an average return of around 10-12%.

Mutual fund investments become even safer and convenient if done via SIP (Systematic Investment Plan) route. SIP is a type of investment set up whereby rather than putting in a lump sum, you put in small amounts of money either in monthly, quarterly or annual installments. This, in turn, enables the fund to benefit from the power of compounding and also isn’t too much of a burden on the investor.

risk disclosure

20th May 2019
Mutual funds are an opportunity to make wealth

3 min read

What are the benefits of mutual funds? How much do they cost? Which funds are right for you? What should you consider before investing?

These are just a few of the questions we’ll answer here.

Mutual funds are not bank deposits and are not guaranteed by any government agency.

They involve risks, including the potential loss of some or all of your investment. Past performance is not a solid sign of future performance.

However, it can help you evaluate a fund’s volatility and how it operates in various market circumstances.

WHY INVEST IN MUTUAL FUNDS?

Advantages

As an example, more than 100 million Americans use mutual funds to invest in their long-term goals. Here are some of the benefits they offer:

Professional management

When you invest in a mutual fund, your money is managed by full-time professionals. They research and select investments that are appropriate for the goals of each fund, and monitor the fund’s performance so they can change the portfolio when needed.

Diversification

Buying shares in a mutual fund make it comfortable for you to spread your investment over many different companies and industries. This may help to protect your assets over market volatility. Nevertheless, diversification doesn’t ensure a profit or defend against a loss.

Choice

Mutual funds give you a wide variety of choices to help meet your financial goals. You can invest for different objectives, at different levels of risk and in different kinds of securities.

Affordability

Mutual funds allow you to invest with a nearly small amount of money. Without a fund, it would usually demand a much considerable investment to build such a diversified portfolio.

Liquidity

You can ordinarily sell your shares at any moment and for any cause. Anyway, there may be exceptional moments when fund purchases are limited because of some extreme market requirements.

Automatic Reinvestment

Mutual funds give you the choice of reinvesting your yields and capital gains in new shares of the fund, without being indebted a sales charge.

A mutual fund is when a group of investors gives money to managers to invest in diversified securities. It can be stocks and bonds, for example. Because it’s group, every part-owner as the investor is, profits and loses an equivalent piece. The costs of the mutual fund are divided according to the cost proportion. And, because the funds are diversified among stocks or bonds and other securities, they are regularly lower risk than individual stocks or bonds.

To some investors, choosing individual securities to invest in and guide can be a risky task.

Access mutual funds. With benefits like added assurance and lower risk, mutual funds are one of the best investment opportunities to enter the market. But before you take your place into the group funds, you need to know the tricks.

Mutual funds are under the control of money managers.

They create portfolios for investment with a pool of money. Often, they have different kinds of investment goals. Some managers, like fixed-income managers, focus on generating low-risk, high pay-off investments for their funds, while long-term growth managers try to beat the Nasdaq or S&P 500 during the fiscal year.

Shares in a mutual fund are typically bought at the fund’s current net asset value (NAV, or sometimes NAVPS) per share. This figure is determined by dividing the total value of all the securities in the fund by the number of outstanding shares.

Mutual funds are actually investments like buying stock in companies.

Investors purchase shares into the mutual fund. That, in turn, provides them a right to the fund’s assets. Hence, the value of the mutual fund represents the value of its portfolio.

Let’s say you invest in a mutual fund. Well, not you but a manager will invest the public funds added to the fund. A manager will invest them in several securities, for example in stocks and bonds.

The manager is ordinarily selected by a board of directors and is frequently an owner of the part in the fund.

Such a fund manager will pick analysts to help in making investment decisions. Majority of funds will engage some accountant who’s task is to measure the net asset value of the fund every day. That will define the price of the share in the fund.

Most mutual funds also have compliance officers who keep up-to-date on regulations.

When investors purchase into a mutual fund, their money is managed by the fund manager. Such professionalist invests that money in different assets with specific intentions for risk and returns in judgment: like long-term increase or fixed-profit.

Some funds may be more dangerous than others, that’s true. But usually, the composition of a mutual fund manages risks well-known low.

Mutual funds only trade once daily and are often part of a 401(k) or an individual retirement account, IRA.

The biggest benefit of mutual funds is, they are handled by someone other than the individual investor. You just have to put the hard decisions in an expert’s hands. The fund manager is more prepared for reasonably allocating our funds than we could do it by ourselves.

The mutual funds regularly submit several portfolios with a group supply of money. So the personal risk to all investors is lessened. So we can say that mutual funds are honestly low-risk and high-reward.

But, mutual funds include some fees in the kind of annual fees and stockholder fees.

Annual running fees usually are 1%-3% of the annual funds under control. The stockholder fees are in line with the commissions paid by when buy or sell funds.

Besides that, an obvious lack of mutual funds is that you don’t have constant control of stocks you’re investing in. Hence, for some traders, this may produce some difficulty, particularly if your fund begins dropping.

Don’t waste your money!

risk disclosure

19th May 2019
Young investors feel stress and insecure while investing

The survey “War on Stress” showed young investors feel stressed and insecure while investing.

By Guy Avtalyon

Young investors are stressed when investing. Janus Henderson, the Financial Planning Association and financial portal Investopedia recently conducted a survey named War on Stress about the young investor and their feelings about investing.

This survey is important because the result showed a high level of stress among young investors.

The main concerns among millennials are increasing student loans and stagnant salaries. That makes them stressed more than anything. Those circumstances are in line with their stress.

This survey shows that 53% of millennials are not earning enough to satisfy their financial obligations. So, they have no possibility to invest. The advice coming from financial advisers and experts that exactly Generation Y should start the first investment as soon as possible, sound pretty nice but not relevant for the young people

Stress has an influence on the young investors

Yes, but in other fields of their lives too. The survey shows that stress is a “significant” or “moderate” for their spirit, prosperity, and well-being because it is present in their everyday life.

Young people under the age of 35, said that they are somewhat or very concerned about the effects of a market downturn.

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It is very strange because early investing gives them an opportunity to invest for a longer period of time and make corrections in their portfolios if it is necessary. They have much more time to recover if they hit the losses. Anyway, they have much more time than older.

Stress among millennials

On the other hand, a high level of stress among millennials is logical.

The majority of young investors started to work during or near the time when the financial crisis has begun. People under 35 have fears about their jobs and financial chances, which is in correlation with the possibility to lose jobs and financial support.

And they still didn’t pay off their student loans.

Investing is triggering more stress for them.

Their salaries are $2,000 lower than that it was the case before the crisis., according to the National Association of Colleges and Employers in the US.

Young investors are disappointed with their financial condition.

More than 32% of them under the age of 35, points exactly that problem in this survey.

Previous generations never had such difficult and heavy packages on their shoulders. For example, their student debts were much lower. But not only younger investors feel uncertain. The whole range of investors between 35 and 44 age have worries about retirement. So, stress is the problem for each group younger than 45 age. All of them are upset with the level of stress that they’re feeling.

The 2019 War on Stress survey recognized an important distinction between younger and older investors. It is the difference in the mindsets and stress levels. Millennial investors with some level of financial security and financial goals claimed that they feel less stress.

The conclusion of this survey is that ‘financial literacy and an established plan may have an effect on reducing stress. Well, that is common with other investors.

10th May 2019
The Worst Investor of All Time

There is no such thing – worst investors. Yes? No? Read to the end.

By Gorica Gligorijevic

The stories about the most successful investors are well-known.

Okay! Not all and not everything.

But have you ever heard about the worst investors? Yes, you probably heard about less successful and about great losses.

But out there, in the markets, is one man who did everything wrong.

Yes, he had a great passion for investing, markets, and, most of everything, desire to earn wealth. Moreover, he was on the right path. But he did things at the wrong time. We ran into this tale randomly and was fascinated with this example.

The name of that investor is Bob.

Actually, he is the worst market timer ever. The worst investor of all time.

And lets the story began. Bob started investing in 1970 when he was 22. He planned to save $2,000 per year and increase his savings for $2,000 every next year. So, his plan was to hit that amount and retire at age 65. It should be in 2013.

In 1972, he had $6,00 savings on his bank account and was ready to make his first investment.

He invested in the S&P 500. Just before the market crash for the S&P 500 for almost 50%. He put all his money at the peak of the market. And we all know that after the peak follows drop.

Bob didn’t sell his stocks. He held them tight.

Why?

Maybe he was expecting them to grow again or he was confused or nervous. Every scenario is possible. This decision caused his later destiny.

His case is the best example of the Greater Fool Theory.

Behind the Greater Fool Theory is an idea to neglect the fundamental analysis of asset values. The main hope is to sell your stocks at a higher price to some other greater fool. Bob, the worst investor of all time, held shares in small tech company Wind River. He earned some money, not a small one, the real money.

And the 90s came.

Bob made his second mistake.

He bought the Iomega stocks at its precise peak. At the moment when their share price was on the maximum. It looks like Bob liked high-tech. Or he had confidence in new technologies. You have to admit that his predictions were good but the timing was wrong.

The tech bubble really went up at the end of 1999. Bob had $68,000 of savings to invest. And he bought, just before a 50% or more market downturn that lasted until 2002.

This the worst investor of all time somehow made losses on Facebook 2012. He bought into the IPO and sold these stocks because he noticed that they are climbing down. If he was patient for only one year his investment would be bigger for 40%. That was the difference between the price he bought Facebook shares and price in 2013.

This the worst investor lost money on Tesla also.

Tesla was up to almost 600% after Bob sold. Following his own loser’s pattern, Bob made another wrong decision. When the stock market crashed in 2008 and interest rates dropped to null, he recognized dividends as a 100-percent sure plan to make a profit.

Bob bought Star Bulk Carriers Corp. The dividend yield was 10 %.

He was defeated.

Dry bulk shippers had been hit hard. They lost 95% of its value in a frame time of 8 months. Theoretically, it was expected that Star Bulk should have a steady cash flow. But one of the company’s customers declared bankruptcy. Star Bulk gave the shareholders some cash to hold them satisfied. Actually, they got half of the dividend.

It was not the end.

Bob tried to trade the ETFs in March 2009.

He bought the Direxion Daily Financial Bear 3X Shares. Exactly at the time that stock prices were on their way to hit the bottom. He lost a fortune.

He bought China Mobile in 2007.

Bob read a hopeful report about the increasing amount of Chinese cell phone users. Of course, the price fell the day after his purchase. His worst mistake when he moved most of his 401(k) into cash 2014. But this story has a happy end. Bob ended up a millionaire with $1.1 million.

How is it possible?

Bob planned out his savings. He never paused on his savings goals.

Anyway, Bob was the worst investor of all time.

9th May 2019
John Bogle – Proud He Was a Billionaire

Who was John Bogle?

By Guy Avtalyon

John C. Bogle, also is known as Jack, was born May 8, 1929, in Montclair, New Jersey. Also, known as one of the Bogle Boys. He had twin brother David Caldwell and older brother William Yates III called Bud. John Bogle studied at Princeton University and in 1951 got a degree in economics. But he didn’t stop his education road. He attended evening and weekend courses at the University of Pennsylvania.

After graduating his main interests were banking and investments. Bogle got a job at Wellington Fund. He worked in administration, marketing and distribution, securities analysis, and shareholder relations. Thanks to his knowledge he climbed very fast in the company’s hierarchy. He became an assistant manager in 1955.

That was a wonderful opportunity for such an analytical mind. He got full access to examine the company and the investment activity. He was ambitious. John Bogle had the initiative. He wanted more and better. Jack Bogle wanted a new fund. And finally, Wellington management changed its strategy of focusing on a single fund. That was Bogle’s first victory and the turning point in his work.

In 1964, by age 35, John Bogle became a CEO, and six years later a chairman of Wellington in 1970. He managed this company with a strong hand. Also, many of his associates claimed that he was rigid. What was all that about?

Bogle insisted the firm diversify its product list in 1958 with the introduction of the all-equity Windsor Fund. He was an innovator. The other innovations followed this one.

But be patient, this is a tale about one of the most brilliant minds among investors. He made a revolution creating the world’s first index mutual fund in 1975. Also, this man changed investing eternally with index funds. He invented the index fund as a form for retail investors in order to provide them to be able to participate in the market with the professionals.

What did John Bogle uncover?

John Bogle uncovered a system for retail investors to approach the market but at a much cheaper cost than the mutual fund. And, you know, if you want something to be done and have a vision and you know that other people can’t see the same goals as you, and you know that they are wrong or tiny-minded, you must be rigid. Especially if you want to succeed. That’s how John Bogle became the titan of low-cost investing.

Bogle was strongly competing from his early days. His battle-fields were all, tennis yards (what a strong drop shot he had) or crossword puzzles or business and markets. His habit was to complete crosswords from the New York Times in ink and later compared his time needed to finish to his children and brothers.

That is a competitive temper! But we have to stay on the course! Bogle’s career had ups and downs. Not a lot of downs, but important to be mentioned. So, the asset management wonder-man made a crucial slip. He approved merger Wellington with Thorndike, Doran, Paine & Lewis. It was an offensive mutual fund company from Boston. Institutional Investor magazine named this new energetic crew of five young managers “The Whiz Kids.”

In 1974, the bull run was over. The bear market of 1973-74 led to bad achievement for Wellington’s funds. The merger was characterized as extremely unwise and was approved by Bogle himself. It caused conflicts between the associates.

John Bogle was fired from Wellington.

Later, he rated it as his biggest mistake, stating, “The great thing about that mistake, which was shameful and inexcusable and a reflection of immaturity and confidence beyond what the facts justified, was that I learned a lot.” Also, he called it “the most heartbreaking moment” of his career.

He was 44, six children. Bogle was out of a job and sick, he had a weak heart. The doctors had told him he had a few years living and advised him to retire to the seaside. He didn’t accept that. But still, he was chairman of 11 Wellington’s funds and he used them to build Vanguard, a new branch concentrated on Wellington fund management.

Bogle offered a new mutual company.

When did The Vanguard Group start?

The Vanguard Group started services on May 1, 1975. With $1.8 billion in assets and staff of less than 50. Bogle gave this name to the new mutual company in memory to Lord Nelson’s flagship and the famous British victory against Napoleon’s fleet at the Battle of the Nile in 1798.

Bogle later said he “wanted to send a message … that our Vanguard would be, as the dictionary says, ‘the leader in a new trend.’ “

“Our challenge at the time,” Mr. Bogle evoked, “was to build, out of the ashes of major corporate conflict, a new and better way of running a mutual fund complex. ‘The Vanguard Experiment’ was designed to prove that mutual funds could operate independently, and do so in a manner that would directly benefit their shareholders.”

When the first retail index fund was created?

It was 1976 when the first retail index fund was created. Very soon, it bought every stock in the S&P 500 index and established the market’s average return. The result was totally sales droop. Only a small number of investors wanted a guaranteed average. Everyone like highs. Big returns, great profits!

Bogle had a lot of critics. It took time for the strategy to be adopted and recognized as a revolutionary type of investing. For the past 5 decades, academics have been discussing the “Efficient Market Hypothesis.” In its most radical mode, EMH states that you might select stocks with a dartboard because they are reasonably priced.

Wall Street responded with what they call “pockets of inefficiency.” Bogle, intelligently, gave up the discussion. His point was that you don’t have to believe the EMH. You just can see things his way, he said.

Bogle believed in what he called the CMH: the Cost Matters Hypothesis. To beat the market you need money.

Vanguard’s first index fund was taunted as an “a sure path to mediocrity,” according to the firm. The index fund makes up 70% of Vanguard’s $5.1 trillion in assets today. He was a great proponent of the mutual fund as an investment vehicle, but at the same time, Bogle was the mutual fund industry’s severe critic.

What did John Bogle criticize?

John Bogle criticized high costs, dishonest advertising, and product conception during his whole career. His radical ideas secured him a reputation as “the conscience of the industry.”

“If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle,” said Warren Buffett.

Bogle hadn’t been delighted with the form the market adopted his idea. After Bogle’s death on January 2019, Jeff Cox wrote for CNBC:

“When he put together the First Index Investment Trust, it was a mutual fund, which prices at the end of the day and cannot be traded during normal market hours. What has happened to passive investing since has been quite a big difference.” Almost half of the passive field is filled by ETFs now.

They offer lower fees than most mutual funds. Investors are able to trade them through the day. That ability makes them subject to the impulses of the market’s liquidity matters.

John Bogle didn’t like that concept

He hated it so much that he called people who deal in ETFs “fruitcakes, nut cases and the lunatic fringe.” Bogle wanted to explain his opinion about this issue in his final book, “Stay the Course, The Story of Vanguard and the Index Revolution” (Wiley, 2018).

He claimed that ETFs are principally the sphere of speculators with the “rapid trading” in ETFs “done by financial institutions that use them to hedge or equitize cash reserves.” “The arithmetic suggests that only about one-sixth of ETF assets are held by investors with a focus largely on the long-term,” Bogle wrote in his book.

Well, his conclusion at the end of that chapter in the book is that he can support the funds as long as they are wide-based and not used for speculation.

Bogle as a public speaker

Jack Bogle was a pleasant and internationally desired speaker. He would spend hours writing and rewriting his notes. His speeches to the Vanguard crew were legendary. You can read them in his book “Character Counts: The Creation and Building of The Vanguard Group.”

Also, he was a philanthropist, from organ donation to the National Constitution Center. With his brothers, he established “Bogle Brothers Scholarships” at their former college they also attended Blair Academy and Princeton University.

Bogle was a frequent commentator on the financial markets for media, giving advice to individual investors. He wrote 12 books. His best-selling is Bogle on Mutual Funds (1994). About this book, Warren Buffett said it is “the definitive book on mutual funds.”

His last book “Stay the Course: The Story of Vanguard and the Index Revolution” was published in 2018. Bogle suffered many heart attacks. He had a heart transplant on February 21, 1996. Eight weeks later, he was back at work in his Valley Forge office and received a Fund Leader of the Year award.

Incredible and fascinating story, don’t you think! It is impressive how he managed to stay alone with his ideas while everyone was against him. Even his health. But Bogle had self-confidence and strongly believing in his ideas.

That power, that strength to continue despite the opponents, to create something completely new is impressive. He was a real revolutionary.

You have to admire it.

5th May 2019
George Soros – The Man Who Broke the Bank of England

5 min read

This is a story about surviving, great success and philanthropy.

George Soros was born as Gyorgy Schwartz in Budapest, Hungary, on August 12, 1930.

His parents were Tividar and Erzebat Schwartz.

With increasing anti-Semitism, the danger for Jewish arose. To avoid Nazi persecution, George’s father changed the family

name to Soros. George was just a teenage boy in 1944 when survived Nazi aggression and occupation of Hungary.

History would never be the same if he didn’t.

The different danger shaped their lives after the end of WWII. Communist domination in Hungary managing by the Soviet Union (USSR). Having the fact that they were cruel with their own citizens, made Hungarians frightened for their lives.

George Soros decided to emigrate.

In 1947 he went to England and began to study philosophy at the London School of Economics under Karl Popper.

Today we can say that Karl Popper’s “The Open Society and Its Enemies” had a great influence on him. In this philosophical masterpiece, Popper criticizes totalitarianism.

The basic idea is that no ideology controls the truth and society can grow only when it is free and open. The main lesson is that respect for individual rights can maintain such a society. Soros was attracted by Popper’s biography and the fact that this book was written during WWII.

Popper was not only a philosopher but also a journalist. While working as a war reporter he started thinking how could Adolf Hitler and national-socialism happen at all.

Popper started writing Open society in order to analyze the history of political ideas and to find an answer to the question above. The whole book was written before the end of WWII.

But Soros never became a philosopher. Actually, he is the greatest philosopher among investors or the greatest investor among philosophers.

Instead, he entered the London merchant bank Singer & Friedlander.

Soros’s first investment

Soros graduated in 1952. Four years later he bought a ticket and sailed to America. He got a job at Wall Street brokerage “F.M. Mayer”.

At first, he worked as an analyst of European securities. Soros, being excellent educated and intelligent, rapidly made success.

He changed firms in the following years and finally decided to start his own business. In 1970 Soros founded his own hedge fund with $12 from investors. The first name was the Soros Fund Management but later he changed at Quantum Fund and the Quantum Fund Endowment.

The rest is history. George Soros became one of the most successful investors in the history of the US.

But we will give you more details because he is an extraordinary man.

He is one of the rare individuals whose example is worth to follow.

The man who broke the bank of England

George Soros grew to one of the most recognized currency traders, thanks to his brilliant bet placed against the Bank of England in 1992. He entered history.

That event is well-known as Black Wednesday.

His bet was that the British Pound price would fall in value.

But let’s start from the very beginning.

In that time, the early 1990s.

It’s essential to explain the political background of Europe at that time. Europe was in the middle of preparation for something today known as the European Union. Their first aim was to set a unique monetary system and monetary stability. They wanted to put Euro on the stage later. The money which will be unique to all member countries.

But, at that time Europe has a combination of different currencies inside the ERM (European Exchange Rate Mechanism). The monetary union was one of the first steps which led to the European Union.

Not all would like this. Some of the countries that geographically belongs to Europe never entered the Union because of domestic coins. They were assured that such a movement would have consequences for their countries economy.

There were a lot of debates inside their parliaments about that issue.

The British government wasn’t an exception.

George Soros was a big investor in that time. He had a lot of experience and success too.

Of course, he was well informed about all the news in the market and politics.

And what Soros did?

The economic conditions assure him that the best move on the market to build a short position on Pound Sterling. He was working on it up to September of 1992.

At that time the UK government noticed that the value of Pound Sterling is climbing down and they decided to reverse it from the ERM in order to keep their national currency value.

And that was a fantastic opportunity for investors like Soros. The great advantage.

Thanks to his short position in the currency trading Soros short sold more than $10 billion calculated in pounds.

Taking this move alone brought billions of dollars to Soros.

More details

The UK agreed to connect the British Pound to German Deutschmark.

The value of 2.78-pound sterling was equal to 3.13 Deutschmarks. But the UK was kicked by the economic recession.

The normal reaction would be to lower interest rates in order to support the national economy. But there is the trick.

Lower interest rates have a negative influence on the currency value, so they wouldn’t be able to maintain pound’s value against the Deutschmark.

The biggest dilemma was: should the UK government try to recover domestic economic growth or enter the ERM. They choose ERM.

The Bank of England made such a big mistake, it raised interest rates. At the same time, they started to use foreign currency reserves to buy the Pound.

That gesture opened the space for short selling. Investors, Soros first of all, recognized that the UK is in the middle of economic depression.

Over two years period, the U.K. proceeded to defend its currency. Those cost billions. They were building a house of cards actually.

In August 1992 the German Bundesbank got the idea that currencies in the ERM could be revalued.

The president of Bundesbank at that time was Helmut Schlesinger.

He was prepared to make a big move. He was ready for a devaluation.

The Bundesbank explored the possibility to set a new lower fixed rate with respect to a foreign reference currency.
That totally changed the risk/reward to a short Pound position.

The Pound would be weaker in any possible scenario. If pound didn’t devalue or if it did. Of course, if it declines it would be by large volume.

At that very moment, Soros told his top trader, “Go for the jugular.”

Soros’s fund, which was building several months, sold $10 billion

Soros’ fund sold $10 billion value of Pounds short.

The pressure on the Bank of England came from other investors. Everyone wanted to sell the pound.

Then the Bank of England made new mistakes.

First, they tried to raise interest rates by 2%. On first glance, it is a logical reaction that should lead to currencies appreciation. But this decision didn’t generate the Pound’s rally. Then they raised interest rates by 3% more on the same day. Well, they hit further selling Pounds.

Nothing helped. At the evening of the same day, about 7:30 the Bank of England stated that Britain would leave the ERM. That meant that the currency on the market. It was their last attempt to save the Pound.

But Pound promptly fell 15% against the Deutschmark and 25% against USD.

And the star was born. Soros become a trading legend. In the next five years, his net worth was $23 billion thanks a lot to this short selling.

The UK decision made Soros richer by more than a billion pounds.

And won the name “The man who broke the Bank of England”.

Black Wednesday is universally known as the day that George Soros broke the Bank of England and made over $1 billion.

George Soros and Philanthropy

George Soros began his philanthropic activity in 1979, and he established the Open Society Foundations in 1984.

“When I had made more money than I needed for myself and my family, I set up a foundation to promote the values and principles of a free and open society. ”

The scholarships given to black South Africans under apartheid 1979, was the beginning of Soros philanthropy.

During the 1980s, he supported the development of the open exchange of ideas in Communist Hungary. Soros was financing educational visits to the West and supporting other actions.

He founded the Central European University to encourage critical thinking after the Berlin Wall fell.

George Soros established the Open Society Foundations in 1984.

When the Cold War was over, he constantly spread his philanthropy to the United States, Africa, Latin America, and Asia.

“George Soros is the only American who rivals the great philanthropists of the 1890s, John D. Rockefeller, Andrew Carnegie, and Julius Rosenwald,” said Nelson Aldrich Jr., editor of The American Benefactor, in a 1996 New York Times profile of Soros.
He supported efforts to create more responsible, open, and democratic countries.

He criticized the war on drugs as “arguably more harmful than the drug problem itself,” and also, helped to start America’s medical marijuana movement.

Soros is a supporter of same-sex marriage efforts. The Open Society Foundations are against discrimination lesbian, gay, bisexual, transgender, and intersex communities. It promotes and defends human rights.

Soros supports autonomous groups and organizations such as Global Witness, the International Crisis Group, the Institute for New Economic Thinking, the European Council on Foreign Relations.

Since 1984 Soros gave to the different humanitarian organizations and through his foundations more than $30 billion of his fortune.

We have to say that thanks to Soros’s engagement, personal and through his organizations, many very important issues on the field of human rights are not only opened, but they are also solved or close to be. Whenever.

“I’m not doing my philanthropic work, out of any kind of guilt, or any need to create good public relations. I’m doing it because I can afford to do it, and I believe in it. ” – said, George Soros.

Don’t waste your money!
risk disclosure

1st May 2019
Warren Buffett – Oracle of Omaha

4 min read

Warren Edward Buffett is his full name. Buffett was born on August 30, 1930, in Omaha, Nebraska.

His father was a stockbroker and a U.S. congressman.

Mother was a housewife.

Among their three children, Warren was the middle one and the only boy.

From his early days, it was obvious that he is extraordinary, unusual and ingenious.

When he was 13, Buffett was managing his own jobs as a paperboy. Also, he was retailing his own horse-racing tip sheet. And he did it very well because in the same year he filed his first tax return.

Oh, yes! A brilliant mind declared his bike as a $35 tax reduction.

Buffett studied Woodrow Wilson High School, Washington, D.C. And shaped ideas on how to make money. With a friend, he bought a second-hand pinball machine for $25 while attending high school.

In a few months, the profits provided them to buy more pinballs. Buffett controlled pinballs in three separated places in one moment. After some time he sold this business for $1,200.

Have you ever see such a demonstration of talent for financial and business affairs early in someone’s teens?

Wait! There is more!

Warren Buffett was a mathematical genius.

He had the ability to keep large columns of numbers in his head and repeat them by heart.

This talent he demonstrated sometimes later just to impress the audience. There was no other reason because he already had great success behind.

Warren liked to attend father’s stock brokerage shop when he was a child. The main reason was the game he played, chalking the stock prices on the blackboard in the office.

When he was 12 he made his first investment.

Buffett bought just three shares of Cities Service Preferred. He paid $38.25 each. Warren had saved $120 and he registered his sister as a partner to buy three shares.

The stock soon fell to $27.

While the majority wanted to sell them as fast as it was possible, Buffett held them until they went up and reached $40.

Then he sold them, making a $5 profit. And it was his first investing mistake because they exploded to nearly $202 per share.
He regretted his judgment so much that later when he became a famous investor, he noticed this occasion as one of the first and most important lessons about patience in investing.

He was really shocked. Warren saw that he and his sister would have a profit of almost $500 if he held shares a bit longer.
But he learned the lesson, and it is more important than $500.

His whole life was a demonstration of that knowledge.

In Columbia University he learned and finally formed his investment philosophy – value investing. It is based on a concept established by Benjamin Graham.

Buffett attended New York Institute of Finance to shape his economics education.

Soon after that, he began numerous business partnerships. One with Benjamin Graham.

Warren Buffett’s companies

Acquaintance with Charlie Munger brought the Buffett Partnership. This company acquired a textile manufacturing firm, Berkshire Hathaway.

Soon after, this led to a diversified holding company with the same name.

Let story to be told.

In 1956 Buffet established the “Buffett Partnership Ltd” in Omaha.

He was mastering in recognizing undervalued companies thanks to methods learned from Benjamin Graham.
He was so successful! Of course, he became a millionaire.

One of the undervaluing companies was Berkshire Hathaway. Buffett started buying its stocks from the 1960s, and in four or five years he had seized control of Berkshire Hathaway.

The Buffett Partnership was a successful company. But despite that, Buffett melted the firm in 1969. He was focused on the expansion of Berkshire Hathaway.

What did he do?

He dismissed the textile manufacturing sector. He was developing the company by purchasing assets in media, insurance, and fuel.

In short, Buffet bought The Washington Post, GEICO and Exxon.

An incredibly successful person got the nickname “Oracle of Omaha”.

The “Oracle of Omaha” even succeeded to turn obviously poor investments into treasure.

Let us tell you this story. Incredible one.

On the early 90s was revealed that traders in Salomon, bond trading firm, were setting incorrect Treasury bond bids to avoid trading rules.

Mike Basham, US Treasury Deputy Assistant Secretary, heard that Salomon trader Paul Mozer had been submitting false bids. He tried to purchase more Treasury bonds than allowed by one buyer during the period between December 1990 and May 1991.

Earlier, Berkshire Hathaway became its biggest sharer, and Warren Buffett became its manager.

Actually, Warren Buffett was temporary Chairman of the Board in 1991 and 1992, after the firm’s emergency takeover by Warren Buffett and integration into Citigroup.

Salomon Brothers was a Wall Street stronghold for most of the last century. But the firm fell from love after it was revealed that it is involved in a series of scandals.

The Salomon scandal dried off one-third of Buffett’s investment.

Buffett decided to take the controls of the company for a period of nine months.

Everyone thought that it was a bad investment for Buffett.

But the ”Oracle of Omaha” not even one moment hesitated to take the thing in his hands.

He started firing employees involved in the scandal with cold blood.

Warren Buffet managed to restore the firm and the recovered firm was sold off to Travelers Companies Inc

And Buffett earned an impressive profit. He doubled his investment.

So, the “Oracle of Omaha” even succeeded to turn obviously poor investments into treasure.

You can find more details in the book “Nightmare on Wall Street.”

Buffett began buying stocks in the Coca-Cola Company in 1988 which resulted in 7% of the company for $1.02 billion.
It was one of Berkshire’s best investments.

Buffett was the director of the company from 1989 until 2006. And also, he was the director of Citigroup Global Markets Holdings, Graham Holdings Company, and The Gillette Company.

Buffett’s work even earned him a glamorous venture into the movie business. Oliver Stone’s film, “Wall Street: Money Never Sleeps,” added cameos by Warren Buffett and short-seller James Chanos.

Also, he appeared in “The Billionaires’ Pledge” and “The Berkshire Apprentice”.

HBO also created a documentary “Becoming Warren Buffett,” two years ago.

The documentary is mostly narrated by Buffett and includes interviews with people close to him. For example, his sisters, children, his business partner Charlie Munger, and Bill Gates.

Warren Buffett is the subject of the bestseller “The Snowball”.

The full name is “The Snowball: Warren Buffett and the Business of Life”.

The Snowball was Amazon.com’s best business and investing book of 2008. Time Magazine, People Magazine, and critic Janet Maslin of The New York Times named it one of ten best books of the year.

He is a philanthropist too.

In June 2006, Buffett announced that he would give his entire fortune away to charity. His donation is one of the largest in US history. His contribution makes 85% of the total of Bill and Melinda Gates Foundation.

But Warren Buffett is political active too.

Can you understand why this is so important?

Buffett has so much money that can live isolated from the rest of the world.

But he is not selfish.

This guy who is every year ranked near the top of the Forbes world billionaires list was a vocal supporter of Democratic presidential nominee Hillary Clinton.

Three years ago Buffett launched Drive2Vote, a website aimed at encouraging citizens in Nebraska to use their right to vote.
Also to assist in registering and driving voters if they needed a ride.

The bottom line

Over his 54-year ownership of Berkshire Hathaway, Buffett has produced 20.5% annual returns for shareholders.

If someone put $1,000 investment in Berkshire when Buffett took the controls, today such would have $24.7 million.

The Oracle of Omaha wrote in his newest annual shareholder message in February this year that he’s wanting to make an

“elephant” of a deal, in order to help Berkshire Hathaway’s portfolio fly higher.

The legend among investors Warren Buffett is still working, every day at his 89.

And for the end of this story about Warren Buffett, here is one of his marvelous quotes:

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

So, readers, when you become rich, think about others and follow the example of the best.
Anyone can do it.

Think you know where are the markets gonna go?
risk disclosure

29th April 2019
Benjamin Graham – The greatest investor in the history

4 min read

Benjamin Graham is widely recognized as the father of value investing.

He was born as Benjamin Grossbaum on May 9, 1894, in London as the oldest son into a Jewish family.

When Graham was one year old, his parents, Isaac M. and Dorothy Grossbaum, migrated to the US. They lived in New York, where Isaac began an export-import trade.

His childhood was really traumatic.

He was just a nine-year-old boy when his father Isaac died. Graham’s mother Dorothy stayed alone to take care of Benjamin and his two younger brothers, Leon and Victor.

Fathers death was one just a first in serial of unfortunate events.

His mother Dorothy stayed to manage the family business but the Bank Panic stole her savings 1907, four years after her husband died.

The family was dumped to poverty. Almost over the night, they lost everything.

And finally, the family was forced to move in with her brother.

But Benjamin Graham didn’t give up. He worked harder on himself.

He became a really good student. Graham was an excellent student at school. He entered Columbia University on a scholarship.

He graduated in 1914 as salutatorian of his class at Columbia.

Salutatorian is an academic title. This honor is known in the United States and the Philippines. This means that Benjamin Graham was the second-highest-ranked graduate of the entire graduating class.

Frankly, this is the point where the whole story began. Graham was in his 20s when he took a brave and unusual action. But

this step led him to the fortune.
Few weeks before his graduation, he got an offer from Columbia University to teach math, English, and Greek and Latin philosophy.

He refused it. Despite the opportunity to finally have financial security.

What he did instead?

Graham joined The Wall Street.

Early steps

At first, he was a messenger at the Newburger, Henderson, and Loeb. That was a brokerage company at The Wall Street.
It was almost a revolution.

At that time university graduates did not see stockbroking as a professional choice.

His first job was to write scores on the blackboard.

But he was an intelligent, smart and with good educational background. The field of his responsibilities rose very soon. The brokerage’s owners gave him to work on financial analyses for the firm.

After 6 years of working for this brokerage, he became a partner of Newburger, Henderson, and Loeb. It happened in 1920.

At that time he changed his name, to better suit the Wall Street background.

And soon, he was earning $50,000 per year. Not bad for 25 years old young man.

That was not the end of his ambitions. His marvelous mind couldn’t be satisfied with such a position. Six years later, he founded with his colleague Jerome Newman, a ”Graham Newman Co.”

And they both showed extraordinarily capabilities.

The first winning

They implemented some advanced strategies. Their goal was not only to secure their clients’ investments. They provided them a 670% return in a ten years time frame.

How they did it?

Well, it was kind of controversy betting.

It was like this.

They would bet that some stock price would be going up but at the same time, they were putting the bet that the price of some other stock would be going to fall. It was a simultaneous betting.

At this way, they could entirely use accessible resources, and not to hold cash positions.

They were beating leading mutual funds by 40%.

And it was beginning of one marvelous career.

Graham made an extraordinary discovery in 1926.

That one provided him a leading position in the market. It was so called Northern Pipeline Affair.

It was all about the Rockefellers and their business. Their Standard Oil was separated into 34 autonomous companies in 1911.

Wall Street didn’t know anything about their finances. Well, actually, they knew nothing about them.

Until the Interstate Commerce Commission demanded all pipeline companies to file financial reports.

Going through these statements, Graham paid attention to one Northern Pipeline Company. In order to have a better view, he traveled to Washington.

What a surprising revelation was waiting for him.

The Northern Pipeline was trading at $65 per share. Also, the company owned railroad bonds at $95.

Graham revealed that the company could issue its assets without the mediators.

Benjamin Graham: The father of value investing

And he began to purchase the company’s stock, getting 5% of it in 1926.

And here was the twist.

Graham demanded owners to issue the access asset to all shareholders stated they were legal owners. He was refused, of course.

One year later, at the time of the shareholders’ meeting, Graham announced his proposal to his shareholders. He was refused again.

Benjamin Graham decided to hire a law firm, and tried to find proxies.

The negotiations with Rockefeller’s Foundation ended without result.

And spectacularly turnover!

The greatest winning

At the beginning of 1928, Graham had got proxies for approximately 37.50% of the company’s shares.

The new meeting with shareholders held in that year was a turning spot in his career.

Northern Pipeline had to accept Graham’s election to its board. Moreover, they issued $70 per-share of excess liquid assets to its shareholders.

Rockefeller invited Graham for a meeting. After that meeting, Rockefeller urged other branches to share excess liquid cash among its legal owners.

It was a great Graham’s victory!

The ”Northern Pipeline Affair,” set Benjamin Graham as an excellent analyst and a shareholder protector.

In 1929, during the Great Depression, Graham Newman Partnership despite the great lost continued to work. They managed to recover their assets, and never lose again.

Their average annual return was of 17% until 1956.

But the Great Depression was the great inspiration to Graham too.

Benjamin Graham’s legacy

He published his first book, ‘Security Analysis’ in 1934, the first book that dealt with the art of investments.

Five years after, Graham published his fundamental work, “The Intelligent Investor”. All that time, he had a significant position in the stock market.

His market play was: buy shares and trade them lesser than the companies liquidation value, which provided him minimum risks.

Benjamin Graham’s play in the stock market excited many young investors. One of them was Warren Edward Buffett. Also, William J. Ruane, Seth Klarman, Bill Ackman, and Charles H. Brandes also considered themselves to be Graham’s followers.
They all employed his value investing techniques. And they expanded them to all markets all over the world.

Benjamin Graham’s masterpieces are “Security Analysis” and “The Intelligent Investor”.

In “Security Analysis”, he explicitly differentiated between investment and speculation. The subject of his ‘The Intelligent Investor’, is value investing.

We are sure you heard about “Benjamin Graham formula”.

It is published in “The Intelligent Investor”.

This formula can help the investors to instantly discover if their stocks were priced reasonably.

Benjamin Graham married thrice.

His private life is not known well. Graham had at least three sons.

On September 21, 1976, Graham died in Aix-en-Provence, France, at the age of 82.

The bottom line

It really looks so easy to be a great investor. Actually, it isn’t. But it is so easy to be an investor. Even with a little money.
And there are no limitations to try it.

Investing is so simple these days. You can get all the help you need. Also, you may implement some of the algo techniques. Or you can use robo advisors.

All of them are present in the market to help you to gain your profit. So, why to wait?
Go! Try your hand!

Who knows, maybe you, yes, you, you can be the next Benjamin Graham.

We are sure you are next.

Don’t waste your money!
risk disclosure

26th April 2019