A Random Walk Down Wall Street - Chapter 2 ~ 4

The madness of crowds in history has been mentioned in the book.

-Dutch Tulips craze

-South Sea bubble

-Wall street 1929 crash

-The soaring sixties: growth stock with -tronics appendix/new-issue craze

-Synergy generates energy...

-Japanese Yen for land and stocks

-Internet bubble of early 2000s

-US housing bubble: Remember that the average home price index is between 100 and 125 in history.

The key to investing is not how much an industry will affect society or even how much it will grow, but rather its ability to make and sustain profits. And history tells us that eventually all excessively exuberant markets succumb to the laws of gravity. The consistent losers in the market, from my personal experience, are those who are unable to resist being swept up in some kind of tulip-bulb craze. It is not hard, really, to make money in the market. As we shall see later, an investor who simply buys and holds a broad-based portfolio of stocks can make reasonably generous long-run returns. What is hard to avoid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges.

Only from my own experience since last year, I have observed 3 speculative investing events and I have personally participate 2 of them.

Weed stock

I bought TSX:CGC at 3.96 in June 2016. It stays at this price for around 2 month and suddenly starts to soar. I told one my colleague to buy it around 8 and it just kept go up and up. I have several friends in the company who also do investing. At that time, when I talked with my friends, I found that almost every one knows that CGC is the hottest stock in the market. Moreover, I read one article on Fool that the valuation of the CGC is over-estimated than the dotcom stock at 2000. I knew that it's the time to sell the stock. I made a good profit from the transaction.




*I have bought it when it was still not popular.
*I sold it when I feel it's too high.
*But then I bought it again when the government has passed the law to legislate its usage in Canada.
*I sold it when I was too scared of the total loss of its value.

-Toronto house bubble
*I bought a house when it's already high but I can still afford it.
*I didn't buy a presale because I don't want to waste too many transactions on buying house and I thought current house is enough for me to live
*I worried about I can never catch up with the rate of increasing
*I have seen 2 guys bought at the wrong time
*My current thought on the house market

-Bitcoin craze
*2012 the hype
*2017 hype again

A Random Walk Down Wall Street - Chapter 1

This book is written by Burton G. Malkiel, who is a professor of economics at Princeton University. He has also been the director of Vanguard Group. It will be no surprise that the philosophy of Mr. Malkiel conforms to Mr. Bogle, the founder of Vanguard Group. In the book, he said he is a lifelong investor and have made lots of money from the stock market.

I just started to learn to invest since last year. The husband of one friend of my wife is a careful person (I can even tell this from his son). He only puts his money in CD. Under the low-interest rate now, 100K will be around 121899.44 after 10 years with current best GIC rate 2.0%. Although making 20K without risk in 10 years sounds like not a bad deal, you need to remember that the average inflation rate is around 3%, which means 100K should worth 134391.64 at least 10 years later. Any investment cannot beat inflation is not a good investment.

The random walk in this book means that one in which future steps or directions cannot be predicted on the basis of past history. In investing paradigm, there are two widely used methods adopted by stock traders: fundamental value investing and technical analysis.

Value analysis can be understood as the stock should only be bought at a bargain or reasonable price. It makes more sense because we would feel ripped-off if we pay more than actual value in our daily purchase. If you can buy something when it's 70% on-sale, why should I be the fool to pay its full price?

On the contrary, technical analysis assumes that A thing is worth only what someone else will pay for it. If someone is willing to pay a baseball card for 1000 CAD, would you care to buy it with 500 CAD from eBay?

In following chapters, Mr. Malkiel provides evidence and analysis to show that speculation in the stock market is effortless and not worthwhile. Sometimes, laziness is actually the best tactics for smart investors.

My Story

I have to admit that I knew nothing about investing before 2016. The only investing book I have read might be "Rich Dad, Poor Dad", which I don't really agree on. The only point I got from this book is that working as an employee paid with regular salary might be miserable at the end of life. This contradicts with all my education from my parents in my whole life.

Talking about myself, I was working as in the academic until I immigrated to Canada. It's really hard to save anything and afford a 3-person family for investing when you are only paid with minimum pay. So basically I landed on this land and started a life with my nothing in my pockets. Shamely saying, my bank account balance was reset as zero after I bought the air ticket for my our three. My parents supported me with 10,000 CAD. Otherwise, I have to find a job right after the landing.

The first two years was harsh for a new immigrant without industrial experiences. Although I found a job within two weeks, the payment was barely covering my daily express only. After one year work in a startup company, I finally got a permanent job in a small company as embedded programmer. The pay was not fair but I learned a lot in that company. I have served there for more than 2 years and finally, I got a contractor job offer. That job started to change my financial situation.

I finally have some money to save and I can share with my wife to reduce the tax paid to the government. From then, I started to read investing books and I'm thirsty about the investing knowledge.