North Texas Objectivist Society (NTOS) Message Board › Reason and Investing

Reason and Investing

A former member
Post #: 13
Thought this might be of interest, but please forgive me if this is at all patronizing:

As I guess a few of you know, I am a professional trader, and I have essentially made a career for myself in being rational where others are not in financial markets; in other words, financial markets are so often driven by emotion and human psychology that fundamentals often get swept aside, and there are countless opportunities to exploit that irrationality. For anyone who is interested, there is an excellent book on this topic, written by one of the experts in the field (behavioral finance), but written in a very accessible and easy-to-understand format. I would highly recommend this short book to anyone who does their own investing, be it in a 401(k) or speculative account. It will surely bring a smile (and perhaps shock) to the face of anyone who values reason!

http://www.amazon.com...­
A former member
Post #: 208
Arron,

Would you mind telling me alittle about the book in your link. It maybe of some help to me. I may like to buy it for myself, yet I'd like to know just a little more about it before I do.I'm always game to do anything I can to do a better job for the folks I help in financial matters. I also have out in a link for you on one of the best if not the best book of all time on stocks. I hope you get it & read it. It will make money for you. You and I could also maybe help each other in this matter at hand. It is always good to meet a full time investor.
It never hurts to swap knowledge so to speek.

I do know the best book ever wrote on investing, well so far anyway. It is " The Bible for Investing." This however is not any type of day trading book. This book has helped make BILLIONS UPON BILLIONS for investers It is a blue print for proper analysis of any stock. One side note, have you even noticed that Warren Buffet has NEVER owned a Mutual Fund? He also so has said," The best time to trade a good stock is never. " He is in fact the most successful invester in history. He says he owes it all to this book, & to Graham & Dodd. If the only I could only get a copy of this bookwas to pay $250,000 for it I'd do it with out a 2nd thought.

Jamie

http://books.mcgraw-h...­

Good PDF FILE


http://www2.cfapubs.o...­'Securi%20%20Graham%2C%20Benjamin%20%20D­odd%2C%20David'


Good Info on BEN

http://en.wikipedia.o...­

Even better info on BEN, with all of his works listed

http://www.bufferstoc...­

"Graham's method of investing is as relevant today as it was when he first espoused it during the Roaring Twenties."--Investor's Business Daily

Benjamin Graham's revolutionary theories have influenced and inspired investors for nearly 70 years. First published in 1934, his Security Analysis is still considered to be the value investing bible for investors of every ilk. Yet, it is the second edition of that book, published in 1940 and long since out of print, that many experts--including Graham protégé Warren Buffet consider to be the definitive edition. This facsimile reproduction of that seminal work makes available to investors, once again, the original thinking of "this century's (and perhaps history's) most important thinker on applied portfolio investment."


The Long-Awaited Reprint of Graham and Dodd's Masterful First Revision

The first edition of Security Analysis, published in 1934, forever changed the theory and practice of successful investing. Yet the remainder of that tumultuous decade brought unprecedented upheaval to the financial world, compelling Benjamin Graham and David Dodd to produce a comprehensively revised second edition.


It is that edition, out of print for decades, that you now hold in your hands. Security Analysis, Second Edition, published in 1940, is considered by many (including legendary Graham student Warren Buffett) to be vastly superior to the first. Yet after three subsequent editions and over six decades, the insightful and instructive second edition could be found only in rare bookshops and closely-guarded private collections.


McGraw-Hill, the book's original publisher, is honored to publish Security Analysis: The Classic 1940 Edition. Identical in every meaningful aspect to the classic original, this is the long-awaited book that set the tone for decades of value investors. Let it provide you with a greater understanding of this country's financial heritage, along with timeless value investing insights that have proven relevant and profitable in all types of markets and financial environments--and will never go out of style.


"The lapse of six years since first publication of this work supplies the excuse, if not the necessity, for the present comprehensive revision ... We have revised our text with a number of objectives in view. There are weaknesses to be corrected and some new judgments to be substituted."--From the Preface


The names Graham and Dodd have come to be inextricably linked in the minds of thoughtful, disciplined investors. Their 1934 book Security Analysis made the two synonymous with intelligent, long-term investing, and forever changed the face of Wall Street. While post-Crash traders and investors treasured the book for its rigorous honesty, determined logic, and unequalled track record of success, the authors saw only the "weaknesses to be corrected."


The second edition of Security Analysis, published in 1940, allowed Ben Graham and David Dodd to set the record straight. It was considered by many then, and is considered by many now--including Graham student and disciple Warren Buffett, to be superior in many ways to the first. Still, as subsequent revised editions appeared, the once-indispensable second edition fell out of print and became virtually impossible to locate.


With Security Analysis: The Classic 1940 Edition, McGraw-Hill returns this long-sought investment classic to the marketplace. While its timeless advice--that investors should ignore social trends, company prospects, and management styles to focus on the balance sheet--is as vital today as it was in 1940, it is the book's updated insights and observations that justify its importance in the annals of both investing and publishing.


Even as the financial world sang the praises of 1934's groundbreaking Security Analysis, Benjamin Graham and David Dodd knew they could improve it. And that they did, with the 1940 publication of a brilliant second edition. Now, after having been unavailable for decades, this influential book returns in Security Analysis: The Classic 1940 Edition. As powerful today as it was for investors six decades back, it will reacquaint you with the foundations of value investing--more relevant than ever in tumultuous 21st century markets--and allow you to own the only book that could rightfully claim to have improved upon the eloquent first edition of Security Analysis.
A former member
Post #: 215
Arron,

This also may be of some interest to you as well. I did however edit some of it out. Whta I did edit was advice that he gave to brokers ect. It was all about hand holding & being a nice guy ect. Yet I feel that I must state that I did edit some of it as to be honest. Yet you can read it all at the link below if you wont to read the hand holding part.

http://www.producersw...­

Jamie


The Incredible Power of Dividends

By Donald Moine, Ph.D., President

Association for Human Achievement, Inc.

Donald Moine, Ph.D., President, Association for Human Achievement, Inc.



How Much Do Dividends Matter?

We all know that it is extremely difficult (some would say impossible) to consistently pick stocks that outperform market averages. If you could consistently pick hot stocks, you’d probably be a mutual fund manager. But even most mutual fund managers can’t even match the performance of a simple S&P 500 index fund!

Without being a rocket scientist, how can you deliver market-beating performance? Consider over-weighting dividend paying funds. There is soaring investor interest in this segment of the market. The number of dividend-focused mutual funds has risen nearly 50% since 1999 and there are also a growing number of ETFs focused on dividend paying stocks.

Why all this interest? Investors are learning that dividends accounted for about 41% of large cap stock gains over the past 80 years. They are learning that dividend-paying stocks have historically outperformed non-dividend paying stocks. A widely cited study by Ned Davis Research found that dividend-paying stocks increased 10.2% per year since 1972 while non-dividend stocks increased a relatively measly 4.4%.

Inflation alone was about 4%. I repeat: non-dividend stocks increased only 4.4%. Do you still want to own a lot of non-dividend paying stocks?

Here is another reason to consider dividend-paying stocks. What type of stocks do well during market downturns? Dividend-paying stocks. They have always done better than non-dividend paying stocks when times get tough.

Of course, you might think that your clients will never figure this all out. Fat chance. One of the reasons that so many financial advisors are struggling now is that clients are getting more sophisticated. You must increase your knowledge of income planning if you want to succeed today.

Do Your Clients Know the Power of Dividends?

At a conference about 10 years ago, I heard a well-known and highly paid motivational speaker talk about “financial pornography.” He categorized popular financial magazines as “pornography” and told advisors they should discourage clients from reading such money magazines.

No doubt you have heard the phrase “financial pornography” many times at conferences. I do not wish to defend these popular money magazines. In fact, I have aimed a fair share of criticism at them. But I would never classify them all as pornography.

Let’s be fair here. These publications do offer some education. In fact, a few of the articles are very well researched. Interestingly, some of these publications, read by millions of investors, have featured articles on the importance of dividends. Millions of Americans, including some of your clients, now know about the power of dividend-paying stocks to outperform other stocks, to outperform annuities and CDs.

If you act ignorant about dividend paying stocks, you will never gain the trust or the business of these investors. Recently, I’ve received several emails from advisors who told me they referred to popular money magazines as “financial pornography.” I’ve asked them why they do this. A common reply is, “I don’t want my clients to know too much. If they know too much, they might not buy from me.”

My answer is, “If you do your job and deliver results, they will always do business with you. You will have more clients than ever and better clients than ever.” Trying to keep your clients ignorant and uninformed is not a solution. It is actually unethical.
A former member
Post #: 216
PART 2

Remember that dividends account for 41% of annualized big cap stock gains over long periods of time. As an Income Planner, you can deliver this 41% advantage to your clients. Solutions

Many advisors want to become Income Planners. I am blessed with the opportunity to work with some of the best income planners in the country, including the top annuity producer in the USA. Judging by their success in building their practices and increasing their incomes, many high net-worth investors want to work with Income Planners.

While I have previously written about the importance of municipal bonds, muni bond funds and closed-end bond funds in designing income portfolios (read my previous articles on Income Planning in the articles archive), dividend-paying stocks also play a vital role in income portfolios. As an Income Planner, you want to offer your clients a full range of powerful income solutions.

Dividend paying stocks do much more than deliver a steady, reliable income. The stocks themselves increase in value significantly more than non-dividend paying stocks. In addition, they have lower volatility. In other words, dividend paying stocks outperform the market and have less risk. Many advisors assume to that to get increased reward one must take on increased risk. Dividend-paying stocks are an exception to this rule.

Over the past 15 years, dividend-paying large cap stocks have outperformed non-dividend paying stocks—and they did so with less volatility. Non-dividend paying stocks had a beta of 1.57, almost twice the .88 beta of dividend paying stocks. As you can see, non-dividend paying stocks had about twice the volatility and lower returns than dividend paying stocks.

What about REITs? Remember that the dividends from REITs are taxed at your highest rate. Dividends from qualifying stocks (and mutual funds and ETFs) are 85% tax-free. Moreover, some experts believe that real estate is currently in a bubble phase. I urge extreme caution with REITs right now.

If you don’t want to spend the time and energy constructing an income portfolio from scratch, an obvious place to start is with income-focused mutual funds. Use dividend-focused funds that seek both current income and long-term performance. For members of the Certified Income Planners Program, we are happy to make some dividend-focused mutual fund recommendations.

DVY and PEY In past years I recommended DVY, the iShares Dow Jones Select Dividend Index. This fund has generated much interest and is still an outstanding choice, but I have become less enthusiastic about it since the index was changed in December of 2004. At that time, the number of stocks in the index was increased from 50 to 100. Many of the newer additions sport lower dividend yields, which is lowering the yield of DVY

DVY currently yields a little more than 3%. The yield may drop in the future. Expenses are very low at .40% per year. Liquidity is outstanding and options are available.

Coincidentally, another dividend-focused ETF became available in December, 2004. This is PEY, the PowerShares High Yield Dividend Achievers. The first dividend payment from this fund was very small, but it is projected to yield about 4% in the future. The yield could therefore possibly be about 33% or more higher than that of DVY in the future.

PEY is based on 50 stocks currently paying very high dividends. However, each of the stocks must have increased their dividends for at least the past 10 consecutive years which further raises the quality of PEY. Over the past three challenging years, a portfolio of the 50 PEY stocks produced more than 17% per year. Compare that to any other income investment.

How Important are Dividends?

Very. In his new book, The Future for Investors, Jeremy Siegel states, “Dividends are the way investors know earnings are real.” His comprehensive research shows that stocks that offer the highest dividends also offer the highest returns.

If you don’t want your clients to miss 41% of the returns in large cap stocks and 36% of the returns in mid-cap stocks, you need to increase portfolio allocations in dividend paying funds. The above findings are from Ibbotson and go back to 1926.

If you want to decrease volatility, increase allocations to dividend paying funds. Dividend-focused funds could also lower your litigation risk.
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