Money & Investing - Banks.com

You’ve hear the saying: “Those who do not learn from history are doomed to repeat it.” Is this the case right now with the current stock market troubles and the state of the economy? In many ways it would seem so. The Motley Fool quotes from something written in 1930, after the great stock market crash, by Alexander D. Noyes in The New York Times:

 We have come to a curious turn in the economic road. Things have happened during the past 12 months in our financial and economic history that we had taught ourselves to believe would never happen again. …

We had contrived new formulas for expanding credit which were to make us independent of the vicissitudes and insecurities of other periods. … One of the cardinal maxims of the last three years had been that the “business cycle” was abolished; if, indeed, it had not always been a myth.

Um, wow. This sounds almost exactly what began happening as derivatives were introduced, de-regulation set in and leaders proclaimed that our system was too “sophisticated” to succumb to the problems of the past. Indeed, the myth of continued growth — without the need for occasional downcycles — also reappeared.

And it seems as though we are on our way to another crash of monumental proportions. And even if the stock market does not completely collapse, our economy is in a state that hasn’t been seen for more than 70 years. Are we going to learn the lessons of history this time? It certainly would be a good idea to consider value investing, understanding what it is we’re investing in and re-assessing how we make (and spend and borrow) money. It is also worth learning the lesson that reasonable and prudent government regulation can stand in the way of unbridled greed and reign in some of the practices that led us to this point.

It’s probably too late to get gifts for someone else, but you can make a Christmas promise to yourself that you will get the gift of knowledge for you. There are some great investing books out there that can help you learn more about investing. One of the best gifts you can give is knowledge, so consider some of these books on investing this holiday season.

• The Intelligent Investor, by Benjamin Graham. Even though it was originally written in 1934, it is still the book on value investing.
• The Essays of Warren Buffett. ‘Nuff said.
• The Interpretation of Financial Statements, by Benjamin Graham and Spencer B. Meredith. Understanding company financial statements is important. Learn how.
• 9 Steps to Financial Freedom, by Suze Orman. You can step your way to financial freedom.
• Financial Shenanigans: How to Detect Accounting Gimmicks and Fraud, by Howard Schilit. A great read. And something that might have been useful to many prior to the financial meltdown.
• It’s When You Sell That Counts, by Donald Cassidy. Sure, it’s nice to know when to buy. But it’s even better to know when to sell.
• Why Smart People Make Big Money Mistakes And How To Correct Them: Lessons From The New Science of Behavioral Economics, by Gary Belsky and Thomas Gilovich. A fascinating read about why we do dumb things — even though we may be smart.
• The Super Analysts, by Andrew Leeming. Learn about being a better analyst.

These books can give you a good foundation to gain experience in the field of investing. Christmas is a time to reflect and consider improvements. These books can help you get ready for a new year of better investing.

Merry Christmas from the Banks.com Investing Blog!

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

One of the cardinal “rules” of investing — and becoming a better investor — is to keep investing. No matter what you are investing in,  you should invest in something. Even if your main goal is merely to beat inflation. There are a couple of things you can invest in, other than stocks, that can offer you returns if you are concerned about stocks. (I, however, maintain that now is a great time to look for bargain stocks that are fundamentally strong. Other investments can add diversity, though.) One is relatively safe and the other is quite risky: bonds and currencies.

Investing in bonds

Bonds represent debt. This can be government debt or corporate debt. Right now, many people are skittish about corporate debt — and for good reason. If you get into corporate bonds, many people cynically observe that you should buy bonds from companies that are likely to get bailouts.

Government debt, though, is considered “safer” (although all investment carries risk). This is why Treasuries are so popular right now. But you should be aware that U.S. federal bonds may not offer the best return. Municipal bonds are starting to get another look as well. These are local government bonds that — while not considered as “safe” as federal debt — are thought of as reasonably sound.

Investing in currencies

Currency trading is another form of investment. Well, actually it’s speculation. The terminology is couched in trading terms, but really you are speculating as to which currencies will rise against others. One of the benefits currency trading has (and why it’s becoming so popular) is due to the fact that someone always makes money.  If you think that the current debasement of the dollar means good news for the euro, you can favor the euro and short the dollar. You can also favor the dollar against the sterling at the same time if you feel that the British economy is so far in the tank that the pound will have a hard time recovering.

Be warned, though: Currency trading is extremely risky. You can get higher returns, but the risks mean that you can sustain heavier losses.

The important thing, though, is to broaden your investing horizons. So many people think only of stocks when they think of investing. There’s a whole wide world of investing opportunity out there.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.