We've Moved

2007-04-11T22:21:00.000-05:00

Fiscal Times has moved. Click here to visit the new site.

Summer Opportunities

2006-01-21T23:44:00.000-05:00

I am currently looking for an internship,job, summer classes (finance/investing related hopefully), etc. to fill in the summer (May-August). If anyone reading this is in a position to make an offer or has any suggestions, please email me at harvey.multani@gmail.com or leave a comment.

Carnival 7

2005-11-07T12:16:00.000-05:00

"Despair" was included in the most recent Carnival of Personal Finance.

Fat Pitch

2005-11-05T03:11:00.000-05:00

"Despair" was mentioned at Fat Pitch Financials as a part of the "30 Days to Better Investing" series.

Who We Are

2005-11-04T10:27:00.000-05:00

Harvey Multani is currently a freshman at Cornell University. He has been investing since the age of 10.

Ben Tagoe is currently a freshman at Princeton University. He has been studying the science of investing since his junior year of high school.

They became friends during their sopohomore year of high school at Cranbrook Kingswood in Bloomfield Hills, Michigan.

They began this site out of necessity. All of their friends wanted to know how to enter the market after watching Ben and Harvey's success; success in the sense that they were actually investing. Most would come to Harvey with questions ranging from how to deal with parental disapproval to commodities trading. The questions began to grow in volume and complexity. After explaining arbitrage for the fourth time that week, Harvey decided that he needed a more efficient way to disseminate his expertise. Ben suggested that he save all the previous answers to the questions being asked through AOL Instant Messenger and just copy and paste them to whoever was asking. One thing led to another and this website was born.

We intend to categorize all the posts on this website and publish them as a book in January at the earliest.

Despair

2005-11-03T13:10:00.000-05:00

Every great businessman has one phase in common with his peers during his ascent to immortality. That is the phase of complete and utter despair during the beginning of his venture. Most first-time investors will experience this feeling early in their carreers and will not have any idea as to what effect this will have on them. Watching the price of a stock spiral downwards, a stock that you had to purchase with money you earned through washing cars or mowing lawns for months will throw you into such a fit of depression that the magnitude would not even be believed if it could be explained to one who has not experienced it. Imagine a cocktail composed of that knot-like weight suspended in your stomach feeling you get when you suspect that your first love is cheating on you, mixed with that dark place you go after getting rejected from your dream school, and topped off with your disillusionment the day you discovered there was no Santa Clause. Once you reach this place, you will begin to question every business and personal decision you have ever made. You will want to sell not only your shares, but every personality trait and value that put you on the road to the financial world. It is easy to say that one should buy for the long-term when one has never owned a stock or seen a 60 percent loss in their portfolio. Investing, like every other important endeavor, has no place for sunshine patriots and summer soldiers. Your ability to cope with despair is directly proportional to your financial success. History has repeatedly shown that epic success comes directly after seemingly-cataclysmic failure. The truly brilliant investors are those that are not only able to handle despair without panic, but also completely embrace it. If you can train yourself to love despair, to be happy and clear in your purpose when every man around you is looking for the nearest razor, then the world is yours for the taking. Not only is this mentality more rare than rubies and diamonds, it is also worth more.

You may now be saying that "this is all lovely rhetoric, but how do I go about building such a stoic and rational mentality?" Napoleon Hill put it best: "Fear can be conquered through forced repetition of courageous acts." How you invest is a direct result of the sum of your values and personality. Cautious men do not invest without heavy research. Careless men do not spend hours analyzing every footnote in a company's annual report. In order to develop courage in the investing world, you must develop it in every other sphere of your life. It is a simple affair. Every person can see potential for courageous acts that better the human experience on a daily basis. This ranges from answering the question posed by the hostile professor to introducing yourself to that romantic interest who always seems a little outside of your league. It does not matter what the act is, provided it requires courage and benefits you without hurting others. Courage and conviction reinforce eachother. You will need both to carry you through the dark times.

Financial Rounds

2005-10-31T14:39:00.000-05:00

Financial Rounds considers "Technical Analysis" to be one of the best posts of the most recent carnival.

Carnival 6

2005-10-31T09:38:00.000-05:00

"Technical Analysis" was mentioned in the most recent Carnival of the Capitalists.

Carnival 5

2005-10-24T11:22:00.000-05:00

"Technical Analysis" was noted in the most recent Carnival of Personal Finance.

Hiatus

2005-10-22T19:13:00.000-05:00

Posting will resume after this coming Tuesday due to exams.

Technical Analysis

2005-10-12T12:02:00.000-05:00

Cole:I have seen many books written on technical analysis. What role does technical analysis play in the realm of the value investor and what can charts really tell us?

A:Technical analysis is the study of previous price movements in order to forecast future price movements. The use of charts is integral to technical analysis. Despite the name, it is neither technical nor analysis. A technical analyst will look at a stock's price chart and try to manufacture patterns of movement. The track record of technical analysis is worse than random guessing. Technical analysis states that the price of a stock determines its value at any given point. If you accept this premise, you deny that there is a chance of a discrepancy between price and value. Patterns can be manufactured for past data quite easily. If you stare at any chart long enough, you will find a pattern. Whether these patterns repeat themselves, I'll let the hordes of poor (financially, not metaphorically) technical analysts answer.

One of Graham's major concepts is that of Mr. Market. Imagine you have a friend, Mr. Market, who comes to you every day with a buying and selling price for your stock. Mr. Market is very happy some days. On those days he will offer you a very high price to buy and sell. Other days he is very sad. On those days he will offer you a low price to buy and sell. His mood tends to change with the weather. He is ruled by his emotions. If you are unsure as to the danger a highly emotional disposition presents, I recommend you read any of Shakespeare's tragedies. In fact, read any tragedy and you will find that it has been exasperated by a highly emotional character. Short-term price movements are like the daily mood swings of a lover. You should not let one happy day force you to propose marriage, nor should you end your relationship over one fight. It is how the relationship fares over the long run that demonstrates its quality. The same concept applies in investing. If you doubt the efficacy of any investing advice you hear, apply it to another situation. The beauty of investing is that all of its fundamental concepts translate to virtually every other human endeavor. Would you stop going to your favorite restaurant over one bad meal? Would you run away from home because of one fight with your parents? Would you drop out of school because of one bad test? If you answered no to all of these questions, then why would you buy or sell a stock based on a price drop or rise? Technical analysis is a way of putting a scientific polish on speculation. It looks like analysis, it sounds like analysis, and it may even be analysis. The question is whether the data you are analyzing has any relevance to the future value of a stock.

2005-10-11T09:16:00.000-05:00

Haloscan commenting and trackback have been added to this blog.

Carnival 4

2005-10-10T09:16:00.000-05:00

"Let Someone Else Do It" was also mentioned in the Carnival of the Capitalists.

Carnival 3

2005-10-10T03:19:00.000-05:00

The Carnival of Personal Finance is now available. "Let Someone Else Do It" was included.

Let Someone Else Do It

2005-10-08T02:32:00.000-05:00

Ben: I’ve had a decent chunk of cash invested in a mutual fund since I was 9 years old. At the time it seemed like a great idea, especially when my mom broke down the long term returns. However, I’ve been following this mutual fund for the past 8 years and its price has dropped significantly. I’m curious to know your views on mutual funds and financial advisors. Do you think I should find another, more reliable mutual fund? Keep my funds liquid? Or should I find a competent professional to manage my money for me? (Assume that I am not interested in managing my own portfolio)

A:If you need the money in less than five years, put it in a savings or money market account. It is best to let investments grow over a long period of time so that any minor downward fluctuations in price disappear. Assuming that you have no short-term need for the money, it is best to stay invested. How you are to stay invested is a more complicated matter. Since you are not interested in managing your own portfolio, you have three choices: an index fund, a mutual fund, or a professional manager/financial advisor. A mutual fund is an investment vehicle where the funds of many individuals are pooled and then managed by a professional investor for a fee. The track record of most mutual funds borders on the criminally negligent. An index fund is a mutual fund except that no attempt is made to beat the market. The fund manager buys every stock in the market or chosen index (S&P 500, Dow Jones Industrial, etc.). This way your returns will be the same as those of the market and your fees will be at a minimum. You can expect your long-term returns to be about 10% annually, if held for a significantly long period of time, because that is the general return on the stock-market as a whole. A professional manager is a business or an individual to whom you entrust your money for investment. Their fees can be either a percentage of assets under management, a percentage or profits, or some mix of both. The choice between the three is best determined by your financial acumen.

If you know little to nothing about valuing a business, stick with the various index funds. This will provide you the least amount of headaches and guarantee that you will receive the same return on your money as the market. Also, the fees tend to be lower than your other two choices.

If you know the difference between investing and speculation and can talk about P/E ratios and growth rates at least somewhat intelligently, then find a mutual fund. Look at a fund's investment philosophy. This can best be determined by its current and past holdings. If it claims to be a value fund, but its history shows rapid trading with no discernible pattern, find a more reliable fund. One of the keys to picking a good fund is to locate one with low turnover (buying and selling activity). Trading activity costs you money in the form of transaction fees. Also, look at returns in down years. If the market returns -10 percent, and the fund is up 20 percent that might be worth investigating. See how often the management changes. If there is a different person in charge of the fund every three years, keep looking. All of this information is available in the fund's promotional literature or on the web. If you cannot find it, call the company and ask. Always remember that you are trying to determine whether or not to trust these people with your money. Insist on taking every precaution and gather all the data necessary in order to make an informed decision.

Picking an individual manager or business to run your money can be tricky. This is a path you should only follow if you could manage your own portfolio at least somewhat intelligently. If you understand DCF to some degree, then you might be able to handle a private manager. If you are wondering what DCF stands for, forget about picking a private manager. Not only must you have knowledge of business valuation, but you must also be a fair judge of character. My family recently decided to pick a private manager for the bulk of our assets; so I am able to give an account of this process. The initial recommendation came from our accountant with whom we had worked for many years. My mother made an appointment with one of the managing partners of the firm in question and asked that I come with her since she knows nothing of common-stocks. I brushed up on the requirements for financial managers, went over all of my investing notes, looked over their promotional material, and compared their positions with their proclaimed philosophy. I found no red flags. I came up with a list of questions for the meeting. These ranged from everything to, "What would you do if a client's investing philosophy differed from yours and he asked you to take a more aggressive position than you felt comfortable?" to "What brought you into this business?". The meeting began with my mother and me on one side of the desk with the partner on the other side. We conversed until I ran out of questions. He explained every issue to the finest detail with my mother sitting in quiet confusion. There was no hesitation or rush. Every answer was clear and to my satisfaction. After the meeting, I told my mother that if I was to choose someone to manage my money, he would be the man. This experience led me to develop a qualitative criterion for selecting a manager. First, always meet the candidate in person and take note of the surroundings. You are looking for the fullest professionalism in dress and decoration. If something strikes you as questionable or suspicious, take note and investigate. Do not hesitate to ask about it; you are trying to decide whether or not to trust this person or organization with your money. Second, if the candidate in any way hurries you or denies you an answer to a reasonable question, strike him from the list. Third, find out what brought them into the business and how they think. You want to hear something along the lines of, "This is why I wake up in the morning." Look for passion; if you don't hear it, walk away. Finding good managers is extremely difficult. For every one manager of ability, there are at least two hundred who know less than you do. If you pay attention to the details and take your time, the return will be worth the effort.

Hiatus

2005-10-05T21:50:00.000-05:00

There will be no posts until after this Friday due to my exams.

Carnival 2

2005-10-02T22:39:00.000-05:00

Our "When to Sell" article was included in the most recent Carnival of Personal Finance. Have a look.

Opportunities in the Gold and Commodities Markets

2005-10-01T11:23:00.000-05:00

Ben: As a novice investor, where else should I look besides common stocks? Assuming I have limited financial resources ($3000-7000), is gold a viable option? How about commodities or currency markets?

A: One of the most important investing concepts is the circle of competence. Your circle of competence is the collection of industries and products you understand thoroughly. This boils down to buying what you understand. You will always be safer buying things you understand. At the very least, when you do lose, you will be able to attribute the loss to bad judgment and not a fundamental misunderstanding of the investing medium. Common stocks tend to be the easiest to understand and trade for young investors with limited resources. The problem with gold is that you have to store and protect it. This means that it costs real money to hold on to gold. There is also a fairly significant risk of theft. There are many reasons to buy gold. There are also many reasons not to buy gold. The one consistently stupid reason I always hear from people pushing me to buy gold sounds something like, “if something goes wrong in this country, you can always pack up your gold and go to another.” My question is that if something goes so wrong that I have to flee the United States of America, the freest and most powerful country the world has ever known; where am I supposed to go? Israel? Saudi Arabia? England? When the time comes to flee America, it really will be the beginning of a new Dark Age and no amount of gold will save any of us. If you buy gold because you feel that the current demand will outstrip supply for years to come based on your analysis of production and consumption, that’s a good reason. In fact, any reason to buy or sell gold is good provide your decision is based on some kind of rational analysis. Personally, I have never intuitively understood the precious metals market, but there are some people out there who do. I would advise those of you to stick with what you know.

Commodities are consumable goods that range from uranium to orange juice. If you understand the uranium market and not the common stock market, by all means invest in the uranium market. Do not commit capital to something you do not understand, no matter how safe it is supposed to be. Think for yourself at all times. Risk of loss tends to decrease with understanding. My issue with purchasing or selling commodities is that there is a limited time frame for your investment. When you buy commodities, you are buying that commodity for delivery on a future date. This means your position must be closed in one way or the other when that day comes. If you buy a commodity and do not sell before that day, you may have to take physical delivery of the two hundred barrels of crude oil or whatever it is that you bought. If you sell commodities and do not buy them back before that day, the exchange will find a most unpleasant way for you to settle your debts. But if you have an intuitive understanding for grain or some other commodity, then find a way to apply it in the market. As always, buy what you know.

The premise behind investing in currency is that you are effectively buying stock in a whole country. You are hoping that a country’s currency will be more valuable in the future because of its fiscal policies and economic stability today. The same rules apply. This sort of analysis takes a great deal of time and expertise. But if you find that it falls in your circle of competence, then proceed with confidence and care. Buy what you know.

For the average teenage investor, I would advise mastering the field of common-stock analysis first. Not only will it give you a reference point when proceeding to precious metals or currency, but it is also the field with the least headaches. Remember that investing does not just involve common stocks. Investing refers to any time you purchase an asset with the reasonable expectation of an increase in value. You can use a value-based approach on everything from pork-bellies to utility stocks. Learn to define what is in, what is around, and what is outside your circle of competence. As long as you use an approach based on reason, patience, and courage, you will succeed in whatever market you choose.

When to Sell

2005-09-29T20:43:00.000-05:00

Eric: I have a pretty good sense of what to look for when purchasing a stock, but I don't really know when to take my gains or when to cut my losses. Basically, when is a good time to sell a stock?

A: We have to always remember that buying and selling are opposite sides of the same coin. You can use a value approach to sell as well as buy. The first scenario is that the shares you are holding have increased in value significantly. At this point you are wondering whether it is wise to sell and take a gain or hold on to the stock for future increases. Here is where value tends to conflict with intuition. You will probably feel the inclination to sell and justify it to yourself along the lines of the price being significantly higher than your estimate of the stock’s value. Watch out for that word feel; speculators buy and sell on feelings, investors buy and sell on reason. There are three good reasons to sell your shares. The first is that you have an immediate need for the money that cannot be satisfied in any other way. Think of natural disasters or a sudden increase in the cost of tuition. The second is that the qualities that attracted you to the company have changed for the worse. This could range from an obsolete product line, new management that does not hold shareholder-friendly ideas (issuing options that have no relation to operating performance) or to any kind of fundamental change in the company with which you do not feel financially comfortable. The third and best reason is that you have found another opportunity that more than justifies the costs and taxes associated with trading your current position for the new one. When you sell a stock, you incur three kinds of costs. The first is commission, or what the brokerage house will actually charge you to sell your stock. The second cost is taxes. There are two types of taxes that you have to worry about when selling your stock: short and long-term capital gains taxes. When you sell your stock at a profit, the government will charge you the short-term capital gains rate if you hold your stock for less than a year. If you hold it for longer than a year, you will be charged the long-term capital gains rate. The short-term rate is much higher than the long-term rate. The third cost is opportunity cost. Opportunity cost is what you give up in order to get what you want. You want to realize the gains that come from the stock sale; therefore you must give up any future profits and owner-benefits that come with holding the stock that you are selling. If the new opportunity presents enough benefits to cover these three costs, sell your current holding and buy the new one. If not, stay put. If you believe the business fundamentals have changed for the worse in a way that you cannot tolerate, then do not wait to sell even if the current price will bring you a loss. I guarantee you that waiting around will only bring you more financial heartache. The second scenario is that the price has dropped significantly but there has been no change in what brought you to buy stock in the company. Do not decide to sell a stock just because the price has gone down. Think of price decreases as opportunities to buy more of a good thing at a lower price. If you buy a share at 50$ with your estimate of value at 70$, it’s a good deal at 50$ and a steal at 30$. Investing is as much about your personality as it is about the tools you use. Patience and confidence will always win the day.

Confidence

2005-09-27T20:37:00.000-05:00

Ben:
95% of the people who I go to for advice on investing tell me to keep an eye on signs of Consumer Confidence. Whenever I ask them to elaborate on exactly what Consumer Confidence is or entails, I always get some hazy response along the lines of, "it's how safe people really feel buying stuff". I was wondering if you could clear up exactly what Consumer Confidence is, and explain whether it really does have any bearing on the securities that I pick.
A:
Consumer confidence is an index that measures how optimistic people feel about the present and future state of the economy. Now you have to keep in mind that this is a survey of people's emotions. This means it is just as hazy as it sounds, if not more so. As investors, not speculators, we could care less about people's emotions. Speculating has to do with buying something in the hope that someone else will come along in the future and pay you a higher price. Speculation is buying to sell. Investment involves buying something because the value of it is higher than the current price. Investing is buying to own. Speculators believe that things like consumer confidence are important because it generally means that people are feeling fairly confident in their abilities to conduct financial transactions. Simply put, people are far more likely to buy something if they think they know what they are buying. As a measure of people's feelings, I find the index to be totally useless in the world of an investor. It does not matter how the average machinist in Ithaca, NY feels about the economy in general considering that he is probably getting his information from the evening news. Also, we are not dealing with the economy in general. We are focusing on individual securities and investments. Instead of looking at consumer confidence, look at things that actually affect investing, like inflation. Inflation measures the decrease of purchasing power over time. For example, if you sell a stock and recieve a 10% return, and inflation is running at 2%; your actual return is 8%. If you leave money in a savings account which yields 1%, the absolute number of dollars and cents you have has gone up but the real return on your money is -1%. Inflation is a way of saying that one dollar 10 years will buy less than one dollar today today.
The best investment opportunities tend to come when the market is down and everyone feels gloomy and terrible. It is then that independent judgement, capital reserves, and a thorough analysis can yield a massive gain in value. The purpose of a bear market is to return wealth to its rightful owners. When the market crashes, that is generally the best time to look for discrepancies between price and value. Consumer confidence has virtually no bearing on the stocks that you pick. A great value at a great price is just that, regardless of how people feel.

New Format

2005-09-27T16:03:00.000-05:00

The format of the site will be changing to reflect its new purpose. I intend to write and self-publish a book with all of the information in this site. The format will now be a question and answer where a friend of mine will post questions on business, finance, investing from a total beginner's perspective and I will be answering. The hope is to have at least half of the book finished by Nov. 24th. This means we will be averaging about 3 Q&A posts every week. If you have questions that you would like answered, put them in the comments and they will probably be included in the book.

Carnival

2005-09-26T16:09:00.000-05:00

The Carnival of Personal Finance is up at Free Money Finance. I haven't had a chance to go through it myself, but make sure you have a look around. The previous ones have been full of valuable insights.

Get Started

2005-09-22T00:43:00.001-05:00

Everyone wants to own stocks. Not a single person I have spoken with has ever said, “I find the market terribly boring and would never want to participate in it.” To all of those who want to join the ownership club, I say “if you desire it, make it so.” The most common excuse for inaction is a lack of money. For some reason or another, young people tend to think that a large amount of money is necessary to begin investing. This is backwards at best. If you have a large amount of money, why would you need to learn how to invest? You learn to invest in order to make a large amount of money. I have studied my share of wealthy individuals. The one thing I have always found in common with the mega-rich is that all of their net worth is generally in the equity of their companies. Read the last sentence again. Warren Buffet is worth over forty billion dollars and only earns 100,000$ a year. Ninety-nine percent of his net worth is in Berkshire Hathaway stock. It was virtually the same situation for every great fortune in American history. William Gates does not receive a billion-dollar a year salary. His net worth is mostly in Microsoft stock. The key to lasting wealth is ownership; ownership of assets, businesses, and ideas that generate income. How does one become an owner? That is where the stock market enters the fray. Stop looking at a share as a piece of paper with a number on it. It is not a gambling slip. If you want to day-trade, close this window and go to the race-track. There is no difference between day-trading (speculating) and gambling, except that gambling takes far less paperwork. I am talking about ownership, becoming part of American society and receiving all of its commensurate benefits in the same way that all the great creators of the past have done. Buying a share of Intel gives you an ownership stake in Intel’s plants and intellectual capital. You must believe that Intel is going to create goods and services that will not only benefit humanity but also be sold at a reasonable profit. Ownership is the difference between riches and wealth. Think about the Yankees. Sure you may hear that some player has received a multimillion dollar contract. It may seem that the player is wealthy. I contend that he is only rich. On the other side of the transaction is someone who can afford to write the multimillion dollar check and still make a massive profit. That man is wealthy. The player is nothing more than an employee. He collects his check and is done with the organization, financially. The owner profits from the name and the organization in perpetuity. Your choice is simple. Remain an employee, someone’s employee, or buy a piece of the pie in the sky. Now we come to practical part of joining the club. Where does one start? If you are an average teenager, then you probably are not paying for food and shelter. That leaves you with a fair amount of disposable income. Here is what you will do: pull out a piece of paper and a pen and write down every material thing you want in life. I am not only talking about the Ferrari’s and yachts, I am talking about what represents wealth to you individually. All those little things like marble floors or being able to order room service at a hotel without worrying about the cost. This will be different for every person. Once you have written the list, put the jar and the list somewhere safe. Put at least ten dollars into the jar every week. Saving is the first step to investing successfully. Read the list and visualize having all of the things on it every time you put money in the jar. Under no circumstances are you to take money out of this jar for use in anything except stocks. Put every piece of spare change you can into it. Do not think about buying 100 shares of this or that company at a time. You only need enough for one to be considered an owner. Open, or have your parents, open a brokerage account. Deposit the money every two months. If you cannot wait, use www.sharebuilder.com. It will let you purchase single shares for a fairly low commission. Read the rest of the posts on the site for information on how to determine the value and safety of a company. You will start small just like every other investor since the beginning of financial markets. Remember that it is not where you start that is important; it is where you will eventually end.

More on Free Lunches

2005-09-04T01:53:00.000-05:00

One of the best sites I have seen on the web so far is The Facebook. What bothers me about the site is that there is so much information that goes unused. Each student's Facebook profile is a marketing survey. Music, hobbies, and even summer plans are posted in a clearly organized and browsable fasion. But the ads that are sent to me over the Facebook's recommended groups are untargeted at best. Sidebar ads are generally used for announcements and larger image ads. My proposal is to use the sidebar space purely for announcements and create a seperate box underneath the announcements box for contextually targeted google ads. Google's adsense system constantly scans a website for changes so it may custom tailor ads for that site. For example, if you look at the ads above this post, you will see ads for financial software and the like. You will not see ads for pet boarding or bikini waxes. Why is it that I have O.A.R. listed as a favorite band but do not see ads for O.A.R. paraphernalia? How come I don't see ads for boats if I list sailing as a hobby? I am amazed with how much revenue I have generated from this site alone due to Google's AdSense. Though I have not met the men and women running The Facebook, I imagine they enjoy money and could use it for food or upgrading the website even further. The technology exits to scan each page and target ads for the user. The beauty of this is that the Facebook staff would only have to insert the code and tailor it a little. After that, they simply collect their check every so often. I am sure that Google would not mind having their AdSense system being used on something that people check four to five times a day. I am sure they can use the same system that is used in Gmail to set this up. I am not an expert on marketing or IT, but even I can see that this could potentially be very easy money for the Facebook owners.

Look It Up

2005-08-18T02:43:00.000-05:00

Accounting is the language of business. It tells you how and what a business is doing at any time. There is no way to avoid learning accounting when dealing with investing. I have met far too many people who have lost significant sums of money by failing to learn how to read anything other than the last line on the income statement. As a young investor, your starting capital will be fairly small. Many teenagers will use that as an excuse to avoid investing. The common misconception is that one needs a large amount of money to invest. This does not make sense. If one had a large amount of money, why would one invest? The truth is you can start with any amount of money. The only difference between professional managers and the teenage investor is that the teenage investor must be far more discriminating in his buying habits. There are blatantly foolish mistakes that every investor makes. These mistakes almost never change and have been heavily documented. Why make these same mistakes yourself when you can go to your local library and read about those mistakes in order to avoid them yourself. Studying history has a real monetary value in security analysis. If you learn how to read the balance sheet, income statement, and cash flow statement, you are far less likely to buy an underperforming doughnut company than someone who just buys because he likes the taste of their products.