How to start
Q. I know very little about stocks, but I want to invest in them. How should I proceed? — J.L., Dothan, Alabama
A.
Before you deploy any dollars, take some time to read up on investing. You want to be comfortable with how you invest and confident in your approach.
Ideally, the more you learn, the fewer expensive mistakes you’ll make.
You could start with books such as “The Little Book of Common Sense Investing” by John Bogle (Wiley, $27) or others in the “Little Book” series.
Studying stocks and choosing which ones to buy and when to buy or sell them will require time and skill.
But note that you can do very well over long periods simply earning roughly the market’s overall return if you invest in one or more low-fee, broad-market index funds (such as one that tracks the S&P 500).
Q.What’s the“triple-witching hour”? — L.M., Kalamazoo, Michigan
A.
It comes four times a year — on the third Friday in March, June, September and December — when stock options, stock index options and stock index futures all expire on the same day. The last trading hour of that day is known as the triple-witching hour, when the market might be extra volatile.
We average investors can safely ignore options and futures, which are generally focused on short-term movements instead of long-term growth.
All hail Charlie Munger
Warren Buffett’s great friend and business partner Charlie Munger recently died a little short of his 100th birthday. Buffett has said that Munger made him a better investor
— via advice such as: “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.” Here are more nuggets credited to Munger:
On investing: “The world is full of foolish gamblers, and they will not do as well as the patient investor.” And: “Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.”
On risk: “When any guy offers you a chance to earn lots of money without risk, don’t listen to the rest of his sentence. Follow this, and you’ll save yourself a lot of misery.”
On succeeding in life: “It’s so simple. You spend less than you earn. Invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life. … And do a lot of deferred gratification because you prefer life that way. And if you do all those things you are almost certain to succeed. And if you don’t, you’re gonna need a lot of luck.”
On learning: “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero. You’d be amazed at how much Warren reads — and at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
On thinking: “We all are learning, modifying or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.”
Search for “Charlie Munger” online, and you’ll find much more Munger wisdom that might make you a better investor — or person.