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Fire Your Broker! Value Investing With Less Than $100

January 17, 2009
With markets in turmoil, more people are turning in to see who is the latest casualty on Wall Street. Unfortunately, many of these individuals are also individuals who lost a large portion of their savings, retirement, pension,etc. because their mutual funds, advisers or Madoff’s lost their money. In this article I will try to get you the reader headed in the right direction for less than $100, the way I did it.

On the second day of the new quarter ( our university is based on a 8 week quarter system) a Wall Street Journal representative came in to sell the Journal. Putting an unorganized speech and overselling aside, I came away with one thing that I will tell anyone who wants to handle their own money; to understand Wall Street, you have to speak the same language as Wall Street. EBITDA, Return On Investment, Breakup Fee, Arbitrage, P/E,etc. might sound Marsian at first, but a couple of weeks reading the Journal and one will have no problem fitting in cocktail parties.


Wall Street Jornal Subscription: $0, WSJ.com currently has free articles. Test the waters first then think about subscribing. Ebay has discount offers.


Read, Read, Read

Read everything you can about finances, but stick in the value camp. Outside my office there’s is a poster that states, “It’s difficult to soar with eagles when you run with Turkeys”. Wall Street is a game of action, but its the boring crowd that wins. In total I have about 10 investing books and 5 of those are all the editions of David Dreman’s Contrarian Investing Strategies. Unless you are the type who likes to have new books, Amazon.com or Half.com will help us save a ton of money. Below are the list of books in my library and their used price:



That’s 12 books for $51.79 (not including shipping). Running total: $51.79
Online Media

Twenty-five years ago there was a big discrepancy between the information available to the general public and information available to institutional investors. With the expansion of the internet, that gap has now closed. The information available online is HUGE, but some of it can also be misleading. For example, its great reading all the different stock analysis but one should never and I man NEVER make an investment decision on something a blogger wrote (including this site). Below are some resource I have bookmarked.



Again, all these sites are free (some offer premium services) and are constantly being updated on a daily basis. I can continue with with investing magazines such as Forbes, BusinessWeek,etc.. but some of their commentary makes no sense as they sometimes include greek letters (beta, alpha,etc.).


Internet: $15-$20 for DSL. Running Cost $71.79


I will not include the capital you will be adding into your brokerage accounts but assuming you make one trade a month and you maintain a balance above $2,500.00 USD, your fees will be $0


By ALEXG, www.contrarianvalueinvesting.com

About the author:

Alex Garcia
Alex Garcia is owner of http://www.magicformulapro.com, a Magic Formula Investing blog covering Joel Greenblatt's magic formula, which identifies potential value stocks. In addition, he covers value investors such as Seth Klarman, Li Lu, Bruce Berkowitz and Walter Schloss.

Visit Alex Garcia's Website


Rating: 1.0/5 (1 vote)

Comments

DaveinHackensack
DaveinHackensack - 5 years ago
Alex,

If your family's business is successful, why not just invest your time in learning it inside and out, and then work for them full-time after college and help them expand it? You'll never have access to as much information about any publicly-traded company as you will have for your family's business. Why not use that to your advantage?

Value investors like Buffett talk about investing in businesses, but the truth is that you can't buy stock in many profitable, successful businesses, because they aren't publicly traded. Remember: no company goes public to offer you a good investment opportunity; they do so when they need capital. Many times, profitable companies don't need capital, so they don't go public. Here's an example of that situation that I ran into recently:

Years ago, I worked for a start-up company and left with shares in it. At the time, the company was raising money from venture capitalists and wasn't profitable. Last month, during the company's annual meeting, I was impressed with the financial results I heard: Revenue up ~80% year-over-year, profits up ~20% y-o-y, ~$1.2 million on the balance sheet and no debt. I later e-mailed the CEO asking if I could buy more shares of the company: no dice though. Why not? They don't need the money -- they are profitable and self-funding now, and are growing organically.

Again, I don't know anything about your family's business, but if it's a good one, it's probably a safer investment for you than any stock you could invest in, where you only get snapshots of the companies' financials once a quarter. A lot of smart, experienced value investors have been getting their heads handed to them lately. If you have the alternative of investing in a business where you know you can trust the management (because they're your family) and you have an information advantage, why not take advantage of that?
Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
Buying books used is good.

Looking at free websites can't hurt.

I didn't read anything in your posting about how to identify a good investment or how to avoid a bad one, though.
augustabound
Augustabound - 5 years ago
stockdocx99 Wrote:

-------------------------------------------------------

> I didn't read anything in your posting about how

> to identify a good investment or how to avoid a

> bad one, though.

Why did you get the impression you would get that out of the article?

His title doesn't suggest that.


Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
Fire your broker! ...implies that you can substitute his suggestions for the services of a knowledgable broker.

While reading and acquiring more points of view is always a good thing, I don't see any connection with his bargain hunting to being able to "fire your broker".
augustabound
Augustabound - 5 years ago
stockdocx99 Wrote:

-------------------------------------------------------

> While reading and acquiring more points of view is

> always a good thing, I don't see any connection

> with his bargain hunting to being able to "fire

> your broker".

The title implies you can do your investing on your own, so does the article. I saw nothing about finding bargains like you suggest.

Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
The 'finding bargains' I referred to was in buying 'used books' and perusing free websites.

"Firing your broker" implies that reading books and visiting websites will substitute for having a broker. He didn't make a case for that.
augustabound
Augustabound - 5 years ago
stockdocx99 Wrote:

-------------------------------------------------------

> The 'finding bargains' I referred to was in buying

> 'used books' and perusing free websites.

Buying books used is good.

Looking at free websites can't hurt.


This was your first post. You agree with Alex on this point.

> "Firing your broker" implies that reading books

> and visiting websites will substitute for having a

> broker. He didn't make a case for that.

Nor have you made a case to oppose his view, you just shot him down.

Most on this site have read countless investing book and view free websites everyday and have never used a broker. So investing without a broker can be done successfully using your own resources.


Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
That's absolutely true but nothing in the article has anything to do with that.

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