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Originally posted by sailor
THIS for the long winded explanation, or THIS for a shorter, more concise version.
Essentially, ignore trying to make money in the short run. Instead, place your money into a mututal fund--and the more companies that it includes, the better. There are some that even include every stock traded. By doing this, your gains are essentially exactly what the market does. You thus by definition cant make any more than the market as a whole does, but you also cant lose more. In the end, you come out on top.
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Good books, both. I'd also add "The Intelligent Investor" by Benjamin Graham. Get the newest edition, though. There's sort of a long-term argument between these two books, one which (for now) it looks like the Value guys (Graham's camp) have won. I think the newest Random Walk editions concede some of Graham's position. Essentially, Random Walk argues that investing is a crapshoot, whereas I.I. says you can find underlying value. Both sides have some merit. I think the very existence of Warren Buffett tends to justify Graham, though keep in mind that Buffett has millions to invest with-- the average $5,000 in cash American won't have much success with his strategies.
Bob