Does reading make you a great investor? Know the answer to that question here!

Wednesday: The Independent Investor FROM THE DESK OF MILES EVERSON: Welcome to today’s topic on “The Independent Investor!” Every Wednesday, we publish articles about great investing tips with hopes to get you on the path towards true wealth and value creation. Let’s talk about the importance of reading in life and investing, as well as some book recommendations by my friend and colleague, Professor Joel Litman. As a huge proponent of reading, I am happy to share this topic with you. Are you excited to know more about today’s investing tip? Continue reading the article below. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

Does reading make you a great investor? Know the answer to that question here! Reading is an important activity and skill. As former US President Barack Obama once said: “Reading is the gateway skill that makes all other learning possible.” In other words, this activity is essential because it not only helps you learn and gain new knowledge; it also lets you converse with people you might not be able to interact with otherwise. What are some of the benefits of reading? It strengthens brain activity. - Reading gets your mind working across different areas. It involves using your analytical skills, stimulating your memory, and activating your imagination to process the words you read. It boosts your communication skills. - Reading and writing go hand in hand. If you’re looking to become a good writer, many of the suggestions you’ll come across will include reading more as it helps widen your vocabulary. It helps in self-exploration. - Reading gives you an opportunity to think about things in a new perspective, learn about other cultures, events, or people, and adopt new methods to reshape or enhance your lifestyle. It entertains. - Reading is a form of entertainment that can take you to different places, points in time, or adventures. It enhances your creativity. - Reading helps spark new ideas or images in your mind and leads to more creative outputs or expressions. Overall, this activity is important because it opens doors to new worlds, provides entertainment, and has neurological and psychological benefits. Besides, it’s hard to escape the need to read! From text messages to signs, emails to business documents, and everything in between, there’s always something for you to read every day. Reading, Book Recommendations, and Investing. Is it true that reading gives you an edge as an investor? YES! In fact, some of the world’s greatest investors are known to be voracious readers. They believe reading has a compounding effect—the more they read, the more they know… and the more they know, the stronger and wiser they become as investors. However, choosing the right book to read isn’t as easy as it sounds. According to Professor Joel Litman, CEO of Valens Research and Chief Investment Strategist of Altimetry Financial Research, to ensure you’re reading a book that will be an efficient use of your time as an investor, you should first ask yourself these questions: “Is this book for business or for pleasure?” “What kind of learning do I want to achieve after reading this book?” “What kind of conversation do I want to have with my peers or colleagues after reading this book?” Professor Litman says traditionally, in wanting to learn more about finance and investing, it’s often the books written by the big names in the industry that come to mind. These include: The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham Margin of Safety: Risk-Averse Strategy for the Thoughtful Investor by Seth Klarman Reminiscences of A Stock Operator by Edwin Lefèvre … and more. For Professor Litman, picking the right book about finance or investing helps fulfill an unmet need. The written work you choose to read must help develop the skills you need to have to boost your career or enhance your expertise as an investor. So, the next time you think about what book to read or what to recommend to anyone who asks, take a step back first and assess the unmet need a particular reading fulfills. Existing Knowledge is Also Important in Making Decisions about Life and Investing One of Professor Litman’s go-to recommendations for anyone who’s planning to invest is a book by Peter Lynch, the former Manager of the Magellan Fund at Fidelity Investments. Lynch played a significant role in helping Fidelity Investments become a finance goliath that it is today. Another great contribution of Lynch? He taught that great investing starts with first understanding what is already known and analyzing the current trends in the finance industry. His landmark book, “One Up on Wall Street: How to Use What You Already Know to Make Money in the Market,” explains how you can beat the pros by using what you know. The published work also offers easy-to-follow advice for sorting out the long shots from the no-shots by reviewing a company’s financial statements and knowing which numbers really count. There are also some guidelines for investing in cyclical, turnaround, and fast-growing companies. As Lynch wrote in the book, your portfolio can reward you if you invest for the long term… and by using your existing knowledge and paying attention to high-performing companies, you’ll find stocks that are worth putting your money into even before financial analysts discover them. Wouldn’t that be great? We bet it would! — Professor Litman says investing is not just about staring at spreadsheets and building great models or frameworks. It is also a matter of thinking through your knowledge and critically evaluating it. … and like how you should rely on your existing knowledge to identify which books to read, you should also use what you already know to figure out what stocks to invest in. This can be in the form of going to your local mall and pointing out which stores have lively environments, observing which fashion brands most people are buying products from, or conversing with your friends or colleagues about a few things you notice on some companies’ financial statements. Apply these tips the next time you are making an investment decision! Additionally, we also hope you’d read some of the investing-related books mentioned above. These will not only widen your knowledge and vocabulary on finance and investing but also let you in on the secrets of some of the greatest investors in the world. Start making reading a habit! Hope you’ve found this week’s insights interesting and helpful. Follow us on LinkedIn. Stay tuned for next Wednesday’s The Independent Investor! Ray Dalio - Founder and former Co-Chief Investment Officer of Bridgewater Associates… Learn more about the importance of meditation for investors in next week’s article!