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May 9, 2019, 2:59 p.m. EDT

What to tell a new graduate about investing in stocks

Success with money and investments requires humility, self-awareness, and a few good friends

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By Vitaliy Katsenelson

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•   “ Basic Economics ”,  by Thomas Sowell, which has taught me more about economics than all my economics classes combined.

•  “ Margin of Safety ”, by Seth Klarman — one of the most brilliant investors of our time. Though the book is out of print, you can find it online if you’re resourceful.

•  “ The Most Important Thing Illuminated ”, by Howard Marks, which is filled with Klarman-like wisdom.

•  The “Little Book” series: The process of writing one of these books made me appreciate the series even more that I did already. These books are typically written by investors who often have taken their “big” books (as I did) and simplified and condensed them into smaller, more accessible works. This process of simplification and condensation forces you to keep what matters the most. My two favorite books in is series are “ The Little Book of Behavioral Investing ”, by James Montier, and “ The Little Book That Builds Wealth ”, by Pat Dorsey.

•  “ Reminiscences of a Stock Operator ”, written in 1923 by Edwin Lefevre, tells from a first-person perspective the fictionalized tale of the early years of the great trader Jesse Livermore. It is rumored that this book was actually written by Jesse Livermore and edited by Lefevre.

This book provides a great introspective look inside a trader’s mind and teaches many behavioral and common-sense lessons. My favorite edition is the one annotated by my friend Jon Markman. His annotations are like a book within a book; they take you behind the scenes of Lefevre’s story and give important insights into the key characters and the backdrop of that interesting time period.

I don’t want to end with empty platitudes, but I’d be remiss if I didn’t stress the importance of having an unstoppable, insatiable thirst for knowledge. Learning doesn’t cease when you graduate; it continues and never stops. As I look at my investment role models, all them, without exception, have that quality. If you don’t have that thirst, cut your losses and find another career or hobby. A value investor needs to have a growth mindset.

Now read: A retired top executive says this killer question will kick-start (or reboot) your career

Vitaliy Katsenelson is chief investment officer at  Investment Management Associates  in Denver, Colo., which has no position in any of the stocks mentioned in this article. He is the author of “Active Value Investing” (Wiley) and “The Little Book of Sideways Markets” (Wiley). 

So, how does one invest in this overvalued market? Our strategy is spelled out  in this fairly lengthy article.  

Vitaliy Katsenelson is chief investment officer at Investment Management Associates in Denver, Colo.

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