Monthly Archives: April 2016

Zero to One Book Review

Zero to One Book ReviewZero to One, by Peter Thiel, is a great little book about Notes on startups, or, how to build the future.

Pretty compelling, right?

And that’s exactly why I’m so excited to review this book for you today. Although it’s not a strict investing book, Thiel’s musings are definitely rife with business insight. So for that reason, I couldn’t ignore sharing this book with you.

So keep reading. Because this review is going to give you everything you need to help you decide if Zero to One is the right book for you (or your favourite entrepreneurial nephew, perhaps).

Now let’s cut to the chase.

Summary of Zero to One:

Zero to One is a short and easy-to-read book that was based on Thiel’s lectures at Stanford on startups. One of his students, Blake Masters, took exceptionally good notes from the course. And that’s what led to this book.

Essentially, Zero to One shares a framework for how Thiel thinks about business. Each chapter contains a different idea, most of which challenge conventional business wisdom. For example, one chapter is called “Last Mover Advantage” (in contrast to the more common first mover advantage). It’s this kind of counter-intuitive teaching that kept me from putting down Zero to One.

And even though Zero to One is primarily about startups and founder-driven businesses, there’s lots you can learn as a regular self-directed investor or retail trader. The ideas in this book are sure to get you thinking.

By the way, let me also quickly explain the title of the book to you as well…

Explaining the Concept of Zero to One

In Zero to One, Thiel argues that a lot of business resour es are spent on incremental improvement. That is, going from n, to n+1. It’s easy and accepted to make this kind of incremental change on products, projects and companies.

But Zero to One emphasizes a different approach.

The concept of Zer to One is about creating new things. Thiel argues that much more value is created going from nothing to something (0 to 1), vs building a new feature or improving an existing product or service (n+1).

Make sense? I hadn’t thought of this concept before reading this book. But once it hit me I couldn’t shake it. And I’m glad my friend recommended this book to me.

Biggest Weakness of Zero to One:

When doing these book reviews, I always like to provide a balanced view.  But in the case of Zero to One, this is easier said than done. To be honest, my biggest complaint is probably that the book was too short.

The reason is, I really enjoyed Peter Thiel’s thinking and simply wish that I could absorb more of it. That’s hardly a real complaint. And I’m sure there are lots more resources online, which I’m going to look into.

But for now suffice it to say the book does a wonderful job introducing some great business ideas. I just wish it dove deeper into some of them.

Zero to One Book Review – The Final Word:

Zero to one is a really neat business book. It’s easy to read, very intriguing and does a heat job making you question conventional business wisdom. For these reasons, I recommend checking out Zero to One on Amazon.

And by the way, if you still want a little bit more information, I encourage you to watch the video book review below. This will help you further determine if Zero to One is the right book for you.

Zero to One Video Book Review:

Free Stock Trading Psychology Videos

Regular readers will know I’m a big fan of trading psychology. So I hope these Free Stock Trading Psychology Videos are right up your alley. And the great thing about these videos is that you can listen to them on repeat and pick up something new each time.

So rather than bog you down with a bunch of pre-amble, let’s cut to the chase…

Free Stock Trading Psychology Videos:

One of my favourite trading psychology experts is Dr. Brett Steenbarger. Here are two great free lectures of his you can watch free…

Dr. Brett Steenbarger on Improving Trading Performance.
Dr. Brett Steenbarger interview on Trend Following Radio.

Both of the above talks are great. Dr. Brett has so many great insights it’s hard to pinpoint any part as my favourite. I promise he’ll make you think.

Another great perspective I enjoy in trading psychology is the late Mark Douglas. Here’s a video of him at his best: Mark Douglas – Mind Over Market.

Shifting back to Michael Covel for a minute, his podcast has interviews with all kinds of great trading psychologists. This interview with Dr. Van Tharp is definitely worth a listen.

Another timeless lesson in Market Psychology is this video presentation from Nick Radge. His discussion of qualitative vs. quantitative traits in trading is incredibly insightful. Do you have what it takes to make the journey? I have probably watched this video 50 times or more. Watch it to try and understand why your brain and instincts could be working against you.

And by the way, if you want more of Nick Radge, Michael Covel has two more interviews with him that you can listen to free here, and here. Now that you mention it, who hasn’t Covel interviewed?

Finally, I’m not sure who Manesh Patel is, and the production quality isn’t great, but the content in this free trading psychology video is very solid and I recommend checking it out when you’ve got some free time.

More Stock Trading Psychology Resources:

If you’re still hungry for free stock trading psychology information, I recommend you check out the books below. They are some of my favourite investing books; and in case you didn’t know, I’ve read plenty.
The Disciplined Trader
Trading Psychology 2.0
Zen in the Markets
Trading in the Zone

Tips to Follow When Making Financial Decisions in Your 20s

People tend to take risks when they are young. Old people prefer to settle down. They are not risk-takers. When making financial plans for 2016, keep this maxim in mind. Why? Because if you are a young person, then you should be taking risks.

But taking risk is not same as acting like a foolhardy. When making financial decisions in your 20s, don’t be hot-headed. In this article, I’ll help you get an idea of how to handle your personal finances when you are young.

Credit card debt

We tend to ignore credit card debts. Not only does this not help us, but it actually intensifies the problem. My advice to all of you is pay off the debt on your credit cards as early as you can. Don’t let it accumulate.

Due to poor financial decisions in your 20s, you may incur credit card debts. True, it’s not good for you but there’s an advantage – you have plenty of time ahead, which you can use to pay off the debt.

You may find yourself a job or make some quick cash in some other ways. Feel free to take risks,because the gain would be colossal – you’d get rid of the most annoying thing in this world – debt.

Budgeting skills

Young people need to learn budgeting. They can make a household budget and stick to it. They don’t need much grey-matter for any of these, all they need is smartness. First make a list of all incomes, from both stable and unstable sources. Then list down the monthly household expenses. Next, tally these two.

Let’s say your total household income is $4,000 a month and expenses are $3,000. You earn $1,500 from from stable sources and $1,600 of your monthly expenses are on required utilities. Try paying the required utility bill from stable income and the non-required bills like eating out, watching movies from non-stable income sources.

Acquiring budgeting skills in your 30s and 20s, especially in your 20s is critical to financial success in later stages of life. Financial decisions in your 20s determine how you’ll do with your finances later. Lessons learned from budgeting skills stay with you forever, benefiting you this way.

Using credit cards

Credit card again! Paying down existing debts helps but prudent usage of credit cards helps even more. Never use more than 10% of your credit limit. If your card has $500 credit limit, never use more than $50. Before you use the card again, pay off the $50 debt.

Retail outlets allow buyers to pay using their credit cards, which is a reason behind the craze of purchases made using credit cards. Financial decisions in your 20s can be mostly wrong. Overuse of credit card is one such decision.

Another thing, never make the minimum monthly payment. Always pay the full amount. The minimum monthly payment is often less than 10% of the debt. Given it’s 1% and you have outstanding balance of $1000, it takes more than eight years for you to clear the debt. Now add interests and charges and it takes even more. Plus, you end up paying more than what you actually owe.

When you are young, take risks. Pay all the debt at once even if you have to break your savings for that. You can earn money in the future, you have plenty of time.

Timely bill payment

You need to pay your bills on time. Young people tend to be forgetful and they don’t take things seriously. The result? They make delays in paying auto loans, electricity bills, student loans, etc. The untimely payment of bills hurt them in the end.

Your financial checklist probably excludes timely bill payment. But take it from me, it’s way more important than you think it is. Not paying bills on time is a bad habit. Beyond that it hurts your FICO score. Want to know how it happens? Then read on.

FICO score

Here also, young people, especially those who are in their 20s and 30s have an edge. The FICO score can be under 620, making it hard for you to get approval for loans. You can still improve your FICO score by making lifestyle changes because FICO score is linked to your lifestyle.

The records of delays in bill payments stay on your credit report. Removing them is a herculean task. You have to negotiate with creditors and request the credit bureaus. At the same time, use your credit card to improve the score. Still there’s no guarantee that the records will be removed or the score will improve. Hence, be on the safe and pay all the bills on time.

Retirement savings

You may be young, but that’s no excuse not to remember that financial decisions in your 20s can make or break your future. One such decision is saving for life after retirement. Saving consistently for the post-retirement life makes your future safe.

The 401(K) tax is huge. According to estimates done by private sources, an average person pays more than $100K through his service life for paying 401K taxes. This finding shows how much you can save if you make cogent plans.

Use all the non-taxable accounts to build your savings. Set up an IRA account for tax-free saving. Use the health savings account (HSA) to save because your employer sends money to this account before tax deduction. When you are young, spend time and resources to build savings for a better and secure future.

This article is contributed by Tina Roth who is the owner and blog at Pro Finance Blog – a leading personal finance blog.

2 More Trading Chats

I’ve been training for a race lately. So my time on the treadmill has been on the heavy side. The good part is, that gives me lots of time to listen to trading and investing podcasts.

Last week I told you about the chat with a trading psychologist. And this week I have two more Chat with Traders Podcasts that I wanted to share. The first one was with Jerry Parker, and the second with crude oil trader Tracy aka ChiGrl.

As always, the podcast does a great job sharing educational trading lessons. Below are my unedited thoughts, while listening to the podcast.

Jerry Parker Podcast:
Trading is hard. It has to be. It’s not easy. Low win rates are okay. Drawdowns are good. Do the uncomfortable.

Think of optimal loss size… Not too big or small. Aims for 40% win rate

Diversify trades across time frames.. Some systems are faster or slower than others (eg contrast 100 day breakout with 300 day breakout).

Sample size of backtest is most important thing in trading (qualitative!)… Too many variables in system limits sample size (which really matters in fat tail environment)

Build robust systems. Bet small. Buy rallies and sell the lows

Chigirl Podcast:
-your head is your enemy – keep yourself out of your way. Make the same trades again  and again.

The market likes to balance itself

No matter you’re doing or trading passion/enjoyment can help fuel your dedication. But you need a system to make it automatic. Don’t use discretion until you’ve been doing it for 10 years.

What’s going to make the market react?

If you rely on fundamentals, know your market:
Rig count is a poor proxy for oil production right now

About guessing or predicting and just rare what’s in front of you.

Patience is very important to long term success. You don’t need to be trading all the time. Wait for the opportunity to come to you. Trading should be boring. I talk about trading more than I trade. Avoid overpaying your broker!

Random: Wunder Capital was the sponsor on one of the shows. Don’t know about this company in particular, but it’s neat to see impact investments coming to retail market so quickly.

 

Chat with a Trading Psychologist

I was listening to Dr. Brett. Steenbarger on the Chat With Traders podcast this weekend. And I couldn’t resist the urge to share it with you here. If you haven’t listened to this yet, I highly recommend it.

Below are links to the podcast, as well as some additional relevant resources for one of the best trading psychologists around.

And as I explained in my review of Trading in the Zone, trading psychology is something I can’t get enough of. I hope you’ll feel the same way!

Finally, I’d be remiss if I didn’t remind you that I mentioned Chat with Traders in the best trading podcasts of 2015 blog post. So congrats to you home-gamers following along who’ve already caught this one.

Chat with Trading Psychologist Dr. Brett Steenbarger:

SoundCloud podcast link: How to master trading psychology, and introduce new best practises w/ Brett Steenbarger

iTunes podcast link How to master trading psychology, and introduce new best practises w/ Brett Steenbarger

Dr. Brett also has a great trading blog and engaging twitter account.

And if you want to hear him speak a little more, check out his appearance on the Trend Following podcast with Michael Covel.

Now as promised, below are my unfiltered conscious thoughts, while listening to/reflecting on the podcast. Take it for what it’s worth!

Notes on Podcast with Trading Psychologist Dr. Brett Steenbarger:

Do more of what works… Model your success! Update your success diary/playbook and review it.

Adapt to changing markets (all businesses must)… Drawdowns may reveal changing market conditions…

Improve without curve fitting… Build different systems for different market conditions. Diversify with different methodology for different conditions.

Build on your strengths.. How does this reflect in process? (Eg are you best at slow thinking methodical science experiments… Also compliments time horizon… Deeper and more analytical experimental design… Find data and perspective other people are ignoring. If you do what everyone does you will get the results everyone does.)

Best practices > repeated > lead to best processes

Habits and routines are much more important than motivation… Implement best practices routinely to develop positive habit patterns. Motivation follows action.

Leverage your success and work around your weaknesses. Acting on your strengths is fulfilling (intrinsically rewarding)… We feel strong and fulfilled when acting on your strengths… If you’re intrinsically frustrated that means you might be working in an area you are weak at.

Goals need to be followed with a specific plan. A goal without a plan is a wish. You need daily actions to drive consistent and regular progress towards goal. P&L goals emphasize outcome over process, which can lead to performance anxiety. Focus on what you can improve on. Risk adjusted returns are a better way to focus.

Traders need to make friends with loss and failure. They can teach us and make us stronger. It’s how we become better. Your drawdown is telling you what’s not working.

Think in percent and basis points… Easier psychologically than thinking about dollar amounts and thinking about money. Putting too much pressure on yourself can be a big challenge. You need other thinngs in your life outside of market to help refresh you during draw downs.

And that’s it! Feel free to mention your favourite part of the podcast in the comments below.