If You Understand the History of the Stock Market You Can Ride the Waves Better

Just like with basic economics, if you are getting your information from the government and general news sources, you are likely confused.  It is the goal of these entities to keep you that way, thinking you need to keep coming to them for answers and regulation.  The book Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies, 4th Edition, by Jeremy J. Siegel, is the antidote for that.

Although an understanding of economics, such as can be easily gotten by reading Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics, is key to understanding the stock market, Mr. Siegel’s explanation of the actual facts of history and trends of the stock market lifted me out of the storm of stock market opinions and hype.  Full of clear historical data, with research from a large variety of people, complimented by charts as visual aids, all pulled together by unpretentious narration of the author, the hard copy of this book is preferable so that the charts are readable and the book can be used as a reference in the future.  Now, when I read other resources of current information, I have a substantial base with which to evaluate what I’m being told.

Here is a summary of the content:

–     The real history of the stock market, without all the political propaganda

–     How to really evaluate risk and volatility

–     Introduction to well known indexes that are used regularly in the news

–     What the S&P 500 Index is historically and today

–     How tax rates have historically affected the stock market

–     Just who determines what is a bear or bull market and when they know

–     The ins and outs of understanding value and earnings

–     How expectations and economic news do and do not cause flucuation

–     The impact of the Federal Reserve, the fall of the gold standard, and trying to                 predict the business cycle

–     Which world events moved or did not move the stock market

–     Who reports economic data and who it makes a difference to

–     Trading versus investing

–     Why trends and calendar anomalies tend to be unreliable over the long term

–     Why knowing the facts does not always turn you into a savvy investor

–     Things to consider if you choose to hire someone to help you invest

My favorite quote out of the book is by Dean Witter as he spoke to his clients during the crash of 1929:

“There are only two premises which are tenable as to the future.  Either we are going to have chaos or else recovery.  The former theory is foolish.  If chaos ensues nothing will maintain value; neither bonds nor stocks nor bank deposits nor gold will remain valuable.  Real estate will be a worthless asset because titles will be insecure.  No policy can be based upon this impossible contingency.  Policy must therefore be predicated upon the theory of recovery.”

The stock market will always fluctuate.  There is no need to be swept along by mob behavior or constantly concerned about the news sharks.  Reading this book will get you well on your way to calmly riding the waves of the stock market.

To read more of my Stock Market Diaries:

The Mother Who Invested in the Stock Market

The Moral Superiority of a Wise Investment Strategy

How I Learn the Language of the Stock Market