How to Teach Yourself Finance & Economics

Summary

This video is a practical, book-driven roadmap for self-educating in finance and economics. It starts with mindset and trading psychology (Market Wizards, Come into My Trading Room), then covers core concepts via the creator’s “iceberg” primers. It stresses risk literacy (Success Equation, Fooled by Randomness), recommends CFA Level I topics for fundamentals, and suggests value- and special-situations reading (Poor Charlie’s Almanack, One Up on Wall Street, You Can Be a Stock Market Genius). Advanced paths include earnings analysis, macro/geopolitics (Lords of Finance, Ascent of Money, Geopolitical Alpha), derivatives/distressed debt, and real estate. Finally, apply learning by paper trading, small real trades, written research, and a personal macro dashboard.

Takeaways

• 😀 The foundation of success in finance is understanding both market psychology and the broader economic principles that govern markets.
• 😀 A strong finance education requires not only theoretical knowledge but practical experience, such as paper trading or real money investments.
• 😀 Reading books by experts like Jack Schwager, Dr. Alexander Elder, and Michael Mobuson is essential to understanding the psychology of traders and the role of randomness in financial markets.
• 😀 To gain a deep understanding of finance, dive into key topics such as market risk, value investing, and macroeconomic trends with books like 'The Most Important Thing' and 'Poor Charlie's Almanac.'
• 😀 Analyzing stocks or macro trades through personal equity research case studies helps reinforce knowledge and provides a practical application of theoretical concepts.
• 😀 Following major market indicators and creating a personal macro dashboard allows you to track the market over time and recognize patterns and movements.
• 😀 Practicing market analysis for at least a year, tracking bonds, interest rates, stocks, commodities, and FX pairs, helps develop an intuitive grasp of market cycles and trends.
• 😀 The CFA Level 1 curriculum provides a solid foundation for understanding finance fundamentals, covering key topics like quantitative methods, financial statement analysis, and derivatives.
• 😀 Realizing the complexity of finance and the amount of effort it takes to master the field can help manage expectations and guide you toward the right approach, whether through self-study or professional assistance.
• 😀 Success in investing and finance requires consistent learning, staying updated with financial news, and understanding both market fundamentals and technical indicators.

Q & A

What is the main objective of the speaker's guide in the video?

The main objective of the speaker's guide is to provide a comprehensive roadmap for self-educating in finance and economics, offering resources and actionable steps to deepen knowledge and gain practical experience in the field.

What are some psychological aspects that one should focus on while learning finance?

The speaker emphasizes the importance of understanding the psychological side of finance, particularly the mindset required for trading and investing. Books like 'Market Wizards' and 'Come Into My Trading Room' are recommended to build a strong psychological foundation.

What are the key resources for learning the fundamentals of finance?

For foundational knowledge, the speaker recommends studying the CFA Level 1 curriculum, focusing on areas like quantitative methods, economics, corporate finance, and equity investments. Additional resources like Schweser’s notes can be useful for summarizing key concepts.

How can one start applying finance knowledge practically according to the speaker?

To apply finance knowledge, the speaker suggests paper trading, testing ideas with a small amount of real money, and writing equity research reports. The practical application can also include building a personal macro dashboard and tracking financial data over time.

What is the significance of 'following the market like a sports fan'?

The speaker recommends immersing oneself in the market by regularly tracking financial data, similar to how one would follow a favorite sports team. This helps develop a keen understanding of market movements, trends, and the impact of financial news.

Why does the speaker suggest reading books like 'The Most Important Thing' and 'Poor Charlie’s Almanac'?

'The Most Important Thing' by Howard Marks and 'Poor Charlie’s Almanac' by Charlie Munger are recommended because they provide valuable insights on risk management, value investing, and developing a long-term strategic mindset in finance.

What does the speaker mean by 'testing with a small amount of money'?

Testing with a small amount of money refers to taking the knowledge gained from reading and applying it in real market conditions with limited financial risk. This helps one experience the emotional and psychological aspects of trading and investing firsthand.

How does the speaker suggest dealing with the overwhelming amount of information in finance?

The speaker suggests breaking down the learning process into manageable parts, starting with foundational knowledge and progressively moving to more advanced topics. He also advises writing research reports and following the market consistently to consolidate learning.

What role do books on global macroeconomics play in the speaker's approach to learning finance?

Books on global macroeconomics, like 'Lords of Finance' and 'The Sovereign Individual', help expand one's understanding of the macroeconomic factors that drive financial markets. The speaker emphasizes their importance for building a broader, global perspective on finance.

What are the suggested steps for someone who feels overwhelmed with finance learning?

If someone feels overwhelmed, the speaker suggests reaching out for professional help. He mentions that while self-education is essential, sometimes consulting with an expert can help streamline the process and provide clarity on complex concepts.