Economic Wisdom to Apply in Your Twenties

Chapter 38

Chapter 5 Section 2 Investing doesn't have to be good at math

We usually have a concept that people who invest successfully must be people with extraordinary mathematical minds.For example, the investment wisdom of Buffett and Soros must have a strong mathematical hormone. James Simmons, an American mathematician and investment guru, is a professor of mathematics at MIT and Harvard University. His high investment returns are undoubtedly the same. Thanks to his shrewd mathematical mind.

You may be worrying about this.For many people in their school days, the subject they hate the most is mathematics.Whether it is simple equations and functions in middle school, or calculus and models in college, mathematics is indeed not an easy subject.The thought of investing and having to deal with annoying mathematical formulas and models makes many young people in their twenties feel the same.

However, the truth doesn't seem to be what you think it is.Buffett, who has been recognized by the world as the "stock god", will tell you that successful investment does not require advanced mathematics knowledge.

"If higher math is required, I'll have to go back and deliver papers, I've never seen higher math work in investing...you don't need to be a rocket scientist. Investing isn't about a guy with a 160 IQ beating the IQ A game for 130 people."

What Mr. "Stock God" said above is not a joke.Buffett is not as busy with the deduction and calculation of mathematical models as we think, so what is he doing every day?Buffett himself sums up his day job this way: "My job is to read."

So what is Buffett reading?

What Buffett reads most is the financial report of the company. "I read the annual report of the company I am concerned about, and I also read the annual report of its competitors...I read a lot of materials. I stay in the library until the last time before leaving." Of course, Buffett does not just read listed companies For the publicly disclosed information in the annual report, after he finds the companies he is interested in from the annual report, he will read a lot of relevant books and materials, and conduct research to find the hidden truth behind the annual report: "I look at the information disclosure of listed companies (mostly Undisclosed) in the same way I look at icebergs, needing to see most of what is hidden below the surface." 
Buffett believes that reading and investment research are combined. "You can pick a company whose financials you don't know very well, but whose products you are very familiar with. Then find a large number of annual reports of this company, and all the articles about this company in the last 5 to 10 years, and dig deeper. , immerse yourself in it. When you have finished reading the material, ask yourself: Is there anything I don't know but must know? ... This is an investigative process, like a journalist interviewing. In the end you want to write a story. Some companies have an easy story to write, some companies have a hard story to write, and what we look for in investing are companies whose stories are easy to write.” 
Please believe in the advice given to us by Mr. "Stock God".Successful investing is less about struggling with arcane math than it is about reading skills.By mastering a large amount of information and carrying out investigation and research, we can accurately grasp the investment environment and investment prospects.

Buffett reminds every young person who wants to succeed in investment: "To invest successfully, you don't need to know what Beta value, efficient market, modern portfolio theory, option pricing or emerging markets. In fact, everyone It’s best to be ignorant of these things. We believe that students of investing need only be well educated in two courses, one on how to value businesses and the other on how to think about market prices. … …If you’ve got a Ph.D. and spent years learning to use mathematical models to do complex calculations, and then you come to value investing, it’s like a Christian going to seminary and discovering that all you need to know is the Ten Commandments.” 
Investing is actually not as mysterious as we think.Li Zhilian, a well-known Korean life and financial expert who wrote the best-selling book "It's Easy for Women to Become Rich", also wrote in her book: In fact, investment is a subject that does not need to rely on mathematical skills.As long as you can calculate, as long as you listen carefully, there is no need to worry about learning badly.As long as they know basic calculation methods and have investment experience, women who are not good at math can still beat men in the investment game.The reason why women in Seoul, South Korea are engaged in investing and succeeding is by keenly interpreting the government's policy analysis and doing simple calculations.

Stop worrying about your weak math knowledge creating any obstacles to your investments.Remember Buffett's advice to you: Learning to invest is very simple, as long as you are willing to read.

Wisdom Pieces: Recommended Reading by Buffett
1. "Security Analysis" (by Graham).Graham's classic masterpiece, a must-read book for professional investors, Buffett believes that every investor should read this book more than ten times. 
2. "The Intelligent Investor" (by Graham).Graham is written specifically for amateur investors, and Buffett calls it "the greatest investment book ever written." 
3. "How to Choose Growth Stocks" (by Fisher).Buffett calls his investing strategy "85 percent Graham and 15 percent Fisher."Using Fisher's techniques, he argues, understanding the business ... can help make an intelligent investment decision.

4. "Buffett's Letter to Shareholders: A Tutorial for Joint Stock Companies".This book collects and organizes the essence of Buffett's letters to shareholders for more than 20 years. Buffett believes that this book is a first-class work for sorting out his investment philosophy. 
5. "The Autobiography of Jack Welch" (by Jack Welch) The autobiography of the world's number one CEO.When recommending this book, Buffett said: "Jack is the Tiger Woods of management. All CEOs want to emulate him. Although they can't keep up with him, if they listen carefully to what he has to say, they can get closer to him." 
6. "Win" (Jack Welch).Buffett said: "With "Win", there is no need for other management books."

(End of this chapter)