If you’re like anyone that wants to learn more about the markets you probably have a Wall Street Journal subscription. It is a great resource and something I used to read cover to cover almost every day. I still read it often, but I tend to skip the bombardment of writers telling me stocks are going up/down on any given day, recently the narrative has been the trade war and tariffs. Don’t get me wrong these things pose a big threat to the global markets, but in my personal opinion that has not even come close to materializing yet and as someone who looks at the big picture I don’t think one day of stock market noise can be explained by any one thing.
So if you are looking to further deepen your knowledge there are few things you can do, many of which are free or won’t break the bank. Some of the things we like to do include:
Reading Actual Portfolio Management Research
Find a fund, asset manager, investor, professor, economist or anything of the sort that you like and resonate with. Read what they have to say and ask yourself if it makes sense. Then read something completely opposite and see what you think. I used to think individual stock picking was the only way to invest. My ideology was that bonds could never give me the returns I needed and other financial products involved heavy amounts of leverage. Then I read Burton Malkiel’s, “A Random Walk Down Wall Street.” Now, I like looking at data and Malkiel consistently provided concepts I found easy to understand followed by charts to drive his thoughts home. I am now more open to a portfolio that is diversified across the world and across asset classes.
Some other ideas include reading AQR Capital’s website. With $226 billion under management across all their offerings its quite amazing they have a research tab right on the homepage so you can read up on their thoughts and insights. I am also a big fan of Meb Faber’s blog and weekly podcast. Aside from running a $1b AUM investment manager he frequently puts out free research and inexpensive books.
Looking At Economic Indicators
The Federal Reserve, Bureau of Labor Statistics, Institute of Supply Management, etc. regularly put out economic indicators that gauge the health of the economy. A lot of guesswork is taken out when you have data showing how many people are buying houses or how inflated the prices of goods are.
Getting even more creative, public companies are required to disclose their financials every quarter. The largest companies choose to have earnings conference calls and field questions from some of Wall Street’s top analysts, but these are completely available to the public. So for free you can hear the executives of top global business talk about what their views are on their businesses and the overall economy.
Some of our favorite indicators include:
- Real GDP Growth – GDP Growth less inflation
- Purchasing Managers Index(PMI) – gauges business health by means of a survey to purchasing executives at hundreds of companies which includes new orders, factory orders, employment level, supplier’s delivery times, and inventories
- Housing Starts – how many people are buying new homes
- Caterpillar/Boeing Earnings Calls – industrial giants who are sensitive to changes in the global economy
Tinkering With Data Series
There are a number of free or low cost data series out there on the internet. One of the most popular is the Fama/French database which includes US equity data dating back to the 1920s. AQR Capital, which I referenced before, has a similar dataset on their website as well. These two are especially nice because they have different factors you can play around with and see how they have historically performed.
However, even yahoo finance has free data. Most recently I was playing around with an S&P 500 strategy that tilts into lesser represented sectors of the market and found that yahoo price data was more than sufficient.
And you don’t have to be a programming genius either, you can do a lot with excel and you’d be surprised how one simple plot can lead to many ideas. One of my favorite websites portfoliovisualizer.com actually allows you to create a portfolio and see how it historically performed.
But if you are a real nerd you can play around with quantopian.com, quandl.com, and quantiacs.com. These websites have free financial data and essentially built a backtesting engine for you so you just have to code up a strategy and see how it performs. (Not sure if quandl does the backtesting for you I just heard they have great data)
More than anything it is important to be creative. The industry notoriously is pretty secretive about their research because an overused strategy is one that does not work. However, more and more firms are starting to provide research and insights to the general public so make use of what you can. We are working on starting two new sections of the website. One for money manager’s letters to investors and one with interesting papers, excel spreadsheets, and more. So hopefully we can provide value to you as well.
As always we welcome questions, comments, and thoughts via email at founders@themodernpiggybank.com. Be sure to subscribe to this website and follow us on twitter @themodernpiggy2.
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