| Background: Quantitative institutional trader with a Math/CS/Econ background. I have built and run trading strategies at hedge funds for the US and emerging markets. True story: A senior trader on the trading desk asked me - "Why did the market go up yesterday?". I tried to pontificate away at some explanation and after a while just shrugged and said - "I really don't know", fully expecting to be commended for my honesty. The trader laughed and said: "The market went up because there were more buyers than sellers". Next question, "Why is the market going down today", he continued "Because they are more sellers than buyers". The whole machinery of finance exists to give you a better story around this but nobody really knows. There are two perspectives to understand finance. We will call the two perspectives the Alien Scientist and the Blob ;) The Alien Scientist perspective is that you have arrived at a new planet with a thriving civilization unlike your own and they act in inexplicable ways. After a period of observation, you can predict the outcome of the behavior in the long term. You cannot predict why the outcomes happen. You also cannot predict behavior in the short or medium term. The Blob is one of the many beings who populate the planet under observation. The Blob is actively trying to understand their environment and how their fellow blobs behave so they can predict the outcomes and thrive from it. The Blob is equally vested in understanding the why of the behavior of their fellow Blobs and also the interaction of the environment, the blobs and so forth (i.e. second, third, fourth-order effects). You can take the approach of the Alien Scientist (long term investor) or you can take the approach of the Blob (trader/economist). If you take the investor (Alien Scientist) approach you are more concerned with the long term outcomes in financial markets and not with the why (aside: most financial market information is pure noise). The Alien Scientist approach should start by reading "A Random Walk Down Wall Street" and books by John Bogle and Warren Buffet's musings on investments. You would also do well to understand the various tax structures and treatments available to you - 401k, housing, .... since these can significantly impact your end outcomes. You can invest all the time freed up not having to study finance by reading gossip rags and watching reality shows - you will be entertained and there are pretty people to look at ;) Or invest it in your wellbeing and your long term earning power (i.e. career). There is plenty of advice in this thread on the Blob approach if you want to go that route. Good luck! |