Ed Mamula.com

The Motley Fool will always occupy a special place in my heart.  When I was a teenager, I managed to save a few thousand dollars over the course of a couple of years.  This was the first time that I had any trading capital that I could control without parental supervision. (My first trade having been a wild ride in Pepsico through the 1987 market crash…)

Other than a few odd conversations with relatives who would claim to be making money holding various stocks, I had no source of financial education.  I’m not sure how I found the Fool, but I’m immensely glad that I did.   

The Fool is a great place for absoulte beginners to learn the basics of investing.  They publish an online guide called Our 13 Steps to Investing.

If you know nothing about trading and investing, please go there and read the first 9 steps.  Yeah, that’s right, the first 9.  The last 4 steps are marketing fluff designed to get you to subscribe to newsletters. 

It’s easy for an experienced investor to dismiss the Motley Fool, because the information presented there is rather basic and light, but for newbies, it’s a gentle and fun introduction to self-directed investing.   Maybe someday you’ll be a snobby graduate of the Motley Fool like me.

 On another, related note, I worked at the Motley Fool as a database programming intern for 2 years while I was in college.  I managed to land the internship mostly because of my enthusiasm about the company.  I really didn’t have the necessary skills at the time of the interview, but I had the drive to contribute to the company, and a man by the name of Kevin Book gave me a chance.  For those of you who watch CBNC, you might see Kevin from time to time.  He’s moved on to Friedman Billings Ramsey, and now he gives talking head analysis to CNBC.  Go Kevin!

Here are two memory distorted bits of wisdom from one of my favorite professors at the University of Maryland, Dr. William Nickels.  Both points are entertaining and remarkably useful.

1) “Almost everybody, almost all the time, is almost always wrong.” This statement works well to counterbalance our natural tendency to believe whatever we hear.  I always like to say that beliefs rush into a vacuum.  This means that if I know nothing about a topic, I’m very likely to believe the first thing that I hear about said topic, and consciously or unconsciously begin to compare competing thoughts to the “truth” that I learned first.  What’s more, I might immediately associate the person who gave me this first glorious bit of information as an expert on the subject!  Remembering that almost everybody almost all the time is almost always wrong should help us to keep an open mind for opposing viewpoints.  This, in turn, should allow us to form opinions based on our own judgment rather than forming beliefs in the same way that mortgages are filed in the courthouse…first in time, first in line!

2) How to become an expert on any subject:  (This one fits in very nicely with the first topic.)  In order to become an expert on any subject, all you need to do is “keep a file”.  That’s it.  If you’re interested in a topic, you learn everything you can about it.  You cut out magazine articles on the subject, you bookmark relevant websites, you buy books on the subject, etc.  In this way, you can literally achieve encyclopedic knowledge on the subject.  And if whomever you’re speaking to doesn’t know about point #1, you can sell them anything.

Seriously though, it makes perfect sense.  If we want to become experts in a topic like, I don’t know…investing in stocks, it stands to reason that we have to do a lot of reading and absorbing information in order to move from a novice to an expert.  Any street fighter will tell you that book smarts ain’t common sense.  True expertise is forged when the fusion of our book smarts and battle scars allow us to succeed where others fail.