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Top comments that mention products on r/finance:

u/to_change · 1 pointr/finance

I'm reading through the McKinsey "Valuation" (5th Edition) textbook ( and I've had some issues that I was hoping to get answered.


  1. In the second chapter, the authors discuss the so called value driver formula: Value =( NOPLAT_i * (1 - g/ROIC) )/WACC-g. Where g = constant growth rate, ROIC = rate of return on incremental capital invested, and NOPLAT_i is the operating profit after tax (before reinvestment) in period 1. However, then they go on to show this diagram: In this situation, WACC = 9%, and the initial NOPLAT is $100. They model it for 15 years and then use 3% perpetuity growth formula for the terminal value. I have 2 questions.
    1. I don't understand how they can say that the value of the company is $1100 when ROIC and growth are both 9%. The value driver formula would clearly give a value of 0 (I know it's only applicable in constant growth settings, but this is one of those) because g/ROIC would = 1 when g = ROIC, and thus the numerator goes --> 0. This would also however make sense because of the other formula they mention: Investment Rate = growth rate / ROIC. If growth rate = ROIC, then IR = 1 and you reinvest everything in order to get the growth you want.
    2. Secondly, I've tried to model these scenarios out on my own in Excel and I don't get anywhere close to the $1100 present value. Anyone want to take a crack at it to help a guy out?

      Either way, I feel like I'm missing something really obvious. Help is appreciated :)
u/xcrunna19 · 3 pointsr/finance

For questions 1 and 2.

  1. If you are packing the loans into a CDO, they are being sold on the open market. Once it achieves a AAA rating, as most did even though they were mostly subprime, alt a, or arm, it is sold and shipped off the originator's books (While the originator of the CDO collects X% in fees)

    Basically how the originator makes their money is by X amount of CDOs they sell. There was no incentive to pick and choose the best borrowers to sell a loan to because how the CDOs were sold they achieved the best rating regardless of the borrowers credit risk.

    Due to this model, people are going to try and get as many people into the homes and sell the CDO asap. This caused questionable lending practices to result, NINJA (no income, no job, no assets) loans, manipulating borrowers income, assets, etc.

    Things that could be changed to help not have this occur again:

    a) Feds monetary policy was pretty meh during this period, due to low interest rates the banks had pretty much an endless supply of money and when all the reasonable ventures dried up they had to explore other opportunities to lend.

    b) Ratings agencies need an overhaul in how they receive their commission, preferably they should be being paid by the investor not the person issuing the security. This will help to eliminate the bias that results.

    c) Having X% (2-5) remain on the institutions books who created the CDO will help to make them responsibly lend. This is because if they are required to have it remain on their books, they will make better longer term decisions in who to lend to.

    I'm pretty sure all of these issues are discussed in Nouriel Roubini's book Crisis Economics

    Another Great book already mentioned in this thread is by Michael Lewis The Big Short

    If your interested in the European Crisis Michael Lewis also just came out with Boomerang
u/Kill_All_The_Humans · 18 pointsr/finance

Do you mind a quick story?

I was a triple finance major. My university offered a series of courses that allowed me to get degrees in corporate financial management, commercial bank management, and investment science & portfolio management. They taught me that "if you crunch all the numbers, you can definitely get the 'right' answer for what a stock is worth."

I served as the president of the investment club for 2 years - we had $500k in real money and we had beat the S&P by over 2% every year since the fund started.

Here's the BIG part they missed (so much for a finance degree I guess).

Timing... is... everything.

I had bought NuSkin enterprises personally sometime early in the year. I think I roughly doubled my money and figured it was a good stock, so it should be bought. Not having been taught that timing matters, I recommended it to the investment club. Needless to say, it was NOT a good buy... at least, not at that price.

The club lost a little money on it but I learned a valuable lesson. Timing matters.

My friend went to Chicago to be a technical trader and I became a financial advisor. Eventually I learned that 'trading' was not a sin, even though it was taboo in school. Buy a good stock at a bad price - bad trade. Buy a terrible stock at a bargain - moolah!

I think it's great that you're trying to get a foundation for investing, but keep in mind that investing IS really about timing. Sure, you can crunch the numbers, but if you can't look at a chart and say "it's not a good time to buy" then it's all meaningless.

Try THIS BOOK or find something like it. It's important to be able to read price charts and not just to crunch numbers. In fact, if you get good enough at reading the charts you won't need the numbers. Other people can calculate them and leave their footprints in the price charts for you to follow.

Then, of course, pick the book that interests you the most in your series. Then the one that interests you 2nd most. If you get bored with one, put it on a shelf and come back later.

There is no truth in those books, only stories - you make the truth in your own mind based on what you will perceive reading them.

Best of luck.

u/jones3316 · 9 pointsr/finance

I think that a great first step would be to look outside of r/finance. This subreddit is really not advanced at all.

Yorn just recommended you an arbitrary portfolio and some very, very specific (and illiquid) assets. There's a multitude of things wrong with what he said but the biggest ones are:

  1. You have $40,000. There is no way to invest in that many assets, so you can't even execute the strategy that he recommended. Not to mention the transaction costs would be ridiculously high.

  2. Commodities are highly mean reverting over the short and long term. There is no guarantee of an increase in price with inflation. Technological advances could cause the price of a commodity to be must cheaper in the future for example. They aren't buy and hold instruments.

  3. The high risk section. Taking a total punt with 20% of your net worth is pretty stupid.

    He is right that you need to learn a lot to invest successfully. One of the first things you should learn is that you don't take unfounded investment advice.

    Now, for my advice (which you should research heavily):

    There are a few strategies that retail investors can implement if they would like to pursue active management of their portfolio.

    These are:

    Value - buying stocks that that are undervalued based on some fundamental factor (like earnings). Value is conducive to longer term holdings. This book, despite its dumb title, is a good primer.

    Low volatility - Buying stocks with a low standard deviation of price returns. Also conducive to long term holdings.

    Momentum - Buying assets that have recently increased in price. Tougher to implement and requires more frequent trading, but can be done at the sector level (and across asset classes) through ETFs.

    Also, be wary of the advice that index investing as your best/only option. The S&P500 has returned basically 0% in the last decade with 2 50% drawdowns. Not the type of characteristics I'd like to see in my portfolio.

    Also, diversification means buying assets that are negatively correlated in bad times. Not just buying a lot of things.

    EDIT: Just read below that you don't know what a mutual fund is. I like this book for an introduction to financial markets.
u/ah_lone · 3 pointsr/finance

Reminiscenses of a Stock Operator is a pretty good and easy read to start with. 2,3 & 4 are good. Michael Lewis' Big Short and Liar's Poker are pretty entertaining and definitely worth picking up.

u/CRNSRD · 12 pointsr/finance

I have an eccentric obsession with the oil/energy industry. Some of these books were mentioned already, but below are my absolute favorites:

u/MrSprinkleBit · 1 pointr/finance

There is a great book called "Investments" (very original I know) it is written by a professor called Alex Kane (I had the pleasure to meet him, great guy). We used this book at a finance class at Harvard and I learned a lot from it. I fetched a link for you:

u/Sonkidd · 3 pointsr/finance

I would read "a random walk down wall street" for a good understanding of basic theories behind investing (fundamental analysis vs technical, risk and portfolio management etc...).

Then diving into to the different schools of analysis, for fundamental analysis, I super highly recommend reading: McKinseys Book on Valuation (, you might need a quick primer on accounting and corporate accounting before jumping into that book though. Warren Buffet's Essays and books and the classic "The intelligent investor" are also good resources for insights.

For portfolio management, I would study basic modern portfolio theories
(, and read books on portfolio management such as

But then to go even further, it will be more robust to read more about risk management and the shortfalls of such portfolio management models highlighted in the recent market crashes. "The Black Swan", "Fooled by Randomness", "Irrational Exuberance" are good books to read to more qualitatively understand risk and learn to protect yourself from it.

u/TheFreeloader · 1 pointr/finance

Reminiscences of a Stock Operator by Edwin Lefèvre. It's from 1923, but it's still just about the best book on trading and speculation that you will find and widely regarded as a must-read for investors. And in addition, it is also gives a very interesting look at Wall Street at the beginning of the 20th century.

u/scarletham · 11 pointsr/finance

Learn as much as you can about FIX.

There are some books that might be worth checking out, as well.

All that being said, focus on being a good programmer first and foremost. If you can show that you have researched stuff like FIX, exchange connectivity etc, that shows passion, and that's what gets you the job.

u/TheHolyLampshade · 3 pointsr/finance

Trading and Exchanges by Larry Harris is probably the best. It tends to lean toward Equities, but many of the concepts (market participants; economics; etc) are universal to all assets. The market structure itself tends to deviate for other assets, but this should give you enough of a baseline to know what else to search for if you want to go deeper down the rabbit hole.

Second may be Empirical Market Microstructure by Joel Hasbrouck.

If you want something on more exotic asset types (STIRs or such) let me know.

u/erlo · 5 pointsr/finance

I recommend you read this book.

Call it what you want. "Bullshit" or whatever. I don't disagree with Buffet btw, on a total return basis it's hard to beat the market. But if you care about other metrics, and you have access to cheap funding, and you're trying to preserve capital, then it's not "bullshit". There's a reason good pension funds are heavily diversified.

But yes, let's be abrasive because people don't agree with you.

u/mediaocrity23 · 2 pointsr/finance

Top books to get into Finance and trading. This first one is by far the most fundamental book. Most jobs you get you will be asked to read this, and even if you aren't its still an amazing read. Published in 1931, still very relevant today, you will read 10+ times over your Finance career

Reminiscences of a stock operator

Then the Market Wizards series by Jack Schwager

Market Wizards

Hedge Fund Market Wizards

The New Market Wizards

This is where I would start. GL

u/hamsumwich · 19 pointsr/finance

RJR Nabisco, one of the biggest LBO's at the time. I believe there's been bigger ones since then, but I'm not an expert. However, I'd highly recommend reading Barbarians at the Gate, which is a fantastic read on the topic.

u/rcinsf · 2 pointsr/finance

Well my college textbook was pretty fucking in depth. My gf just used the current iteration for her Investments class. It's VERY dry and pretty hard material. You can pick up an old edition for next to nothing (my 3rd or whatever edition was almost identical to her 11th? edition except the historical shit which really is more fodder than anything).

I think this might be it (says 9th is current):

So save your money and get this one used:

Same info, starts at $7 :-)

Names sound familiar, my book was from the mid 90s (and is on my shelf in oklahoma or I could tell you for certain).

It covers a lot, but realistically investing isn't just about the numbers. If you want help I'll give you my opinions. I should probably write a short doc on it since I keep having to come up with the same shit for all my friends and family.

u/carlmatt · 2 pointsr/finance

Now it's been a while since I read these, and I'm not complete sure if these are the kinds of books that you're looking for, but I found them quite good:

Options, Futures, and Other Derivatives by Hull:

Investments and Portfolio Management by Bodie, Kane & Marcus:

I hope this helps!

u/tsmango · 2 pointsr/finance

This book looks like a good read; should I get a kindle I'll make sure to pick it up. But what about This Time Is Different? It seems like another good book to get some relative history on economic collapse and recovery.

u/GrahamAndDoddsville · 2 pointsr/finance

I really enjoyed the following. Essentially a chronological collection of biographies on some of the historical hedge fund all-stars, so you are introduced to contextual history of the industry, their different philosophical approaches to trading, etc.

More Money Than God: Hedge Funds and the Making of a New Elite (Council on Foreign Relations Books (Penguin Press))

For something much more technical (i.e. If you are interested because you are considering a fund of your own):

Taxation of U.S. Investment Partnerships and Hedge Funds: Accounting Policies, Tax Allocations, and Performance Presentation

u/mushpuppy · 2 pointsr/finance

This has been a fundamental of investment strategy for at least 40 years. So much so that you can read about the advantage of index funds over mutual funds in wikipedia.

Here's a lay article from Wharton about it.

Here's an article from Money in 2008 that said that of the mutual funds they tracked, not a single one was profitable. Although dated, fundamentals haven't changed since then. (Hint: that a mutual fund beats its peers is not praise.)

Investment and lay financial publications routinely publish comparisons of mutuals to index funds. All of them are like the Money article.

The last I remember reading about mutuals the stats were something like: a huge percentage (something like 70-90%) of funds fail after 5-10 years, and of the ones that survive, most lose money. Of the ones that don't, only a few meet (much less beat) the market.

You need to remember that financial companies are not interested in making you money. They are interested in making themselves money. And your money doesn't just disappear. It goes to someone. (Whenever I say this I usually get howls from investment professionals.)

A simple test is to look at the annual returns of any company's funds. The numbers are dire.

In contrast, it's relatively easy to use a stock screener at a site like yahoo or google to identify any number of large caps that regularly pay dividends in excess of 10%. It requires a little work, but via dividend reinvestment a person literally can earn a fortune over time.

Anyone planning on putting money into the market needs to educate him/herself first. (And with much respect I don't mean by asking on reddit.) So here's what to do: start reading Barron's, Forbes, Investor's Business Daily, the WSJ, the Motley Fool, Seeking Alpha. Read them critically; don't just believe what they say. (As an example, I've never found the Motley Fool's suggested investments to be useful, although its analyses generally can be educational.) Here's a book, a very basic one, about the market.

Finally of course no needs to take my advice. I'm just some guy on reddit.

u/ttg314 · 5 pointsr/finance

> whoaa why has my tutor been telling me to discount each expense per year then add them up then discount the total!

Fire your tutor, lol. That makes no sense. You come up with the FCF first then discount it. I mean, I guess you can do it his way but it's stupid. In a real model your going to have so many inputs you would need to discount. Read Valuation. Then you'll actually know why it works that way and it'll be much easier. It's a pretty big book so for this topic so you'll only need to read up to Chapter 6.

Tip: Read the whole thing. It'll do you good.

u/FKYS · 2 pointsr/finance

Yes OP, this is an answer you are looking for. Read about value investing, another good book to read is Seth Klarman's The Margin of Safety. And if you don't know who Seth Klarman is you have to look it up.

u/ItsKoffing · 2 pointsr/finance

This Time it's Different: 8 Centuries of Financial Folly is pretty freaking awesome and is very detailed plus look at the cool cover.

u/faruqmarican · 19 pointsr/finance

More Money Than God is one that comes to mind though it is more of a narrative than a technical guide. It may be more useful to just skim through different books by managers who have written them, Alchemy of Finance, Stock Market Technique, The Intelligent Investor... etc etc

u/protox88 · 3 pointsr/finance

In that case, start with the famous Hull book. It requires basic mathematical foundation (i.e. intro calculus) and a bit of knowledge on probability.

Don't worry about PDEs, Monte Carlo, or anything for now. Try to understand the Hull book, which is less mathematically rigorous.

If you're still interested after that, then you can look into more advanced probability theory (via measure theory), martingales, stochastic calculus, and so forth - which requires more advanced calculus and understanding of mathematics (probably by 3rd or 4th year math if you're studying in university)

u/sulandra · 2 pointsr/finance

I think you need to specify whether or not you want academic oriented work or something that is more entertainment oriented. For the latter, any Michael Lewis Books (The Big Short, etc.) or David Einhorn's Book (Fooling Some of the People All of the Time) would be good.

u/azmenthe · 2 pointsr/finance

Personally I just search for papers. There are lots of good academic papers on market microstructure, specific strategies, I just had some pulled up too but I lost them, if I find any I'll post them

Just to make sure these are the books that are considered too old, because I still think they have a lot of good information:

Trading and Exchanges

Algorithmic Trading & DMA

u/frstwrldprblm · 2 pointsr/finance

to complement these (and i know you asked for books):


how the economic machine works


turtle trading
i put this because this is the way real people making real money traded. and the rules are VERY simple.


market wizards

reminiscences of a stock operator


the best investment advise you'll never get

--i will come back and edit this post and add some more stuff.

--> note, i RARELY trade single name stocks.

u/bsdfish · 3 pointsr/finance

Take a look at Algorithmic trading and DMA which is an OK overview book of both the technical (high level) and strategy sides. It's not great but I'm not aware of any better book out there.

u/NeutralMilkResort · 0 pointsr/finance

Around 20 or so. I think Harris' Trading & Exchanges is one of the best that I read in the beginning, if that's what you're looking for.

I don't trade off candlestick patterns.

u/nagget · 4 pointsr/finance

Heard on The Street is a great book to prepare for interviews. ^^Psst, ^^up ^^here, ^^there's ^^a ^^free ^^pdf ^^if ^^you ^^search ^^on ^^google.

u/oliverbm · 2 pointsr/finance

[This] ( Rosenbaum and Pearl text is widely considered the handbook of IB and does an excellent job of covering the day to day tasks of an analyst / associate.

u/hab12690 · 1 pointr/finance

Currently reading this for my derivatives class. Luckily it just became highly relevant to the job interview I have next month.

u/nobloodyhero · 11 pointsr/finance

Daniel Yergin's The Prize: The Epic Quest for Oil, Money, and Power

Historical account of the oil industry, which is particularly relevant in today's markets.

u/SPh0enix · 1 pointr/finance

While it is but a part in the M&A process, the book "Valuation: Measuring and Managing the Value of Companies" by McKinsey is one of the bibles on Valuation.

Amazon link.

u/dontbeabanker · 1 pointr/finance

After reading Lewis' book, reading different blogs, ordering this book, and grasping for answers here, your reply has answered more questions than all of the above combined. I'm going to look into the information available from the exchanges -- just googling some of the exchange-specific order type names has turned up a wealth of info.

Thanks so much for the reply; I may have more questions later but I should do some reading first.

u/LemonsForLimeaid · 2 pointsr/finance

Is this the same one just newer? Would you recommend?

u/yellowstuff · 2 pointsr/finance

The situations you mention were all fairly different. No short explanation will give a good sense of what happened. I don't know that much about Amarath, but there are good books written about the other two.

There's an excellent book about the rise and fall of LTCM.

I don't think the definitive book on the mortgage crisis has been written yet, but Michael Lewis wrote one I thought was pretty informative.

u/Rufio6 · 6 pointsr/finance

Expected Returns

AQR publications (Cliff Asness / Antii Ilmanen):

Other than that, CFA material. The CFA stuff that is relevant is golden, the rest of it is just good to know. If you don't want to be a charterholder, you can still find sets of the books for $180 or so.

u/DirtPow · 14 pointsr/finance

Have Wikipedia/Google by your side and research anything you come across that doesn't make complete sense or you'd like to delve into further.

u/DerpOfTheAges · 1 pointr/finance

Is this a good book for learning investing? It was recommended by the investment club I am in at uni.

u/grebfar · 11 pointsr/finance

This list should give you a good start.

“Day Trading with Short-term Price Patterns and Opening Range Breakout” by Tony Crabel

Trader Vic: Methods of a Wall Street Master

You should probably read most of the books in this link.

Evidence Based Technical Analysis

And for the masochists, Reading Price Charts Bar by Bar

u/heardman · 1 pointr/finance

I have an earlier version of this I used this in a BComm finance degree majoring in Finance. I'm now in a Masters of Finance and my intro investments class used it, and I'm also studying for my CFA level II test, and the bodie kane book makes up part of that reading list.

It probably hits one step above high school. For example the book gets through standard deviation by showing it in it's normal formula, and doing a number proof of how it works. It doesn't go into the theory of what standard deviation is, you need a stats book for that.

u/der_logiker · 2 pointsr/finance

[Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions] (

u/alector · 17 pointsr/finance

Without knowing exactly what you want to learn about within M&A -- tough to say, but Rosenbaum & Pearl's Investment Banking is generally regarded as the classic.

u/Erratic_Jester · 6 pointsr/finance

May not be exactly what you're looking for, but I've had Trading & Exchanges: Market Microstructure for Practitioners as a textbook for a course at my university.

It covers a lot of useful stuff (from amazon): "This book is about trading, the people who trade securities and contracts, the marketplaces where they trade, and the rules that govern it. Readers will learn about investors, brokers, dealers, arbitrageurs, retail traders, day traders, rogue traders, and gamblers; exchanges, boards of trade, dealer networks, ECNs (electronic communications networks), crossing markets, and pink sheets. Also covered in this text are single price auctions, open outcry auctions, and brokered markets limit orders, market orders, and stop orders. Finally, the author covers the areas of program trades, block trades, and short trades, price priority, time precedence, public order precedence, and display precedence, insider trading, scalping, and bluffing, and investing, speculating, and gambling."

It might be a bit dated by now, but it's still very nice to have. Link to book extract here, for evaluation purposes.

u/FRONTIER_ALPHA · 1 pointr/finance

Current multiples are normally behind a pay wall. Commonly followed sector specific multiples can be found in this Book

u/KingKliffsbury · 1 pointr/finance

There's no margin call book, but the book I was recommending was the big short by Michael Lewis.

u/bguillot · 1 pointr/finance

This book of 1921 or 1923 and it is a must read about trading and it is still VERY relevant today.

Check it on amazon and all the comments.

Fooled by randomness is excellent as other have mentioned.

To understand Soros read The crash of 2008 and what it means... he is the opposit of of warren buffet and both make still lots of money at very different end of the game and both lost a lot in the crash and recovered nicely.