I have found that a better understanding of history, particularly how the current market is both different and similar to the market a century ago, definitely helps me make better investment decisions. For the record, my favorite historical investment book is Confusion de Confusiones by Josef de La Vega, a book about markets from several hundred years ago (can you believe how long this game has been going on?).
Baruch provides very few actual investment tips. But I was quite pleased to read about his overall investment philosophy, since it provides an excellent explanation, from an investment legend, for why I called my blog Casino Capitalism. Below are some brief quotes from the introduction to Baruch's Investment Philosophy chapter.
Baruch quotes Sir Ernest, the private banker to King Edward VI:
When as a young and unknown man I started to be successful I was referred to as a gambler. My operations increased in scope and volume. Then I was known as a speculator. The sphere of my activities continued to expand and I am presently known as a banker. Actually I have been doing the same thing all the time.
Baruch then comments:
That observation is particularly worth pondering... J.P. Morgan would gag at the word 'gamble' when I used it. Still, the truth is that there is no investment which does not involve some risk and is not something of a gamble... In our own age when Henry Ford started to make the first Model T, he was embarking on one of the most gigantic speculations of all time. We would be foolish to try to stamp out this willingness in man to buck seemingly hopeless odds. What we can try to do perhaps is to come to a better understanding of how to reduce the element of risk in whatever we undertake.
There you have it. The only investment advice you will ever need: Focus on Minimizing Risk. It's always easy to grasp the "hype" element in various stocks and other investments. What is extremely difficult, though, is to gain a proper understanding of all the risks involved in the purchase of stocks and businesses.
With that in mind, you need not ever fear (a fear that is the backdrop of efficient market theory) that investment opportunities will diminish, despite the growth in the number of professional stock market players. In fact, as more and more money gets funneled into hedge funds and other investment vehicles, it seems to me that even more outstanding investment opportunties will develop over time, since there will be more money to fuel dreams and hype even amidst huge uncertainties. Human nature being what it is, we will always get caught up in hype, ignore risks, and focus on the immediate present, providing the opportunity for profit when previously ignored or even unknown risks are revealed, prices plummet, and expectations of future success become nil.
My Own Story by Bernard Baruch, from Amazon. (This is an affiliate link that generates revenue for Seeking Alpha without raising the cost to the buyer.)