No. of Recommendations: 2

If you’re willing to read Fabozzi, then add this book to your list. If you like Thorndike’s book, then try some of Jack Schwager’s.

But if you really want to understand bond investing -- and I do mean investing-- you need to come at it as a good stock or futures trader would and focus on the trilogy of Money-Mind-Market. In other words, you need to dig into behavioral finance and gambling theory in an effort to understand why/how we humans all make such very bad decisions for ourselves about money and risk. But an easy shortcut to those topics is Justin Mamis’, The Nature of Risk.,

The key idea is this. There is a trade-off between ‘information-risk’ and ‘price-risk’ that we humans aren’t comfortable making, which is why the idiot academics (sorry for the tautology) like Markowitz, Merton, Scholes, Sharpe, Malkiel, Bogle, Bernstein (Wm, not Peter), etc. inevitably screw up the money entrusted to them to manage, as well as give out horribly bad advice. The obvious antidote to that group of truly stupid people is the books and technical papers of Mandelbrot and Taleb and their demonstrations of the limits of statistics when they are applied to non-physical domains. E.g.,

But if you want an even easier shortcut to all of the above, just go shopping at your local market for bell peppers and broccoli. Everything needed to make money in bonds is there if you just pay attention. That’s all bond-investing is. It’s just shopping. “How much am I paying, and what am I getting in return?” One can get fancy about the process. But that’s the basic question.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.