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I’ll be the first to say that most classes geared toward investors are absolute bulls##t. After all, in econ they teach things like the efficient market hypothesis and in finance they teach models that do not come close to accurately predicting the market. If someone out there has created a model that can predict future movements of the market why would they share that model?? I know if I developed such a model I wouldn’t tell anyone about it and then I would retire and live life on the beach.

Yesterday, an outside (econ) professor came to my university to present a research paper. The topic was bubbles in different markets. Clearly, right when I heard the title I was interested. Before the speaker could develop the model, he had to make restricting assumptions about the number of assets available (10 different assets to choose from), the number of agents in the market (5 agents), and that the game would end at a certain period (this is the most ridiculous assumption in my mind because I don’t know one person who believes that the market is going to come to end any time soon).

As you might have guessed, his model didn’t yield any useful about how to spot a bubble or how to take advantage of one. The only thing that he could conclude is that when the market contains people with experience bubbles don’t occur. I have my qualms about the validity of this result since there were numerous people with years of investing experience who bought into the tech boom during the late 90’s.

The moral of the story is that those of you who aren’t taking advanced finance or econ classes aren’t missing a thing if you’re striving to become a great investor. Naturally, the question arises of what classes should one take to become a great investor. I have never heard a definitive answer, but I’ll gladly give you my thoughts and you can tell me if I am off the mark. I believe math is the subject that greatly enhances an investor’s ability. Math problems force people to think logically, which is a necessity to for investors trying to find bargains in the stock market. Since math deals so intensively with numbers investors with a math background aren’t intimidated by the numbers on the balance sheet or formulas to calculate free cash flow or annualized growth rates. Also, if you are looking for a job in finance a math background is a great asset when applying for jobs. Lastly, and most important, math teaches students to work diligently and thoroughly which is the most important tool an investor can have.

There are my thoughts on what classes investors should take. I have to say that I probably am biased since I was a math major in undergrad, but if anyone else knows of some good classes for investors let me know before I register for next quarter…

 

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