Reading Note 2 for《Principles》

Principles

I have read the first two chapters of Principles , these two chapters' contents are mainly focusing on author's early experience.

Author's early experience

His father was a veteran who has taken part in WW2 and Korea War, and his mother died when he was young. He didn't like studying in school at that moment. Then he got a chance to invest stock market. Due to the great economic development of USA, he earned some money from stock, and he gradually likes doing investment. Then he studied Financial in a normal college, and because of his strong interests in trading and investment, his GPA was excellent. At this time, he transferred his interest into trading on commodities.

After completion of his bachelor degree, he went to HBS(Harvard Business School) to pursue a higher degree. During this time, USA was involving in the mud of Vietnam War, and due to his father's bad memory in World War 2 and Korea War, his father tried his best stop Dalio from entering Vietnam War. Dalio was very lucky, he didn't need to consume his life on meaningless war. After graduation from HBS, he worked as an employee for a couple of years, and finally, he started his own business, it was called Bridgewater. And his thinking about investment and principles applying for daily life and works is increasingly mature.

Two Classic Sentences from these two chapters

One is talking about prices of stock market:

I gradually learned that prices reflect people's expectations, so they go up when actual results are better than expected and they go down when they are worse then expected.

Another one is talking about making money:

It's senseless to have making money as your goal as money has no intrinsic value--Its value comes from what it can buy, and it can't buy everything. It's smarter to start with what you really want, which are your real goals, and then work back to what you need to attain them.

About Quantitative Trading

As I mentioned in the first note, he always likes programming some rules to make investment decisions. It looks like the quantitative trading at present. I think he was the one of Quantitative investment pioneers. Although there is no more details about this issue in chapter 2, this thinking or methodology is very forward-looking, because human is very emortional, human is easy to make irrational decsions when they have emotional problems. However, the computer don't have this problem, when we have programmed running rules, it will execute the procedure autimatically and ruthlessly.