The Best Method to Learn Finance
By: Guerric De Ternay
Tags: Leadership

Learning finance is important. Indeed, we must know the rules of finance before starting to invest our money. And our goal is to do it as quick as possible. Therefore, we need an efficient method to do so.

Fortunately, Tim Ferriss, a bestseller author, has explored this area for us. In The 4-Hour Chef, Ferriss highlights an efficient method that aims at accelerating the learning process. After reading the whole book*, I have chosen this method. It seems to be the perfect way to boost our knowledge on finance.

The method is a real recipe for learning any skill. It can be summarized in one simple acronyme: D.S.S.S (Deconstruction, Selection, Sequencing and Stakes).

Let’s plan our method to learn finance!

[caption id=”attachment_81" align=”aligncenter” width=”528"]

DSSS: Method of fast learning[/caption]

1. D for Deconstruction: Let’s start with finding the ‘ Minimum Learnable Units’.

In the deconstruction process, we explore the area of finance and deconstruct in small pieces.

Definition of finance — Finance deals with the allocation of capital. The area can be divided in three categories: public finance, corporate finance and personal finance. As individuals, we will focus on the latter.

Personal finance is the management of individual’s money. It involves budget, saving, investment and insurance. Although investment will interest us the most, we will also refer to the others, which can have big impacts.

Deconstruction of investment in small pieces:

- Shares

- Bonds

- Funds

- VC/Business Angel

2. S for Selection: Let’s find the 20% that are the most important.

To start, our focus will be on the main principles of investment. These can be useful in every situation from investing in start-ups (Business Angel/VC) to investing on the stock market (shares, bonds, or funds).

The best way to learn these key principles is to choose the best teachers. Who are these amazing teachers? Some seasoned investors have proven how talented they are by constantly beating the market. Let’s ask them to teach us how to become an experience investor.

List of our teachers:

- Warren Buffett (Investor)

- Peter Lynch (Investor)

- Charlie Munger (Investor)

- Bill Ackman (Activist investor)

- Mario Gabelli (Investor)

- Carl Icahn (Activist investor)

- Jesse Livermore (Speculator)

- John Bogle (Investor)

3. S for Sequencing: Let’s determine in what order we should learn the blocks.

In the sequencing process, we take the 20% that we selected above and we order it.

One of our teachers, Warren Buffett has been highly influenced by two books: The Intelligent Investor and Security Analysis written by Benjamin Graham. Both will be the first basis of our learning. Although Security Analysis was the first to be published, the sequencing process leads us to start with the Intelligent Investor, which was written to explain and teach finance to non-professionals.

In addition to this, Jesse Livermore wrote How to Trade in Stocks, a book about his journey as a speculator. The book is full of advice for people willing to put their money on the market. It will be another bedrock of our learning process.

List of our books:

- [amazon text=The Intelligent Investor: The Definitive Book on Value Investing&asin=0060555661]

- [amazon text=Security Analysis&asin=0071592539]

- [amazon text=How to Trade In Stocks&asin=0071469796]

These two books have inspired many of our teachers. Some of them are called value investors because of the emphasis Graham put upon the price and value when he decides to invest. The use of these books is perfectly consistant with our choice of professors.

4. Stakes: Let’s set up stakes to guarantee that I follow the program

In the stakes process, we determine what will happen if we do not reach our goal. The goal will be to learn every day something new about finance.

Which stake and which carrot can help you to achieve your ambition? I let you determine what will motivate you.

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*In The 4-Hour Chef: The Simple Path to Cooking Like a Pro, Learning Anything, and Living the Good Life

, Tim Ferriss applies this method to learning cooking. Yeah, I know a link between cooking and finance seems weird. Yet, the book introduces more than some recipes. The method can be applied to diverse skills from new languages to sport to professional skills. Let’s apply this method on finance!