The purpose of this book is to help readers understand the basics of stock market investing. Material covered includes the difference between stocks and businesses, what constitutes a good business, when to buy and sell stocks, and how to value individual stocks. The book also includes a chapter covering four case studies as well as a supplemental chapter on the pros and cons of real estate versus stock market investing.
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Editorial Reviews
From the Back Cover
Most people work hard for their money, and it is sad to see them lose it so quickly in the stock market. They assume that because they are successful in their careers or businesses, they will be successful in investing.
To make money as a doctor, lawyer or business owner requires a certain skill set that makes one's products or services desirable in the marketplace. Investing requires a completely different skill set.
A successful investor does not need an advanced degree in economics. He or she does not even need to be that smart. A successful investor only needs two things: 1) capital to invest and 2) the ability to recognize good companies when they are selling for less than what they are worth.
Few people find success in stock market investing because they do not know how to recognize good companies that are trading at reasonable prices. Basic knowledge of how to evaluate investments will help them make better choices when deciding where to put their money.
This book teaches investors how to recognize good companies, evaluate their current worth, decrease the chances of making investment mistakes, take advantage of Wall Street's short-sightedness, build wealth through stock market investing ... and much more.
About the Author
Mariusz Skonieczny is the founder and president of Classic Value Investors, LLC, an investment management firm that builds and manages customized investment portfolios for its clients. He is the author of "Why Are We So Clueless about the Stock Market?"
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More About the Author
MARIUSZ SKONIECZNY is the founder and president of Classic Value Investors, LLC (www.ClassicValueInvestors.com), an investment management firm that builds and manages customized investment portfolios for its clients. He is the author of "Why Are We So Clueless about the Stock Market?"
Customer Reviews
Most Helpful Customer Reviews
30 of 31 people found the following review helpful
Format:Paperback
This is an excellent primer on equities. Skonieczny begins as simply as in a Dummies or Idiot's guide by explaining what a business is and how investing in the stock market is buying a piece of a business. He delineates how businesses are evaluated in terms of bottom line success or failure, the details of which are what the investor should know about any business before buying its stock. This is the fundamentalist approach to investing, the sort of knowledge that cannot be skipped and is known by any savvy investor.
The prose and the illustrations are easy enough for a sixth grader to understand, and that is one of the strengths of the book. Skonieczny knows what he is talking about and has taken the trouble to make it clear to the beginner. A key idea, so basic that it is often overlooked or not really appreciated by the beginning investor is that of risk to reward. Skonieczny makes it clear that any stock market purchase must promise a reward greater than the prevailing interest rates and greater than Treasury Notes and other fixed income instruments because the risk in the stock market is greater. He shows how this thinking is merely an extension of the understanding that you wouldn't start and run or invest in a business unless its bottom line profit potential was greater than what the bank gives its depositors.
When to Buy? (the third chapter) concentrates on the objective value of a company based on its projected earnings relative to the price of the stock. Skonieczny eschews technical analysis. No voodoo technical charts with running averages and ghostly heads and shoulders. Instead there is a simple chart on page 37 showing the price/value fluctuations of a stock. Assuming that we can get a good grip on what a company is actually worth, it is obvious that you buy when the price is less than the value. Simple. And if investors followed this strategy with any kind of real fidelity bubbles and panics would go the way of the dodo.
When to Sell? (a later chapter) follows the same sort of reasoning. Skonieczy writes: "The best time to sell is when projections turn out positive, the company prospers well, and the market realizes its full value by pricing it correctly." He adds, "Another reason to sell is when an investor finds a better investment opportunity." (p. 117)
Skonieczy is not enamored with stocks that are unpredictable and/or have high price to earnings ratios or high volatility. He likes companies with "moats" and other advantages over its competitors. His is not a gambling approach to the market but rather a conservative, fundamentalist approach. Whether you are of similar mind or not, this book is still an excellent guide because to go beyond the fundamentalist approach it is essential to know the basics. It is one thing to gamble blindfolded, another to take calculated risks. And you can't know the risks unless you understand the fundamentals, and understanding fundamentals is what Skonieczy's book is all about as an investment guide.
One of the bits of advice that I especially like is Skonieczy's insistence that we not "blindly over-diversify, preventing our individual picks from having meaningful impacts on the overall performance." (p. 139) What's the value in painstakingly picking the best stocks with the best safe and sane prospects only to water down our portfolio with other stocks just to be diversified? Personally I don't think being diversified in the market is really the key to sound financial planning. I think it's being diversified overall, not just within the stock market. For the long run the wise investor should have some money in stocks, some in real estate, some in bonds, perhaps, some in cash (meaning CDs or such).
This book is particularly timely since we are just coming out of a recession it would appear, meaning that there are many publically traded companies that are undervalued. Reading and understanding the concepts presented in this book and applying them to the market now might very well help the investor separate the good prospects from the not so good ones, the risky ones from the less risky ones.
--Dennis Littrell, author of "The World Is Not as We Think It Is"
The prose and the illustrations are easy enough for a sixth grader to understand, and that is one of the strengths of the book. Skonieczny knows what he is talking about and has taken the trouble to make it clear to the beginner. A key idea, so basic that it is often overlooked or not really appreciated by the beginning investor is that of risk to reward. Skonieczny makes it clear that any stock market purchase must promise a reward greater than the prevailing interest rates and greater than Treasury Notes and other fixed income instruments because the risk in the stock market is greater. He shows how this thinking is merely an extension of the understanding that you wouldn't start and run or invest in a business unless its bottom line profit potential was greater than what the bank gives its depositors.
When to Buy? (the third chapter) concentrates on the objective value of a company based on its projected earnings relative to the price of the stock. Skonieczny eschews technical analysis. No voodoo technical charts with running averages and ghostly heads and shoulders. Instead there is a simple chart on page 37 showing the price/value fluctuations of a stock. Assuming that we can get a good grip on what a company is actually worth, it is obvious that you buy when the price is less than the value. Simple. And if investors followed this strategy with any kind of real fidelity bubbles and panics would go the way of the dodo.
When to Sell? (a later chapter) follows the same sort of reasoning. Skonieczy writes: "The best time to sell is when projections turn out positive, the company prospers well, and the market realizes its full value by pricing it correctly." He adds, "Another reason to sell is when an investor finds a better investment opportunity." (p. 117)
Skonieczy is not enamored with stocks that are unpredictable and/or have high price to earnings ratios or high volatility. He likes companies with "moats" and other advantages over its competitors. His is not a gambling approach to the market but rather a conservative, fundamentalist approach. Whether you are of similar mind or not, this book is still an excellent guide because to go beyond the fundamentalist approach it is essential to know the basics. It is one thing to gamble blindfolded, another to take calculated risks. And you can't know the risks unless you understand the fundamentals, and understanding fundamentals is what Skonieczy's book is all about as an investment guide.
One of the bits of advice that I especially like is Skonieczy's insistence that we not "blindly over-diversify, preventing our individual picks from having meaningful impacts on the overall performance." (p. 139) What's the value in painstakingly picking the best stocks with the best safe and sane prospects only to water down our portfolio with other stocks just to be diversified? Personally I don't think being diversified in the market is really the key to sound financial planning. I think it's being diversified overall, not just within the stock market. For the long run the wise investor should have some money in stocks, some in real estate, some in bonds, perhaps, some in cash (meaning CDs or such).
This book is particularly timely since we are just coming out of a recession it would appear, meaning that there are many publically traded companies that are undervalued. Reading and understanding the concepts presented in this book and applying them to the market now might very well help the investor separate the good prospects from the not so good ones, the risky ones from the less risky ones.
--Dennis Littrell, author of "The World Is Not as We Think It Is"
15 of 16 people found the following review helpful
Format:Paperback
I found this book to be most excellent in explaining what can be complex financial terms and ideas. Even though I have a business degree, and MBA, and work in finance, I sometimes find it difficult to explain to others these basic concepts. Skonieczny discusses these topics with a simplistic brilliance that makes topics such as p/e ratios, discount rates, when to buy, and when to sell seem so easy. I wished that I had this book when I was in school, this would have made some of the study much, much easier. Now that I have this in my hand I hope to make better decisions regarding my personal investing.
I liked that in the final chapters of the book he explains clearly why AIG, Fannie Mae, and Freddie Mac failed. While keeping up with the news I don't think that I had ever had these failures explained so consisely. I liked that he then picked out some companies that were doing a really good job and explained how and why they were doing well. He also went on to emphasize that we are responsible for our own study and understanding of our investing. I feel that if we applied spending the one hour a week per stock that fewer of us would end up with bad investments, and perhaps avoid retirement portfolios that have dropped in value considerably.
I really admire Skonieczny for taking a topic that is typically dry and dull and breathing life into numbers. While I may work in finance isn't often that you find someone that is passionate about explaining these theories in terms and words that everyone will easily understand. Whether you are a student trying to make sense of finance, or even an investor that is trying to regain control over your investments I believe you will be able to get a lot of valuable material out of this book.
I liked that in the final chapters of the book he explains clearly why AIG, Fannie Mae, and Freddie Mac failed. While keeping up with the news I don't think that I had ever had these failures explained so consisely. I liked that he then picked out some companies that were doing a really good job and explained how and why they were doing well. He also went on to emphasize that we are responsible for our own study and understanding of our investing. I feel that if we applied spending the one hour a week per stock that fewer of us would end up with bad investments, and perhaps avoid retirement portfolios that have dropped in value considerably.
I really admire Skonieczny for taking a topic that is typically dry and dull and breathing life into numbers. While I may work in finance isn't often that you find someone that is passionate about explaining these theories in terms and words that everyone will easily understand. Whether you are a student trying to make sense of finance, or even an investor that is trying to regain control over your investments I believe you will be able to get a lot of valuable material out of this book.
12 of 13 people found the following review helpful
Format:Paperback
Skonieczny explains the important difference between
buying a stock versus the complexities inherent in
purchasing an entire business. Clearly, stocks are
much easier to analyze than entire businesses.
Clueless investors make errors for a plethora of
reasons including panic, buying too high, not knowing
how to value a business or selling too early.
This volume helps potential investors avoid costly
errors through a systematic analysis of the investment
fundamentals.
More importantly, the author covers the difficult
question involving how to create wealth over the
long term. The book explains various mechanisms
like reinvesting dividends, DRIPS and wise diversification.
Personally, I favor reinvesting dividends due to the
savings on broker fees.
The author covers the important concept of an investment
moat which protects revenues and profits from competitors.
Ferrari has created a moat via the tremendous prestige
of ownership coupled with known superior quality of the
product.
The book depicts stock worksheets which cover the fundamentals
of investment analysis like trading price, PE ratios,
dividend payout, stock peaks and troughs. Profitable stocks;
such as, Burlington Northern RR are cited due to the superior
revenue streams and the constancy of business operations both
now and well into the future.
The book would make an excellent acquisition for your
personal library.
Dr. Joseph S. Maresca
buying a stock versus the complexities inherent in
purchasing an entire business. Clearly, stocks are
much easier to analyze than entire businesses.
Clueless investors make errors for a plethora of
reasons including panic, buying too high, not knowing
how to value a business or selling too early.
This volume helps potential investors avoid costly
errors through a systematic analysis of the investment
fundamentals.
More importantly, the author covers the difficult
question involving how to create wealth over the
long term. The book explains various mechanisms
like reinvesting dividends, DRIPS and wise diversification.
Personally, I favor reinvesting dividends due to the
savings on broker fees.
The author covers the important concept of an investment
moat which protects revenues and profits from competitors.
Ferrari has created a moat via the tremendous prestige
of ownership coupled with known superior quality of the
product.
The book depicts stock worksheets which cover the fundamentals
of investment analysis like trading price, PE ratios,
dividend payout, stock peaks and troughs. Profitable stocks;
such as, Burlington Northern RR are cited due to the superior
revenue streams and the constancy of business operations both
now and well into the future.
The book would make an excellent acquisition for your
personal library.
Dr. Joseph S. Maresca
Most Recent Customer Reviews
5.0 out of 5 stars
A "Clear and Useful Resource" for your investing library.
This book is a clear and useful resource for your investing library. The author, Mr. Skonieczny is on the right path to "intrinsic value per share" business valuations. Read more
Published on June 5, 2010 by Bud Labitan
5.0 out of 5 stars
Good Book on Understanding Investment Principles
Although written for beginning investors it contains excellent descriptions of how businesses operate, which I often find seasoned investors do not grasp. Read more
Published on February 3, 2010 by John A. Pierce
3.0 out of 5 stars
Book Review from the Aleph Blog
This is a basic book. If you are trying to introduce someone to investing, this would have value. It uses concepts familiar to every man to explain that there is nothing amazing... Read more
Published on January 23, 2010 by David Merkel
5.0 out of 5 stars
Excellent for Beginners Learning to Invest in Stocks
The day I received the book, I decided to read just one chapter and see how it went. I found it hard to put down! What a great work! Read more
Published on December 30, 2009 by DR
4.0 out of 5 stars
We are so clueless about the stock market not because...
I believe we are so clueless about the stock market not because we are lazy or inadequate. Instead I believe it's because we are all selfish human beings. Read more
Published on December 30, 2009 by Lawrence
5.0 out of 5 stars
A small book that clearly explains the most critical financial...
This book provides a clear and concise explanation of many critical principles and ideas to value a stock or a private company. Read more
Published on December 12, 2009 by ShadowStock
5.0 out of 5 stars
A Worthwhile Quick Read for New Investors
Those of us who allocate capital for a living are probably familiar with fielding the following types of questions at social events, particularly during the holiday season:... Read more
Published on December 9, 2009 by Ravi Nagarajan
5.0 out of 5 stars
Learn how to invest your money
Mariusz delivers sound advice for those looking to become successful investors. A must read for those who are just beginning and a great refresher for those with more experience.
Published on October 7, 2009 by B. McMahon
4.0 out of 5 stars
How Well do You Understand Your Investments?
Investing requires knowledge but surprisingly few investors have the education they need to make informed decisions. Read more
Published on September 14, 2009 by Bryan Carey
5.0 out of 5 stars
Excellent Introduction to Fundamental Analysis
If you don't know anything about the stock market and you want to make intelligent choices, this book is for you. Read more
Published on September 13, 2009 by D. Buxman
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