Customer Reviews

How to Retire Rich

5 star:		(15)
4 star:		(9)
3 star:		(2)
2 star:		(4)
1 star:		(2)

 

 

Jim O'Shaughnessey founded the Cornerstone Growth mutual fund. Subsequently, it was sold to Hennessey Funds and is going strong under new manager Neil Hennessey. The fund is strictly managed according to the "reasonable runaway" formula set forth in the book. For 2001, it gained over 12%, beating the S&P by more than 24%. It is now up approximately 8% for 2002. Morningstar now rates the fund 5-star. (I have no connection with O'Shaughnessy or Hennessey other than investing with them.) It is also easy to run the formulas, and buy the stocks online yourself. It just makes sense--buying value stocks which have appreciated over the past year. Jim's research shows that these stocks will continue to appreciate. Value + momentum = profits. The formula predicts 17% average gains over time and in fact the strategy has earned about 16.9% over the last 5 years, with no significant help from the tech runup. Run the numbers for yourself--17% will make you rich pretty darn fast. Highly recommended reading, and unique among the stock market books I've read for actually making sense and working.

Mr. O'Shaughnessy outlines several of his investment strategies and in particular his "reasonable runaways". If you look at his numbers AND factor in costs of establishing a similar group of stocks (something he neglects to do)the S&P 500 is the clear winner.

A VERY IMPORTANT piece of investing advice that Mr. O'Shaughnessy advises against is the use of stop-limit orders in his portfolios. By neglecting to use this very important investment tool, you open yourself up to huge losses in the very questionable turnaround stocks that have just been run up in price. Most of these WILL go down and many they will go down big and not recover. Take the advise of someone that has been watching (and burned very badly) by taking his advice and not using stop-limit prices, USE THEM IF YOU EMPLOY THIS VERY RISKY STRATEGIE!!!

If you look at ANY of his mutual funds, you will clearly see that the performance of all of his funds badly trails the S&P 500. His expense ratios are also out of line to the high side, something that he warns against in this book.

The three pieces of advice that are of any value in the entire book are to establish a plan, stick to it, and, if 87% (or so) of mutual funds (including his) do not match the performance of the S&P 500, why are you investing in anything other than the S&P 500?

Good luck to all!!!

This book is now part of a series I will use to educate my children about the values of time and discipline for investment strategies. My plan is to get their attention and then lead them to long-term growth strategies. On the other hand, the strategies in this book are a bit difficult to follow unless you use the mutual fund approach. And, like some others, I also am very concerned about the 1.5% expense fees (or more) that the O'Shaughnessy funds charge. That just seems excessive especially in light of the narrowing spread vs. the S&P index over the last few years for each strategy as indicated in his data. Taking 1.5% or more off the top can change things a great deal. It seems to be a common fault with all such books to ignore trading costs or expenses in determining their returns. Try meshing these strategies with those of John Merrill in Beyond Stocks. Combining asset allocation and aggressive investing seems to be the way to go. Once again, I would love to hear from the author about those fees in his funds.

I first read this book about 2 years ago and decided to put the Rational Runaways strategy to the test. After about three months, most of the stocks were up and the portfolio as a whole was up about 15%. Then, one by one, the majority of the stocks faded, then crashed. After a year, I was down about 15%. I decided to combine O'Shaugnessy's strategy with William O'Neill's, plus the considerable information available from Technical Analysis of Stock Trends, by Edwards and Magee. I pick stocks that meet O'Shaugnessy's criteria, that are also in solid uptrends. I sell them when they begin to trend down. Half of my stocks have gone up, half down. I've sold the losers for an average loss of 10%, the winners for an average gain of 25%. My average holding time is 3 months. I've been doing a bit better than 30% per year, and these are not net stocks or dot.coms. These are companies with real and growing earnings, reasonable pe ratios and low ps ratios. It's easy to mistake a bull market for genius, but so far, I believe I've found a strategy that will do well in any market environment.

As an avid reader and a novice investor I could not put the book down. The information was clear and very understandable. I immediately went on line and was able to pull up the 50 stocks I will be using for Reasonable Runaways. My goal was to self manage my 401k. This has given me the tools to do so. I'm in it for the long term so will let you know in 25 years how the strategy worked. I feel strongly enough about the concept to share it with all my friends and family. Wouldn't it be fun to grow wealthy together???

I have also read "What Works on Wall Street". If you must chose between the two "How to Retire Rich" is the better book in my opinion. "What Works" does provide reinforcement of the ideas if that is important to you.

This is a well written book on the basics of investing and how it can help you retire not only rich, but sooner. It is especially catered to beginners and tells things in easy to understand terms.

I like O'Shaughnessy's style and the practical manner in which he presents things. He gives factual quantitative data for his qualitative reasonings.

The drawback, I feel, are some of the strategies. It might not be elementary to test these strategies out. I don't know how reasonable/pratical it is to follow 50 individual stocks. I can barely keep up with 10. Perhaps some additional help in pursuing these areas in a more efficient manner might help. Overall a helpful and well written book.

I liked it so much, I refer to O'Shaugnessy in my periodic newsletter, Investment Insider.

A must read for anyone who cares about their financial future. The cloud of confusion that shrouds Wall Street has been blown away. Finally, a simple, easy to understand investment guide that gives actionable advice. Forget about the 5,000 mutual funds that consistently underperform the market. Forget about this year's genius or this year's hot fund. Follow a discipline and stick to it through thick or thin. Thanks, O'Shaughnessy. This book summarizes everything I've learned about investing over the years, but, of course, not yet acted upon. That will change. ----Three things to count in life: death, taxes, and dismal stock market returns without an invesment strategy!----

A truly amazing strategy. I recently concluded tracking a 25-stock Reasonable Runaways strategy and the results are eye-popping. The portfolio turned in a 77.81% return dating from November 8th, 2002 thru November 7th, 2003. I will be putting real money to work now that I was able to see it with my own eyes...

The main message of _How to Retire Rich_ is that if you want to retire rich, or retire at all for that matter (ever!), you must invest in the stock market. You just don't have a choice in the matter. Sit down and let James O'Shaughnessy take you through the math---you'll quickly see that that is just the financial reality. The good news, however, is that investing in the stock market, when done properly, is not what you think it is. It's not about outsmarting all the other investors out there. It's not about trying to get a 'ten-bagger' so you can buy a cool car and brag at parties. It's not even about shrewd business savvy and scanning financial reports. It's about picking an effective strategy and sticking with it year in, year out until the day you retire, never pulling your money out of the market.

But if that sounds hard, don't worry. One of HTRR's strongest points is the wealth of wisdom it provides on the mental aspects of investing over the long term. What do you do if your portfolio tanks? What do you do if it soars? This is a problem? You'd be surprised! O'Shaughnessy is probably the only author with a completely rounded, mature outlook on the emotional aspects of investing. Reading HTRR will give you the confidence you need to invest and stay in the market through good times and bad.

So how do you invest? O'Shaughnessy breaks it all down for you, telling you exactly what to do. We're not talking the usual vague, feelgood accepted wisdom here such as 'buy market leaders' or 'buy on weakness, sell on strength'. Throw all those books in the trash! HTRR will tell you how to quickly find the precise stocks you should buy. You'll finish the book at 2 o'clock and have a list of the stocks to buy in your hand at 2:30. Yes, it's just that easy. You'll also know exactly when to buy them (now) and when to sell them (a year from now), and what do after that (repeat the process until you retire). What could be simpler?

O'Shaughnessy should be nominated for a Nobel Prize. He is a modern-day Charles Darwin with a theory that has all the hallmarks of a revolution in scientific thought. The theory is simple, but deceptively so. Many readers come away thinking they have understood it, only to later demonstrate that they clearly haven't. Even Motley Fool was apparently unable to grasp Reasonable Runaways (one of the strategies in HTRR). They tried to test it with a universe of stocks picked from Value Line (!). When it wasn't performing well after six months (!), they wondered how they could tweak it (!) to "make it dance" (their words). You'll understand just how ridiculous all of this is when you read HTRR.

Perhaps the reason for this widespread misunderstanding is that while the theory itself is simple, its ramifications are not---and without understanding its ramifications, it is impossible to truly understand the theory. Like Darwin, O'Shaughnessy has taken 'God'---the human element---completely out of the picture. That's what readers find so hard to grasp. O'Shaughnessy has shown that not only is human intervention in portfolio management not necessary, it's downright harmful. Given enough time, any human intervention will only lower a portfolio's returns from the optimum returns that could be obtained using a simple model.

I hesitate to include the returns I have earned over the past four years using the Reasonable Runaways strategy in this review, because I don't think they're typical. I have earned 93.15% (CARR of 17.88%) versus 1.17% (CARR of 0.29%) for the S&P during the same period (July 15, 2001 to July 15, 2005). And this is during a time period that includes 9/11. But as you'll discover from reading HTRR, four years is a meaninglessly short amount of time over which to gauge performance. Also, giving out exciting returns numbers shifts the discussion away from the real message of the book---get in the stock market and stay there (investing properly of course). It's the only way you'll ever be able to retire, rich or otherwise.

This book is a good read if it's your first on the topic...but the meat of the message is found in a single chapter, with the rest as window dressing to dramatize his message of choosing an investing strategy and then sticking with it through thick and thin. He hammers home his theme with countless examples and 70 pages of tables in the appendix to illustrate the performance of his preferred strategies. Inspiring for the novice, and good if it drives the reader to invest consistently and according to a plan, BUT somewhat of an overload if you already agree with his points.