Most helpful critical review
141 of 151 people found the following review helpful
VERY basic and (a little) paternalistic, but a good intro for some.
on October 8, 2012
In short, this review explains that this book is very, very basic and limited for anyone who wants a more thorough understanding of how the stock market operates. Anyone seeking more than the most basic of introductions will be disappointed.
All things considered, I think this book is helpful for a select group of people, but you must be someone who falls into that select group to fully appreciate the book. Mr Tyson seems like an all-around good guy who means well and I think genuinely wants to educate the masses about investing and their personal finances. But bear in mind that this book is clearly targeted to the beginner, and is even a bit overly paternalistic at times towards the beginning investor. I'm aware that this is part of the "Dummies" series, but I think Mr Tyson may have perhaps taken that part too literally. Most books in the Dummies series aim for simplified, layman explanations... which is distinguishable from the assumption that the readers are actually dummies or are otherwise incapable of truly learning/mastering the topic they are reading about, in this case.
The biggest pro/praise I have for this book is that Tyson lays out a simple way to approach investing. His method will keep individuals out of trouble and not erode the principal of their investments. He advises against the dangers of being overly unrealistic and the pitfalls associated with trying to get rich quick on the stock market. Further, Tyson discusses stocks, bonds, mutual funds, and the like. You get at least an overall picture of the various instruments available in the investing world. This is a very basic overview, however, as the author does not proceed to discuss concepts such as leverage, options, and futures. But perhaps for a beginner's book, his coverage is appropriate. The topics he does choose to cover will enrich a beginner's conversations and make them seem like they are not ignorant when discussing the stock market. Most importantly, Tyson does not lead the beginner astray. He offers sound advice that is conservative and will help to protect the beginner from high risk.
My con/criticism is that this book is far too basic for those who genuinely want to learn more about investing on their own. Tyson takes on a paternalistic role in his suggestions that most people are incapable of picking their own stocks, and even foolish in trying to do so. This may be the case for many people, but Tyson does not delve into how one should analyze a security by looking at 10-K reports, other SEC filings, management of a company, various financial ratios, the company's position within an industry, and risks that the company is taking. For individuals actually wanting to learn about this, that information should have been present in a book on Investing. (For a starting book that at least has a more thorough review, I'd recommend "The Neatest Little Guide to Stock Market Investing" by Jason Kelly, as that book actually discusses how to do some of the things I have talked about in this paragraph).
I found Tyson's unusual zeal for mutual funds to be excessive. I do think there are benefits to mutual funds for many people, mostly people who don't want to have to manage their own portfolio, or who would simply prefer to let a professional do it for them. And mutual funds can also be a great way to diversify easily, and put your portfolio essentially on auto-pilot. However... there's a substantial downside to mutual funds that Tyson seems to neglect, and my criticism is three-fold.
(1) There is not enough discussion of the fact that mutual funds charge management fees that are often in the 1% to 2% range (meaning that the managed portfolio must make 1% to 2% more just to break even with the market). Mutual funds generally underperform the market, often because of these management fees (roughly 70% of them underperform over a 10-year period).
(2) There is not enough discussion of ETFs (exchange-traded funds), which tend to be less costly than mutual funds. In my mind, these are usually superior choices, so long as you pick ones that are low cost, meaning low management fees. For example, if you are a beginner consider ETFs that follow the small or mid-cap companies (tickers IJR or IJH, respectively). Or even consider an ETF that simply keeps pace with the market (tickers SPY, VOO, or a few others). These have much lower management fees of closer to 0.10%, and in the long run have outperformed the universe of mutual funds by a considerable amount. If a beginner is looking to beat the market, that will likely take either more education/talent/skill, which is not present in this book, a bit of luck, or divine intervention (I'm not ruling out any of these). But a beginner can simply tie the market with an ETF like the ones mentioned.
(3) Tyson appears to part ways with his own advice regarding not picking stocks when he gives advice for how to choose a mutual fund. I hold the view that nearly as much care should be given to choosing a mutual fund as one should put into choosing a stock. Tyson discusses being socially responsible by not choosing mutual funds that invest in vices such as tobacco, gambling, or alcohol products, which you may or may not agree with. He also discusses looking into what types of investments the mutual fund targets. But beyond this, I found his advice to be bare-bones and lacking for the individual who would like to learn more about investing.
Overall, if you are looking to actually educate yourself more thoroughly about investing and are willing to do the sometimes tiring footwork to do so, then you should choose a different book as this one merely scratches the surface. Id' recommend various other titles such as the Kelly book mentioned above, which in my mind provides a very nice introduction to the stock market. Or if you really, really want to learn more about investing, then start reading some of the other classics out there, such as Ben Graham's "Intelligent Investor," Phillip Fisher's "Common Stocks and Uncommon Profits," or even Peter Lynch's "One Up On Wall Street." Further, consider practicing trades risk-free with a paper money account through any broker that has it, as there is not a true substitute for trying your own hand at it.
But if you are a person who does not know the difference between a stock and a bond... if you simply want to learn what the stock market is... and you want a conservative way to safely invest your money, then this book may well be a good introduction. I give it 3 stars because it is a good introduction for those who might want to learn the basics that I have mentioned. But it is EXTREMELY basic; anyone wanting much else will be disappointed.