on October 30, 2006
This is a thick book, but it reads pretty easily. The main message is that there are no easy profits in the stock market. There's no profit without risk, and that means you can lose your money just as easily as make money. He starts each chapter with a "fable," a story of some gullible investor who follows one of the conventional strategies for stock profits (for example, buy low p/e stocks) and, after losing money, finds out it's not that simple. Rather than simply debunking all the traditional stock market investing strategies, he explores how much, if any, truth there is each one, and how you would need to practice that strategy in order to make money. For example, instead of simply screening for low p/e stocks, you would need to add other criteria in order to avoid the real losers. The strategies he investigates are
Low Price to Book Value Ratio
Small Caps and IPOs
Mergers and Acquisitions
Insiders and Experts
Buy and Hold
All in all, it's well-written and interesting. The author is a professor, but he writes for a general audience.
The problem is that his whole approach here is in terms of CLASSES of stocks, rather than individual stocks. He assumes that investors find stocks using stock screening software only, while for most investors that is only a first step. Fro example, Damodarn assumes that contrarian investors buy a stock ONLY because it's gone down in price. But contrarian investors look for stocks which have been beaten down in price unfairly. They look at the whole company, its strengths, weaknesses, and potential for growth. Damodaran's comments mostly apply to mutual funds and asset classes (e.g. small growth). His argument is based on statistical performance of asset classes, but most stock investors buy invidual stocks based on a variety of criteria.
on June 20, 2006
This book is a very accessible overview of finance research on most major investing strategies (or themes). The author introduces each chapter with a short story and then builds the case around each investing theme. The bottom line is that there is no investing "silver bullet" - which is probably intuitive, but often neglected in the search for a magical investing potion.
The major contribution of this book is to address each one of the investing themes (Low P/E, Low P/S etc.) in great depth and actually build model portfolios. Damodaran has comprehensive command of his material and presents concepts in a very readable manner. If you are looking for an in-depth treatment of investment strategies, this is a great book.
on April 6, 2004
I have every one of Damodaran's books, and they have all helped me greatly. This book is no exception. If you want to gain investment knowledge without the pain and losses most people suffer, read his books. Take a look at Damodaran's website also. The webcasts of his classes at NYU are fantastic.
on October 7, 2015
Yet another classic from Aswath Damodaran! Investment Fables is a must read for anyone interested in investments as a career field or any investor looking to not be taken by slimy, sneaky stock pickers. The book looks at what it calls fables and tests them using statistical studies and logical reasoning. These "fables" though are actually the commonly touted investment methodologies such as buying low P/B ratio stocks, buy small companies, buying low P/E stocks, buy growing companies, etc. Pretty much every technique used by both value and growth investors is covered in depth and back up with both data and analysis. After pointing out the pros and cons of each method, Damodaran then explains how an investor can alter the method and screen for stocks that will minimize their downside when applying that "fable".
For students like myself, this is an invaluable book full of excellent insights (even though it is a little older). For professional/individual investors, it is a good way to check your investment strategy and see if there are ways you can improve. And finally, I recommend this book to anyone who has or is looking for a money manager. By reading this you can be more informed about the techniques commonly used in equity selection and be ready to ask the hard hitting questions to test the managers mettle.
on March 16, 2014
Great book that shows through empirical research that there is no broad market research strategy that will consistently outperform the market on a risk adjusted basis. Damodaran does an excellent job of showing why each investment myth is believable and why the numbers demonstratively show why it will not work.
The reason why I am only giving this a four star is because I believe he goes into too much detail at points that most experienced investors already know a great deal about and makes it a harder read than it should be. With that said, this is a great book for beginning and experienced investors to use as a reference when someone mentions a can't miss scheme.
on December 1, 2008
This book provides a 30-40 page critique of the major investment "strategies". These include those surrounding dividends, PE ratios, book values, stabel earnings and well "managed" companies, among others. The book is written in simple language that any layman can understand is geared towards that audience. It provides not only an overview of the strategy but the risks involved, discussion of investment timespan relevant to strategy, strengths and weaknesses, and, possibly most importantly, historical data on how the stragegy has performed.
If one is an experienced invester one has probably, however, has seen all of this before and in much greater detail (probably having absorbed the eequivalent of an easy book on each). Hence for this group of investors the book would provide little additional knowledge.
on July 10, 2008
aswath is the rare academic than can communicate to the layman. he thoroughly analyses many of the simpler beliefs such as: does buying low PE vv high PE really work. easy to read and contains valuable information.
on December 3, 2008
When I first stated reading this book, I was frustrated in that it wasn't what I expected. I thought Damodaran made a theoretical approcah in explaining the investment myths. Instead, he presents findings of emprical research conducted by other academics to show you if myths are really myths and he recommends you several screens to to create a mini portfolio consistent with that investment strategy (myth).
First I thought of giving 4 stars to the book but now after few weeks I finished reading the it, I think that the information in the book is very valuable. You can keep the book for future reference whenever you consider adopting an investment strategy mentioned in the book, and review the research results and get an idea of what sorts of additional criteria you need to use to execute that strategy safely.
on October 5, 2010
In each chapter, Damodaran checks a different investing method. From low P/E to growth passing to great companies and arbitrage. He reviews 14 different investing strategies.
Each of his reviews check both the advantages and risks of each method before proposing an investment method or screen. The logic is very clear and can be adapted you investment strategies and ideas.
This book is absolutely fantastic and I think it is a must to read for anyone who is an investor or wish to become one.
The only negative point is with the kindle version. It comes without chapter and menu, so it is harder to read on a kindle.
on April 19, 2006
Damodaran has written a valuable book that can certainly be described as an antidote to the various crazes that affects many stock market investors at some period in their lives.It is certainly true that the vast majority of stock market participants do not have the time,intuition, experience,temperment,and training to emulate Warren Buffett.Thus,in generel,the argument that one(one of the ten myths covered by the author)should do exactly what Buffett is doing,irrespective of any and all relevant differences between an average investor and Buffett, is flawed.There is ,however,one exception.That exception turns ,not on buying the stocks that Buffett(or Lynch or Soros)is buying,but on getting out of the market and selling if all of the three wise men(Soros,Lynch,Buffett) are getting out.Following them out of the market will not make you a lot,but it will save you a lot of losses.For example,between September, 1999 and March,2000,Soros,Buffett,and Lynch liquidated practically all of their stock market holdings in Nasdaq stocks,as well as much of their other stock holdings,the one major exception being Buffett's holdings of Coca-Cola. Market participants following this strategy,who got out by copying the three wise men, did not suffer any of the estimated 8-10 Trillion dollars in losses suffered by investors who continued to hold stocks based on the myth of " BUY AND HOLD AND then buy some more" after the inevitable dip gives way to another upward movement.The other major point that is missing from the author's overall perspective is that he still is not differentiating between conditions of risk(a mean -standard deviation-known probability distribution)and ambiguity(no accurate or reliable,unique, mean or standard deviation can be calculated).This lacuna is evident in all of the author's books in this field.The work of Keynes,Ellsberg,and Mandelbrot needs to be integrated into the main body of his analysis.