74 of 83 people found the following review helpful:
4.0 out of 5 stars
Excellent and Understandable Overview of Investing Styles and Portfolio Asset Allocation, December 27, 2008
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If you apply this approach consistently and follow it for the next several decades, you will do well. If you follow your own ideas, I doubt if your results after tax will come close to what you could have earned by applying these methods.
One of the guilty little secrets about Wall Street is that the average investor does poorly, selling when stocks are down and buying when they are up, trading too often, piling up extra expenses for taxes and brokerage commissions. Why? People want to get rich quick. It's possible, but you are more likely to get rich slowly. This book teaches you how to do the latter by taking advantage of compounded returns.
David and Tom Gardner have provided a solid resource for those who are new to investing and want to take advantage of long-term trends and the odds to build a portfolio that will outperform inflation and the market averages. At a time like this when stocks have cratered and many bonds have buckled, many people will be reluctant to invest in anything other than treasury securities. Yet the best opportunities to invest usually come when things look quite bleak.
The book assumes that you've never bought a stock before. If that's you, I'm sure you will be able to pick a better stock than my first broker picked out for me (which promptly fell 95 percent in value).
From there, you'll learn about the benefits of buying stocks that grow and pay generous dividends (more than half of long-term gains from stocks come in dividend payments).
Next, the Gardners explain about buying high-quality, large companies inexpensively (at a discount, the Warren Buffett approach).
After that, you'll learn about why small-cap stocks should always outperform larger cap ones and how to pick the right ones.
The next section helps you spot companies that are breaking the mold with new business models that can give them extraordinary success over a short period of time (as Google did in the 21st century).
The Gardners next look at international investing and help you understand the various ways that you can pick successful stocks that will benefit from selling into locations where growth and profits will be high.
In the CAPS section, they explain about their online resource for assessing individual securities as a way for you to check your thinking.
It's an example of crowd wisdom.
Finally, you are shown how to assemble a portfolio using these various approaches . . . adjusted for your age, needs, and risk tolerances.
The book also gives you guidance on how to pick mutual funds in the appendix if you decide you don't want to be a stock picker.
The book has an excellent balance of summarizing the best academic research and outstanding books while providing simple "how to" directions complemented by examples that are completely developed enough to help you understand the analysis and thinking process that are being recommended.
I have only a few reservations about the book that kept me from grading it at five stars:
1. The book assumes that the investor is paying taxes on gains when incurred. If you are investing in a tax-deferred account (such as an IRA or 401k, the answers are a little different from what is described here).
2. The book assumes that an investor who reads this book wants to try to be a stock picker. Most people would be well advised not to be stock pickers. The joys of putting together a portfolio of index funds should have been explained in detail for those people.
3. The section on risk takers and rule breakers wasn't strong enough to teach someone what to look for. That surprised me given that the Gardners have published a book in the past on that very subject.
As a complement for this book, I suggest you also read John Bogle's
Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor and Jeremy Siegel's
Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns And Long Term Investment Strategies.
Good luck!
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26 of 29 people found the following review helpful:
2.0 out of 5 stars
You could do better - much better, January 27, 2009
Customer review from the Amazon Vine™ Program (What's this?)
My personal and professional focus is mainly on trading, but I do periodically act as an investor as well. That being the case, I thought I'd give this book a read to see what the popular Fools had to say on the subject. I didn't come away particularly impressed.
First of all, the whole book is an advertisement. The reader is constantly being sold on Motley Fool services of one kind or another. Of course you know going in that the book is going to promote Motley Fool, but it doesn't need to be so continuous and overt. Makes me glad I didn't actually pay for the book.
Secondly, there is a painfully obvious error (or rather set of errors) made at the outset of Chapter 3 when the authors are trying to preach the advantage of buy-and-hold investing over active trading. I take no issue with the general argument made about how taxes and transactions costs make active trading more of a challenge than buy-and-hold investing. Their example to demonstrate how this is true, however, is so painfully incorrect in its math and interpretations as to be farcical. Such obvious mistakes makes me wonder about the attention to detail of the Fools, which is a problem when you consider company analysis and stock picking is their proported focus.
Thirdly, while there are some good elements to what the book says, most of it is stuff that's been said before many times in other places - better places. If you're really interested in the subject of stock investing, the first place I would go is One Up On Wall Street, by Peter Lynch. I read that book back when it first came out - a looonnnggg time ago - and found it extremely useful. There's a reason it's one of the best selling stock investing books of all time. Of course there are also loads of Buffett books, but I'm not going to recommend any of those because frankly there aren't many who can invest the way Buffett does.
Bottom line, look elsewhere.
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