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An extremely important work, particularly for the investor who is plagued by doubt, confusion, and anxiety.
The amateurs miss the point. This is not about the best stochastic settings or how to massage the bid and the ask. This is about facing up to the very real risks inherent in the financial markets, including the very real risk of financial ruin. Amateurs don't see the risk; therefore, they don't bother to grapple with it. Instead, they would rather blow up and disappear. If one wants to last, he must come to terms with the nature of risk, his own tolerance for risk, an understanding of how to manage risk. Without that, he's doomed.
An informed decision would seem to be a sound one. It may very well be, yet in the context of the market, as information risk diminishes (more knowledge is gained about a particular investment), the price risk will increase (assuming positive news results in a rising stock price). Once an investment is deemed to be solid and secure, the existing information will already be reflected in the price of the equity and the potential for appreciation becomes much more limited (price risk increases). The art of balancing information risk and price risk is a central theme of the book, which is discussed, in intricate detail. Also discussed are methods of determining when price risk is likely to be at an absolute minimum -- all news surrounding a company is bad, and no matter how much more bad news comes out the price does not decline further. An interesting "head and shoulders" method of timing the market is presented as well.
Whether it's embarking on a new career, investing for a quick hit, or retirement, taking a new job, signing an agreement or contract, making a new purchase, or getting married, all of life's decisions involve the same basic tradeoff between information risk and anticipated benefits (price risk). The author discusses not only the stock market and investing, but presents mental models from various situations, which most anyone has experienced, and can relate to in some form.
... Read more ›In-fact, I have given his other books, When to Buy and How to Sell the Five Star ratings as they are very useful and well written.
However, after reading those, this book seems to repeat some of the points made in them and seems a little defensive about Technical Analysis. Avoid this one but positively buy the other two.