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583 of 610 people found the following review helpful:
3.0 out of 5 stars
Decent, but strategies need work., July 1, 2007
This review is from: The Neatest Little Guide to Stock Market Investing (Revised Edition) (Paperback)
I presume the majority of the glowing reviews on this site are from novice investors. Afterall, that's what this book is aimed towards. While it contains many useful bits of information, some of the things mentioned by Mr. Kelly would most certainly be detrimental to a new investor. Allow me to explain.
First, the good. Kelly does an excellent job of defining various stock terms -- everything from P/E ratio to beta -- and doing it in simple language. As a side note, his writing style and prose is significantly better than that featured in most investing books, since he was an English major. Additionally, Kelly provides excellent research resources, including ones that I had not found in my extensive internet searches. More information and more sources is never a bad thing, and Kelly provides the latter in spades. Finally, his introduction to such investment greats as Warren Buffett and Peter Lynch -- while rudimentary -- are very helpful for the new investor. I find it particularly good that he utilizes Lynch extensively in his own strategy, because Lynch is (arguably) the best fund manager that has ever lived.
Unfortunately, Mr. Kelly adds a bit of his own intuition and thoughts into the strategies he presents in this book. First and foremost, his notion that investing in the UltraDow mutual fund is sound is beyond ludicrous. Not only is this an ineffective use of money, but its volatility and risk far outweighs its gains. Secondly, Kelly seems to be a bit full of himself, calling Wall Street professionals "gurus" who know as much about the stock market as YOU do. In the preface, he states that using this book "always works" -- a pretty bold statement from someone who is A) not a business major and B) not really even a market professional. Only later, towards the very end of the book, does Kelly admit that he has "limited experience" in the area of stocks. Er...what was this about "this book always works"? Kelly's strategy is, in essence, based upon filling out a worksheet and setting arbitrary numbers as "good" or "bad" -- i.e. when X ratio outweighs Y number, this stock is a good buy. Get enough of these "good buy" signs together, and you have a stock to buy. Not only does this show his lack of knowledge on the subject, but worse, he makes these statements as if they are guaranteed to make you money. Interestingly enough, Kelly almost always talks about buying shares in the HUNDREDS. That's right, as in 200 shares of Microsoft. Almost anyone who knows something about the market will tell you that investing $5,000 or even $10,000 will yield underwhelming results. The # of shares Kelly is dealing with proves to show that he is not only small time (re: has not made a lot of money off trading) but probably hasn't been at investing for very long. Remember, the market has returned an average of about 9%. Even if you're the worst stock picker ever, by probability, you will earn 9% on your picks over your lifetime. The question really isn't whether you'll make money, but how much will you make? If you follow Kelly's advice, prepare to be underwhelmed.
By far the worst part of the book is Kelly's complete and utter dismissal that short term trading works. Essentially, the strategies outlined in his book -- which you shouldn't use, if you value your cash very much -- are all for very long term investing. While that's a valid strategy, somepeople are exceptionally successful owning a stock for three months, six months or a year. You don't have to be in a stock for three years to see wild gains, and you can perform sound technical analysis on a stock you plan to hold for three months. Kelly makes it seem as if short term investing is not only impossible, but not profitable. For some, though -- even those who do it part time -- it may prove more effective.
As a glossary of investing terms, list of investing resources and a quick overview of how the market works, "The Neatest Little Guide..." is a winner. Unfortunately, Kelly's strategies are inherently flawed, and while they may appear to be solid to a new investor, they should not be trusted. Kelly's view is a narrow-minded one and a rudimentary one at best. In some instances, this reads like a "Fisher Price" version of meatier, more substantial investment books. While it is worth the $10 -- for the definitions and list of investment companies, research sites, newspapers, magazines et al -- you should take Mr. Kelly's strategies with a grain of salt.
A better book for the novice investor -- which isn't bogged down too much with technical terms/complex numbers -- is Jack D. Schwager's "Stock Market Wizards" book of interviews with market professionals (fund managers, independent traders etc.). This should prove to give you an overview of many different strategies and things to look for. It was the first thing I read before I started buying stocks, and it was a tremendous resource.
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59 of 61 people found the following review helpful:
5.0 out of 5 stars
Good Basic Guide for Beginners, June 24, 2006
This review is from: The Neatest Little Guide to Stock Market Investing (Revised Edition) (Paperback)
First of all, Kelly's writing is very witty and entertaining. He has a gift for explaining complex issues in simple and easy to understand langauge. The title describes this book perfectly. Kelly is very concise: long on practical advice, without a lot of dry theory and argument. He covers the basics and terminology of Stock investing well; this book is an excellent introduction to stock market investing for beginners. There is a valuable chapter in which he summarizes the investment methods of some of the most successful and famous market wizards such as Benjamin Graham, Warren Buffett, William O'Neil and others. Kelly reviews the main factors that are essential for evaluating a potential stock purchase. I liked the chapter that reviews the available investing magazines, websites, databases and software. Finally he gives a practical method for finding the best stocks out there: A list of important criteria, where to find those criteria, and how to interpret the data you find.
There are some parts of his book which are not too great, such as his heavy emphasis on the "Dogs of the Dow," a rather well-known and out-moded strategy, and his idea that the UltraDow fund UDPIX is your best core fund holding is just plain CRAZY. This fund is very volatile, with a Beta of 2.07, more than twice as volatile as the market, and an Alpha of -5.78, which means that the risk you take on is very poorly rewarded. For a core fund, try something like Oakmark's Equity and Income OAKBX, or Vanguard's Windsor II VWNFX. Kelly must have some sweetheart deal with Profunds, since they are the only mutual funds he recommends. The so-called "Ultra" funds he recommends are extremely volatile.
He has a website too, which gives a weekly overview of market conditions and advertises his newsletter. In his book, he claims that the website will give you all kinds of important information and tips for free; but not anymore: his newsletter costs $5.50 a month (admittedly, this is cheap for an investment newsletter, most of which cost $10-30 a month). In his book, he makes fun of all those advisors who think they can forecast the direction of the market. But then, on his website, he makes statements like: "I expect a rally in early summer, a sell-off in Aug/Sept, and an end-of-year rally into 2007." Listen, folks, you might as well get a Ouija board if you want to forecast the general direction of the market. The direction of the market depends upon events that haven't happened yet. Kelly knows this, and points it out in his book, but then he still goes on to make absurd statements like that. Worse, his predictions commonly prove wrong.
OK. I subscribed to his newsletter and can now report on that. I was very disappointed. He recommended some real losers, and I discontinued my subscription. CTHR, AMD, BSX, the list goes on and on. He likes stocks which are "on sale," but he ignores that these stocks are on sale for very good reasons. Just because a stock has plunged 50% in 6 months is not a good reason to buy! Another problem I had with the newsletter is that he's too focused on just a few sectors, especially tech stocks. AND the newsletter tends to focus on big blue chip stocks like Disney, Microsoft, or Intel. I don't need to pay someone to point out stocks like that to me! Sometimes months go by without any new recommendations. The newsletter commonly consists of a rehash of market conditions that one can find at almost any financial website. There are some good newsletters out there, but this isn't one of them. Maybe things have changed since I discontinued my subscription, but that was my experience.
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24 of 24 people found the following review helpful:
5.0 out of 5 stars
It really is the neatest little guide, August 5, 2006
This review is from: The Neatest Little Guide to Stock Market Investing (Revised Edition) (Paperback)
I bought this book due to its 5 star rating after 125 reviews, and it did not disappoint. It really is the neatest little guide because the author covered all aspects of beginning to invest in the stock market. Here is what you get:
1).Learn how the equity market works.
2).Learn how to evaluate stocks, How you judge a stock depends on whether you are a value or growth investor.
3).Learn how the master investors invest. Warren Buffet, Peter Lynch, Gary Pilgrim, William O'Neil, and Phillip Fisher.(I have read all the books he recommends and he is exactly right on these being the masters)
4).He discusses the studies of James O'Shaughnessy from the book "What works on Wall Street" This guy studied what stocks really did the best between 1951 and 1996, this book is a must have. Low P/E ratios and low price to sales ratios have performed the best.
5).He discusses how to double the return of the Dow by investing in the Ultra Dow UDPIX from ProFunds. They use margin to double the return of the Dow in whatever direction it goes. He also discusses many other Dow strategies.
6).Write down why you are investing in a stock so you know when to get out.
7).Choose a discount broker and stop wasting money on full service.
8).Research only 20 stocks at a time, use his stocks to watch work sheet to analyze the stocks value.
9).He explains the limit and market order, and the stop loss and stop order and when and why to use both.
10).He shows when to sell your stocks to lock in gains.
This is a great place to start an education in the stock market, he touches on almost everything a beginner needs to know about. I wish I would have read this book before I read the more technical classics. The author also has a great sense of humor and the book is a pleasure to read while you learn. Stop looking for a book on investing and buy this one.
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