17 of 17 people found the following review helpful:
2.0 out of 5 stars
Disappointing, January 21, 2005
This review is from: No-Nonsense Finance : E.F. Moody's Guide to Taking Complete Control of Your Personal Finances (Paperback)
I picked up this book hoping that it would provide me with a refreshing and different outlook on investing. Unfortunately, it fell far short of my expectations. Moody first starts off by saying that nearly all authors, pundits, advisors, money managers, etc. are not to be trusted. In fact, if your financial advisor cannot operate an HP financial calculator, Moody feels you should head for the door. He then spends a fair amount of time attacking the way most people present asset allocation and stresses that the subject is a complex one. He then attacks dollar cost averaging and argues that it will hurt you more often than not. Fair enough--I agree with most of the points he has to make, but then his solution falls far short.
He talks about how you need to understand the fundamentals of investing and spends some time reviewing alpha, beta, standard deviation and Monte Carlo simulations. He then states that you need to pay attention to yield curves and above all, read what the Federal Reserve issues very carefully. THAT'S IT FOLKS!!! I am sure that many people watched yield curves and looked at what the FED had to say, but they still lost their shirt in the last big downturn. He might as well have said to read the Wall St. Journal or Investors Business Daily closely and you won't lose your shirt. In sum, there was little helpful investment advice in this book.
For example, Moody sharply criticizes most people's simplistic approach to asset allocation, but then doesn't tell you how to approach the issue other than to say it is a complex one. If most people are addressing the issue of asset allocation incorrectly, then give us some guidance on how to approach it properly.
One final criticism of the book is that in the first few chapters Moody slips in various one liners and "zingers." I don't mind a little levity now and then, but Moody goes overboard. He should leave the comedy to Robin Williams and focus instead on propping up his book.
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11 of 11 people found the following review helpful:
4.0 out of 5 stars
Probably best for insurance. Investments - good 2nd source., July 17, 2004
This review is from: No-Nonsense Finance : E.F. Moody's Guide to Taking Complete Control of Your Personal Finances (Paperback)
His introduction inspires a lot of confidence. He rails against the ethics, or lack thereof, of most practitioners of financial planning, and stockbrokers. He also says that most people in these professions lack the necessary expertise and depth of understanding that they should have before you should entrust them with money matters. I agree.
Given some of those he cites, like Bodie, Kanes and Marcus, the authors of the textbook Investments, he obviously has read far and wide, and thought seriously about investments. He's right in saying that anyone who does not understand diversification, systematic and unsystematic risk should not be giving investment advice. Nonetheless, my feeling is that his coverage of insurance, retirement and real estate, not investments, are the part of the book most worth reading. He obviously has a wealth of experience, and as his website indicates, is a voracious reader and stays on top of current trends and topics, as well as the expertise that is denoted by various professional designations like CFP. I'll leave it for experts (ones as ethical as he is, I hope) to testify to the quality of his insurance and real estate advice. This appears to have more comprehensive planning and retirement information than I have yet seen.
I am not sure I would use the book as an investing primer (William Bernstein and John Bogle are good) - maybe a secondary source. Some discussion of beta is worded in such a way that it might throw someone new to the concept. A brief example on standard deviation seems to contradict the fact that 2 standard deviations = 2 x 1 standard deviation. This may been have been due to an attempt to keep it very simple (see below).
Beta: On page 12, he gives an example of a stock or fund with a beta of 1.3, calculated as: the fund's return of 13 percent divided by a market return of 10 percent. A beta of 1.3 implies 130 percent of the market return, and 13 percent and 10 percent are consistent with that. He may unintentionally mislead some, though, when he says "for every move the market makes, your stock or fund may increase 1.3 times more."
He probably should have said that the "stock or fund may increase 1.3 times AS MUCH AS THE MARKET." With the phrasing "1.3 times MORE", I am guessing he meant that it typically moves 1.3 times as much as the market, and by "more" he may have meant "following in time previous increases of both the stock and the market". But some readers may think that "more" means "1.3 times MORE THAN the market return". If a stock moves 1.3 times MORE THAN the market, not 1.3 times what the market did, its beta would be 2.3, because it would fluctuate 230 percent as much as the market: 100 percent EQUALS the market, then you'd be adding another 130 percent of the market return.) If the reader goes back to the example of 13 percent and 10 percent, he may avoid this misunderstanding.
In discussing a fund with a beta of 0.33 (fund return of 2 percent divided by market return 6 percent) he says the fund goes "up a third LESS" for "every movement of the market." It has actually gone up a third AS MUCH as the market (2/6). If it actually moved a "third less" than the market, that would be the same as saying it goes up or down TWO THIRDS AS MUCH as the market. That would imply a 4 percent return for the stock (one-third less than 6 percent). In his example, the 0.33 beta stock's return is nonetheless 2 percent.
Standard deviation: On pages 18-19, a distribution is shown in which the average golf score is 110, and the area up to one standard deviation from the average covers "68 percent of all people that play". "The two side bars" defining this area "represent plus or minus 20 percent." They are at scores of 90 and 130, which are each 20 points away from 110 points. Based on this, it seems that the standard deviation would equal 20 points. So, when he said the bars were "plus or minus 20 percent," he apparently meant to say "plus or minus 20 POINTS." What if 20 percent were accurate, and the bars were placed accordingly? 20 percent of 110 is 22 points. Then, the bars would be at 88 and 132 points.
The next two bars contain 95 percent of players' scores. This part of the graph is "the definition for two standard deviations." He says the scores there range as much as, "say, a +30 or -30 percent difference, or scores as low as 80 or as high as 140 for 95 percent of time." 80 and 140 are both 30 POINTS away from 110 points. As with the "20 percent" discussed, there seems to be an inconsistency: 30 percent of 110 points is not 30 points, it is 33 points. Thus, the bars would be at 77 and 143 points. Maybe the numbers have been rounded to keep numbers simple. It would seem simpler to have stuck with points, and left out percents.
Two standard deviations should represent twice as many points as one standard deviation does. Whether one uses 22 points and 33 points based on percentages of the average, or 20 and 30 points based on the bars' locations, the numbers of points for two standard deviations is not twice the number for one standard deviation. If one standard deviation is 20 or 22 points, then two standard deviations has to be 2x20=40 or 2x22=44 points respectively. The example seems to say that two standards deviations are either 30 or 33 points. There is a sizable, 33% difference between 30 and 40, and between 33 and 44. I do not know why he did not just use 20 points for one standard deviation, and 40 points for two standard deviations.
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