on February 21, 2011
The idea that individual investors, with some hard work, research and common sense can follow in the footsteps of Warren Buffett is highly appealing. Unfortunately, this book, and its misleading title, prays upon those desires without executing.
I was disappointed by a number of things with this book:
a) it has nothing to do with Warren Buffett or even Buffett style investing. The profiles include trend following traders, technical analyst investors and macro investors. There is an effort to suggest some of them have a value bent but it's a stretch at best.
b) these are not all successful investors. Their "success" is based entirely upon following imaginary portfolios from marketocracy.com. One of them doesn't even follow his own virtual success and only buys mutual funds!! If someone doesn't follow value investing and isn't financially secure, how can you call them a Warren Buffett Next Door?
c) it left me wondering if the book was sponsored by a couple of online investing sites. Marketocracy.com is mentioned on virtually every page.
There were some interesting profiles and the background as to how people get into investing is a good read but this seems like a stretched out magazine article more than a detailed book. And the title is hugely misleading. If you want to invest like Buffett there are many more interesting and relevant options out there.
on January 31, 2011
There are nuggets of investment wisdom to be found in this book, but why the inclusion of investment advice from individuals who DO NOT actually trade real money? The fact that this book does take that step into the land-of-make-believe and allow paper-traders to wax poetic on investment theory is where I believe it falls irreparably short. I would not go to an avid air-guitarist for lessons on how to actually play the guitar. So why should I, or would I, want investment advice from one who has never actually committed a dollar of his own to the whims of the markets? It's a slap in the face to in-the-trenches investors looking for real-world advice.
on January 16, 2011
I did enjoy most of the stories and the investment strategies profiled in this book. However, I did not think investors who relied on quant's and what I would classify as day trading belonged in a book with Warren Buffett's name in the title. Mr. Buffett would most likely be very amused when some of the investors didn't know the name of the company they invested in because they used mathematical formulas or charts as a basis for buying part of a company.
Some of the investment returns seemed unrealistic because the amount of money invested in a virtual portfolio was in the millions of dollars. However, the author did say he did not look at the one investors brokerage statement to verify actual rates of return leading one to believe he was able to verify real the rates of return for the other investors profiled.
If you are looking for a book that teaches you how to invest, this book will not get the job done. On the back cover, one of the endorsements says "... their unique styles may not be replicable..." and I have to agree. Some of the participants would not fully disclose exactly how they made their investment decisions.
The take away from this book is anyone can be a successful investor if they are willing to first educate themselves and then put in the time necessary for research to generate above average returns. Overall this is a good book and it may give you some ideas how to improve your own investment returns as some investors reveal screening criteria and the websites they use to perform their due diligence. If nothing else, this book will inspire you to work at improving your own investment returns. And since Mr. Buffett's own investment strategy is not replicable, isn't that why we read books with his name in the title?
on April 20, 2013
I have been investing and reading about investing, business, economics and related topics since the early 1970's, and this book has the distinction of being the absolute worst "investment" book I have ever read. I take no pleasure in trashing this book, but if someone actually used this advice, God help them. I actually threw away this book after reading it, but I wish I had kept it now so that I could quote verbatim from it, because some of the things in it was truly incredible. For example, one of the "investors" is a high-frequency trader with a 3,000 + turnover percentage in his portfolio. He doesn't even know what most of the companies do! Definitely Warren Buffett investing. Not. One profile has what has to be the single most convoluted paragraph I have ever read. It seemed to be basing an investment strategy on the Elliott Wave theory, and it's enough to make my head spin. I cannot believe that a publishing house would actually put out something this terrible. This book is like a gory train wreck, only worse. I think that it is actually irresponsible to publish a book like this. Someone who is simple-minded might actually try some of these "strategies". The horror...
on July 20, 2013
Well, the book does contain some novel ideas; however, the majority of the "Warren Buffets Next Door" in this book aren't even using REAL money. Sorry Mr. Schifrin, I'd rather gain knowledge and insight from the Peter Lynch, Bill Gross, and Warren Buffett types who've don't use play dollars. The fact that most of the characters in this book DON'T use real money isn't something that potential readers should overlook. The author tries to dismiss this key fact but there is a certain psychology involved in investing that can't be replicated via "play money" online portfolios. Thanks but no thanks.
I generally had a bit of fun reading Mr. Schifrin's thoughtful, but somewhat rudimentary, exposition on the promise and potential of self-directed investing. While a long-simmering undercurrent of hostility towards Wall Street, so-called "Big Money" institutional investors and the financial industry in general has existed, the whole idea of 'Wall Street- Who Needs Them?' has gathered additional steam after the collective poor performance of the financial industry during the Great Recession. That said, books like this one have attempted to fill the newly created void brought about by the combination of a host of disgruntled and dis-illusioned investors, a rising tide of Boomers going into retirement (and in dire need of advice on how to preserve as well as grow their savings) and the seemingly limitless ocean of information quite literally at one's fingertips a la the internet.
Overall, the book succeeds in showing some of the promise and potential of self-directed investing focusing in on stock market, but it generally fails to provide the reader with a complete picture. Novices are quick to mimic the ten very notable anecdotes of investment success, and the author roundly deserves a figurative spanking for not pointing out that the past is not necessarily prologue. Moreover, although the author made no mention of the costs associated with running the different investment programs highlighted in each chapter, readers can reasonably infer from the information given that the cost is considerable (especially so for the one fellow in the book that dabbles in the shares of junior mining stocks, given the way he approaches them). Finally, while the author readily concedes that the results he presents are based on virtual portfolios, the main problem with this virtual approach is not, as many point out, the difference between actual and virtual, but with the fact that the underlying conditions for the virtual portfolio are wholly inconsistent with those found in the "real" world.
This last comment demands a bit of elaboration. The author likes to compare the results achieved by his ten rising self-directed stars to those of a passive, index-based approach and to those of star money managers such as Warren Buffett. Buffett himself has weighed in on this topic, and he has repeatedly said that, because of the immense capital base underneath Berkshire, it would be extremely difficult to outperform Berkshire's relevant benchmark by more than a percentage point or two. However, he has also said that if given a fraction of Berkshire's capital, he could absolutely "kill the Dow" in terms of total return performance. As such, the author is comparing the equivalent of gnats (his ten self-directed investment superheroes) to blue whales (Buffett and Berkshire Hathaway).
Moreover, certain real-world pressures that exist for professional money managers simply do not apply to these rising, self-directed investment stars and their virtual portfolios. Money managers must constantly guard against group-think, and because their compensation is tied to assets under management (AUM), they have to be a bit more sensitive to losses (as this will affect AUM in two ways, through capital impairment and investors withdrawing their funds in a response to those losses) which in turn leads to a higher level of risk-aversion (the old 'nobody ever got fired for buying IBM' mentality). The pros also have the added burden and associated cost of regulatory compliance, which the armchair money jockeys do not have, and above all, while the self-directed investor can afford to take a long-term view (whatever that means to the individual investor in question), the furthest out the fund pros can think- as a group- is at most one quarter. As such, one can clearly see that running actual money presents a number of problems that the novice running virtual funds avoids, thus demonstrating quite clearly that comparisons between the two are a bit specious, given the reality of inconsistent underlying conditions between the two.
Granted, in pointing out the above, I am not in any way trying to go to bat for the financial community (indeed, I too believe that its collective performance of late has been atrocious, for reasons that go far beyond the more staid basis of total return). Instead, my main thrust with this elaboration is to provide potential readers looking for a few good ideas- of which this book contains a few, a note of sound caution. In sum, this book may prove to be a good source for a few useful ideas for one's investment activities, but those looking to implement any of the broad methods and techniques in the book need to look upon the book as a starting point to, and not the end of, a search for better methods and ultimately, better investment performance.
on December 11, 2010
Although I enjoyed reading the stories and investment strategies used by the people profiled in this book, I have the following comments:
(1) Several of the people profiled DID NOT invest real money, but used the Marketocracy virtual (i.e., fake) investing website. There is a WORLD OF DIFFERENCE between "investing" "play money" and using your real, hard earned cash. I think the book should have profiled only people who used their own, real money.
(2) ALL of the people profiled in this book WERE MALE -- I have trouble believing that the author could not find EVEN ONE good female investor to profile! Profiling at least one female investor might have led me to believe that Forbes publications are no longer chauvinistic...but I guess things haven't changed that much at Forbes...
(3) Although the stories were entertaining, there was nothing in this book that was instructive or helpful to me in managing my investments.
on April 14, 2012
I lost my job in the 2008 depression. So I've taken up trying to make money with my retirement nest egg. This book was a great inspiration. The author has interviewed many people who have done very well. I must have learned something form this and the constant research I've done for the last 2 years because the nest egg is bigger. Good luck to you.
on November 27, 2010
This book consists of two themes
First, Average Joe can make his/her living off investing. Examples included a retired person, a college computer lab tech, and a former truck driver. The author should be praised for including some investors who are not uber-rich. A brief description and biography of each person was given. There is a wide variety of investment philosophies including short-term speculation, momentum, options, and deep value. This book is unique because it profiles your average Joe investors and they give some insight into how they make investment decisions. Not too much is said about Buffett.
Second, thesis is that you can beet the indexes and "blue chip" mutual funds if you invest a few hours of time every day and join a social investing site. (These are mostly subscriptions sites also referred to by the author as responsible stock-picking communities.) In fact many of the individuals in the book were profiled on Markeocray dot com; and an advert for the book was on the home page of couple sites. It was almost as if this book was a marketing channel for these sites. Not that there is anything wrong with that, but it would have been nice to know before buying the book. The author did caution that many of the investors profiled were taken by pump and dump schemes.
Although I am not very knowledgeable about getting investment information from these sights; I am a suspicious of the second thesis. What about selection bias. The investor who lost 45% when the index was up 2% was not in the pool of investors represented. So it is a logical leap to assume that by looking at these successful investors, any intelligent person who takes the time to learn and pay to be on these sites would have a high probability of success. Some of the people had highly concentrated portfolios and may just have been lucky. Also, it is not clear for all the sites what the motivation would be for divulging your best investment ideas. Wouldn't it be optimal just to troll for other people's good ideas? And wouldn't mutual fund managers join and get the same information. The book kind-of criticizes mutual funds, but aren't they doing the same thing as markeocry? If the assemble a good portfolio and make good returns they get rewarded.
on December 25, 2010
I really enjoyed this book overall. I think the thesis is very interesting: find ten Average Joes who have demonstrated good to astonishing track records over a decade in which the highly-touted "indexes" have suffered and tell how they did it.
Another reviewer mentioned that there was nothing in the book that she could use to manage her investments. She either wasn't reading very well or just doesn't want to put in the work necessary to generate good returns. This book isn't supposed to tell the reader which stocks are going to go up over the next week, month, year, whatever. It's not going to tell you which mutual funds are hot. It's not going to go into great detail on how to value a company. What it does is profile ten average people and tell you how they went about educating themselves in the world of investing and details their rewards derived from that education. Make no mistake about it - if you want to be one of the "Warren Buffetts Next Door," you will have to put in a lot of work and educate yourself. The author mentions right in the book that most of the investors profiled spend four or more hours per day online reading, researching, and educating themselves. You'll have to do the same if you want to emulate their results.
According to the book, the strategy for investing success mostly boils down to this: find a niche, be willing to put in the time necessary to research companies in that niche, and then have the confidence to act on your research. The reviewer noted above mentioned that the people in the book aren't managing "real money," but from what I remember, each of them had a "real" brokerage account in addition to the Marketocracy portfolios where the performance numbers come from. Most of them take similar positions in their "real" accounts and many of them made "real" profits that are noted right in the book. They also receive a commission from the website based on assets under management in their virtual portfolios, so they also have an incentive for this "fake" money to perform well.
I only have a couple criticisms of the book. One is that several of those profiled have styles that are impossible to emulate. It's interesting to hear different strategies, but one can't learn a lot from the short-term trader who just acts on his "gut" feelings, and most average investors also don't have the time or resources to visit gold mines and talk to management like another of the investors profiled. Several also made very large profits from incredibly risky and concentrated positions in one or two companies, which is not easy to pull off. I also noticed a number of typos and grammatical errors in the book, so I don't know if it was rushed to press or if it's just my personal reading and writing style. Another thing I found interesting is that the book claims to promote sites that are frequented by serious and dedicated investors, yet lists the Motley Fool in resources section. That website is mostly noise and I don't feel it belongs in the book.
Overall, this a great book and definitely recommended for those who are serious about investing and are willing to put in a lot of time and effort to educating themselves about investing.