Customer Reviews

The Warren Buffetts Next Door: The World's Greatest Investors You've Never Heard Of and What You Can Learn From Them

5 star:		(5)
4 star:		(6)
3 star:		(1)
2 star:		(3)
1 star:		(2)

 

 

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.

d)

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.

Sifting through all the books about investing and money management can be as time consuming as actually being an investor. Luckily, when you see certain cues, such as "26 years at Forbes" or "Investing Editor and VP" you know that the quality of writing will eclipse the blogger/talking head crowd and provide you with real kernels of information and honesty. Each chapter in the book focuses on a narrative of one person's road and unfolds to show both technical lessons in investing and the kind of positive message that we need today. This message is simple but has never been more important: retirement is our responsibility and investing as an amateur is not just a dream but a reality for Americans in all walks of life.

The layout of chapters lets you know what to expect and glean vital information quickly, and Schifrin knows how to tell a great story, even ceding control to his successful investors at the end of each chapter with an "In their words" area. One particular investor tells a story of managing risk by talking about furniture makers and lost fingers--this kind of visceral tale will stick with you while you're cribbing notes about key metrics for your own portfolio.

This book is a must-own for people taking on their financial future and those who want to explore the world of financial freedom.

If there is one take-away from Matt's book, I believe it is that investors who follow what they know, in an analytical manner, are bound for success. Matt profiles superstar "amateur" investors, creating rich portraits of their lives, backgrounds, successes and failures. These are not people with B-school backgrounds, or years of experience on the Street. They are your next door neighbors, friends and family - ordinary retail investors who have had extraordinary results.

Something in each of these investors' lives has informed their investing-style, whether it be years of frugality (leading them to a value approach), or a love for software and mathematics (leading to an options approach), etc. These investors use Main Street smarts to get returns that would make Wall Street experts jealous. With the help of online tools and communities such as Valueforum.com, Marketocracy, the "Warren Buffetts Next Door" research and decide which investments to pursue.

The book is an easy, fun read (I finished it in two days). It has you thinking "How can I do that?" and provides resources to help you become your own "Warren Buffett Next Door".

Adam Menzel

COO

ValueForum.com

As a private investor who suffered big losses during the tech. meltdown and who vowed never to invest in stocks again, only to get seduced back into the market to then watch another collapse when the economy sank worldwide (and who finally figured out how to make money in the stock market), I think that "The Warren Buffets Next Door" is a great book. After all, as investors wouldn't we all like to enjoy the success of Warren Buffet? As Mathew Schifrin points out, the best investors learn from their mistakes (as does any other successful person).

I see many elements of what I have learned about financial success explained in Schifrin's book, so right off the top I highly recommend this book because paying close attention to the very practical tips and strategies throughout this book can help make you a more profitable investor. "The Warren Buffets Next Door" is an entertaining, easy-to-read, interesting book with a lifetime of investment suggestions crammed into one book. What makes this book such a fascinating read is the Schifrin has selected ten ordinary people from very different walks of life who have all achieved remarkable investment success during a decade in which the market destroyed many people.

I really like Schifrin's approach to tell us a little of the personal life of each person. In addition, he provides each person's rules for investing and provides a case study in point for each person. Great information and great reading.

Throughout the book are links to relevant websites and Schifrin makes no bones about the fact that the internet has changed the rules of the game allowing you and me to have access to the research and information that was once the domain of only the professional advisors.

As an author of a book on financial success (The Millionaire Lifeguard), I appreciate and understand what many of the ten investors profiled in Schifrin's book have been through and I found inspiration in their stories (not to mention support for my own investment strategies as well as some new tips).

I highly recommend this book to all investors, but particularly those who have become disillusioned with investment advisors and would like to take control of their own investment portfolios.

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?

This book follows in the footsteps of books by Steven Drobny, Jack Schwager and John Train in that it is structured as interviews with individuals who the author has identified as accomplished investors. Whereas the first three authors interviewed investors who managed assets measurable in the billions, Schifrin's interviewees managed assets that are considerably less and with track records that go back only a decade at most. His subjects are therefore basically individual investors albeit most of them have developed a methodology and discipline that exceeds those employed by the typical individual.

I enjoyed the book. It won't go down as a classic but it is a quick easy read and would be of value to individuals seeking to employ more structure in their investing. The diversity of investment approaches featured in the book shows that there is no one path to success. They range the gamut from fundamentally focused to technically-oriented, from value to growth, from bottom-fishers to momentum chasers, quantitative screeners to sector specialists, etc. I actually found a lot of value via the references to different websites/software products some of these investors use and the screening criteria they employ. One investor's comments with regard to risk using his story about cabinet makers was actually quite novel.

Because these are essentially individual investors, their strategies and investment vehicles are by and large accessible to most individuals which is in contrast to the instruments and strategies available to investors profiled in Drobny, etc. Some of the investors profiled by Schifrin appear to take much larger position sizes (up to 15%) then one would expect from an institutional investor. Also, it appears that the drawdowns for some of these investors can be pretty severe (one was down 42% in 2008, another was down 50%). Furthermore, it seems that while many of these investors had excellent performance, in some cases, a few fortunate stock picks contributed greatly to that performance.

The author acknowledges that the track records involved are all relatively short and that he will do his best to monitor this group of investors and update the results at a later date. It will be interesting to see as time goes by who among them is truly skillful.

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.

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.

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.