25 of 26 people found the following review helpful
A Great Book for the Experienced or the Beginner Investor,
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This review is from: How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn (Paperback)
This book is an easy read, but not an afternoon read.
Each chapter begins with a pertinent, topical, and usually humorous short quote and the chapter expands to explain in easy-to-understand detail, the tenants of the philosophy. Kevin, the second-grader, learns a basic life lesson on investing. This model provides an excellent motif for the quite knowledegable author (an accountant and financial advisor) to expalins the basics without "talking down" to the reader. There is truly something here for all levels of investing experience. And it's a fun read.
I am an experienced investor. I had read a short article regarding the portfolio and had replicated it in a pretend-buy-and-hold portfolio in mid-2006.
Later that year, I used "real funds" and opened an equal-dollar amount in actual accounts with a fee-only broker to manage and a sepaarte brokerage account that I actively managed. After three years, which included the market downturn of 2008 and the rebound in 2009, the set-it-and-forget-it portfolio beat myself and the broker. (I did come in a respectable second, however.)
Knowing "the answer" and "the trick" ahead of time did not ruin the story-line. I had often had an inner debate about how to best "beat the market." The above experiment was but one trial. I initially bought the book as a basic primer for a college-aged nephew who asked some very good questions about beginning investing. Not wanting to see him waste money on brokerage fees or see his initial investments underperform, I felt that index funds would be the best route for him and this book would explain why ... and provide some investment basics. It certainly does both.
My own "aha" experience came in Chapter 3. Kevin accepts the fact that he probably won't win all three spins. And therein lies the most basic rationale for this asset allocation, diversification, and rebalancing model that is so simply explained. It explains why neither my hot stocks nor the advisor's specific mutual funds out-performed the market or this strategy : each of us had winners in our portfolio, but to remain diversified, we had ten or mnore entries ... and all ten buckets did not out-preform the market. Some did and some did not. On average, they were probably, well, average. But there were fees and expenses incurred to capture the "winners" ... and also fees and expenses involved in owning the "losers" ... which gave average results (minus those fees, of course). And therein lies the pitfalls.
I gave my college-aged nephew Oblivious Investing (a shorter, more basic intoduction to investing) followed two weeks later with "How a Second-Grader Beat Wall Street." I read both, and feel that was an appropriate starter series for a interested novice. But I also took home a lot of wisdome even as an experienced investor. I have also read Benjamin Graham's "The Intelligent Investor" and would put "How a Second Grader Beat Wall Street" as right up there in the same league ... just easier to read !