The WorldlyInvestor Guide to Beating the Market

Rating:
Summary: To Profit from Irrational Human Behavior Read this Book!
Review: Although I have been a long student of the markets and have read many investment books, I've rarely read books that have practical value. This book does! Many academic studies continue to push the idea that the markets will never let you achieve above-average profits because it is unbeatable. Well, this book identifies inefficiencies that are created by human behavior which allow the disciplined investors to get more alpha. For example, many stocks with bright futures are under-loved by Wall Street. With the right combination of clues, you can find these companies before you read about them in the newspaper using Ben Warwick's ideas. If you are a mutual fund investor, this book is for you. Many investment professionals like myself have seen a large amount of investors buying the wrong funds at the wrong time. Ben shows you what factors to really look for when selecting mutual funds and helps you avoid falling in the "chasing the hot dot" strategy so prevelant today. In other words, don't look at Morningstar ratings, instead, read The WorldlyInvestor Guide to Beating the Market before buying your next mutual fund.

Rating:
Summary: To Profit from Irrational Human Behavior Read this Book!
Review: Although I have been a long student of the markets and have read many investment books, I've rarely read books that have practical value. This book does! Many academic studies continue to push the idea that the markets will never let you achieve above-average profits because it is unbeatable. Well, this book identifies inefficiencies that are created by human behavior which allow the disciplined investors to get more alpha. For example, many stocks with bright futures are under-loved by Wall Street. With the right combination of clues, you can find these companies before you read about them in the newspaper using Ben Warwick's ideas. If you are a mutual fund investor, this book is for you. Many investment professionals like myself have seen a large amount of investors buying the wrong funds at the wrong time. Ben shows you what factors to really look for when selecting mutual funds and helps you avoid falling in the "chasing the hot dot" strategy so prevelant today. In other words, don't look at Morningstar ratings, instead, read The WorldlyInvestor Guide to Beating the Market before buying your next mutual fund.

Rating:
Summary: One of Many Useful Sources
Review: I have problems with both the title and subtitle. Granted, I am neither a "pro" nor even a relatively sophisticated investor. However, I know what I do not know and think it is naive to claim that, over time, almost anyone (once having read this book) can consistently "beat the market" while beating the pros "at their own game." In the Foreword, Frank Petrilli (president & COO of TD Waterhouse) notes that Warwick presents "a plethora of easy-to-execute strategies the individual investor can use to outperform the investment management professionals." Part one presents a range of strategies for trading individual stocks. In Part Two, Warwick shifts his attention to index trading with exchange-traded funds, "offering insight into how to profit handsomely by trading broad market indexes instead of individual stocks." Then on to Part Three in which Warwick explains how to use the Internet to build a portfolio that "mimics -- and in many cases surpasses -- the performance of any stock index. In Part Four, Warwick provides a thorough guide to selecting mutual funs as well as an "incisive overview of the market timing strategies most frequently used by mutual fund and exchange-traded fund investors." All true.

I have no quarrel with any of Warwick's advice. As have countless others, he stresses the importance of setting specific investment goals, formulating a plan to achieve them, know what your limits are (e.g. "risk/return tolerance boundary"), stay disciplined, "Remember your partner" (i.e. Uncle Sam, "the only rich uncle who never dies"), monitor developments rationally rather than "falling in love" with either a company or a stock, and finally, "Always Do Your Homework!" What Warwick offers is a primer. Viewed as such, I rate it higher than have others. As indicated, insofar as Warwick limits his attention to quantitative strategies, he seems to be on solid ground. However, as Don Mitchell correctly observes in his own Customer Review, Warwick errs when asserting that amateur and even semi-pro investors will outperform the indexes using the same strategies. My own advice to most of those who read this Customer Review of mine is the same as Warwick's: "Always Do Your Homework!" Specifically, read this and several other books which offer both information and advice. (Mitchell recommends four to which I now add Huguet's Great Companies, Great Rewards and O'Neil's 22 Essential Lessons for Investment Success.) The total cost of the books will be perhaps the best single investment you ever make, if measured only in terms of the bad investment decisions the books help you to avoid. Review their tables of contents to identify common subjects and issues, then compare and contrast "apples" only with "apples" and "oranges" only with "oranges." Warwick may not have all the right answers (indeed no one does) but he asks many of the right questions. Learn what you need to know and acquire that knowledge Then what? To paraphrase the celebrated IBM aphorism, plan your investments and then invest (hours as well as dollars) in your plan.

Rating:
Summary: Worse than Useless
Review: I ordered this book as part of my continuing professional education requirement to retain my CPA certification.

Pros: The author does include some useful (if basic) information about the styles of equity investments (what exactly is a "Value" stock, anyway?), some decent trading rules, and does make some very prescient comments about the fact that "investment analysis" provided by Wall Street is often either self serving or wrong.

... Worse, since this book was published (2001...Con: Warwick does a disservice to the investing public by suggesting that they can beat the pros by 7-13% by using (his) stock screening software. Do your own due diligence: either pick an industry (perhaps the one you work in) and get to know it intimately, or bet on the broader markets with sector funds and an investment advisor you know and trust, or both. This book is in the same category as the "Rich Dad, Poor Dad" series of books: Investment porn that feeds the fantasy that you can do it better than everyone else.

Rating:
Summary: Worse than Useless
Review: I ordered this book as part of my continuing professional education requirement to retain my CPA certification.

Pros: The author does include some useful (if basic) information about the styles of equity investments (what exactly is a "Value" stock, anyway?), some decent trading rules, and does make some very prescient comments about the fact that "investment analysis" provided by Wall Street is often either self serving or wrong.

... Worse, since this book was published (2001...Con: Warwick does a disservice to the investing public by suggesting that they can beat the pros by 7-13% by using (his) stock screening software. Do your own due diligence: either pick an industry (perhaps the one you work in) and get to know it intimately, or bet on the broader markets with sector funds and an investment advisor you know and trust, or both. This book is in the same category as the "Rich Dad, Poor Dad" series of books: Investment porn that feeds the fantasy that you can do it better than everyone else.

Rating:
Summary: A Beginner's Guide to Quantitative Stock Investing Methods
Review: One of the great debates among academics about the stock market is whether the market is perfectly efficient or not. Does the market always price stocks correctly? Or does it make mistakes that investors can take advantage of?

You may think that debate is no relevance to you. But if you believe there is no edge available to you, you would buy indexed mutual funds. If you thought there was an edge available to you, you would try to exploit it.

This book argues for market inefficiency, and shows a number of strategies that professional investors use to make money from these inefficiencies. The author ties these strategies back to a Web site where routine screening occurs for these approaches. So you can have a screening list to consider, just like the professionals do.

The author argues that individuals do have an edge. Although they pay more for brokerage commissions, they can trade in and out of illiquid situations and move the market less. He argues that this means you can outperform the indexes with these methods.

If this book simply explained quantitative investing methods, I would have graded it as a five star book. I think the book is wrong in its conclusion that amateur investors will outperform the indexes with these strategies. I graded the book down accordingly.

First, relatively few professionals use only quantitative techniques. Almost all combine quantitative screening (what is described here) with qualitative assessments. These professionals also use much more sophisticated screening than the methods described here. They have much better information than you do, even with the Web site to help you.

Second, they can execute the quantitative strategies better than you can. They have professional traders and intelligent software "working" their trading positions. Are you as skilled as a professional trader? I don't think so (no disrespect intended).

Third, they get preferred access to IPOs, which fatten their returns.

Fourth, they use derivatives to enhance returns in ways that extend well beyond what is described here. Those gains are a significant part of the returns they get.

Fifth, they pay attention all the time. You won't.

And don't forget (as the author acknowledges) that professional money managers trail the market averages 90 plus percent of the time (before you look at tax efficiency and costs).

Reading this book just reaffirmed for me that most people should put their stock money into low-cost indexed mutual funds.

For a basic look at investing, start with Rich Dad, Poor Dad. For your stock investing, read John Bogle's Common Sense on Mutual Funds. If you decide you want to try a little stock picking, I suggest ChangeWave Investing. But be sure to read How to Buy Stocks by Louis Engel first.

Before taking the advice anyone gives you about investing, try it on paper first. See how it works. If you are doing well after 6 months, keep going with the paper version. Most systems blow up within two years. Blow ups on paper are useful lessons, while blow ups in your portfolio are mistakes that can cost you a fortune.

Whatever you decide to do, I hope you achieve your investment goals!

Rating:
Summary: A Beginner's Guide to Quantitative Stock Investing Methods
Review: One of the great debates among academics about the stock market is whether the market is perfectly efficient or not. Does the market always price stocks correctly? Or does it make mistakes that investors can take advantage of?

You may think that debate is no relevance to you. But if you believe there is no edge available to you, you would buy indexed mutual funds. If you thought there was an edge available to you, you would try to exploit it.

This book argues for market inefficiency, and shows a number of strategies that professional investors use to make money from these inefficiencies. The author ties these strategies back to a Web site where routine screening occurs for these approaches. So you can have a screening list to consider, just like the professionals do.

The author argues that individuals do have an edge. Although they pay more for brokerage commissions, they can trade in and out of illiquid situations and move the market less. He argues that this means you can outperform the indexes with these methods.

If this book simply explained quantitative investing methods, I would have graded it as a five star book. I think the book is wrong in its conclusion that amateur investors will outperform the indexes with these strategies. I graded the book down accordingly.

First, relatively few professionals use only quantitative techniques. Almost all combine quantitative screening (what is described here) with qualitative assessments. These professionals also use much more sophisticated screening than the methods described here. They have much better information than you do, even with the Web site to help you.

Second, they can execute the quantitative strategies better than you can. They have professional traders and intelligent software "working" their trading positions. Are you as skilled as a professional trader? I don't think so (no disrespect intended).

Third, they get preferred access to IPOs, which fatten their returns.

Fourth, they use derivatives to enhance returns in ways that extend well beyond what is described here. Those gains are a significant part of the returns they get.

Fifth, they pay attention all the time. You won't.

And don't forget (as the author acknowledges) that professional money managers trail the market averages 90 plus percent of the time (before you look at tax efficiency and costs).

Reading this book just reaffirmed for me that most people should put their stock money into low-cost indexed mutual funds.

For a basic look at investing, start with Rich Dad, Poor Dad. For your stock investing, read John Bogle's Common Sense on Mutual Funds. If you decide you want to try a little stock picking, I suggest ChangeWave Investing. But be sure to read How to Buy Stocks by Louis Engel first.

Before taking the advice anyone gives you about investing, try it on paper first. See how it works. If you are doing well after 6 months, keep going with the paper version. Most systems blow up within two years. Blow ups on paper are useful lessons, while blow ups in your portfolio are mistakes that can cost you a fortune.

Whatever you decide to do, I hope you achieve your investment goals!