Book Review: The Little Book That Builds Wealth
Ah, another little book. I read and reviewed several of them already. Some are good; some not so.
- The Little Book That Beats the Market by Joel Greenblatt (*)
- The Little Book of Bull Moves in Bear Markets by Peter Schiff (***)
- The Little Book of Value Investing by Christopher Browne (****)
- The Little Book of Common Sense Investing by John Bogle (*****)
- The Little Book That Makes You Rich by Louis Navellier (*)
This book, The Little Book That Builds Wealth, is written by Pat Dorsey. Mr. Dorsey is Director of Equity Research at Morningstar. He's in charge of Morningstar's equity ratings. In addition to rating mutual funds with one to five stars, Morningstar also rates individual stocks on the same scale.
Book Review: The Little Book That Makes You Rich
I've come to like these books in Wiley's The Little Book series. Whether you like the book or not, at least you are not investing a lot of time into it, because, it's a little book. This is another one in the series. The title is The Little Book That Makes You Rich. It's about growth investing, which is the opposite strategy to value investing, as outlined in The Little Book of Value Investing by Christopher Browne.
The author Louis Navellier is a money manager. He manages mutual funds and wrap accounts with few billion dollars under management. He also publishes four investment newsletters: Blue Chip Growth, Emerging Growth, Quantum Growth, and Global Growth, which cost from a low of $149 a year for Blue Chip Growth, to a high of $5,000 a year each for Quantum Growth and Global Growth. That's clever marketing if you ask me. Nobody has to subscribe to Quantum Growth and Global Growth. They are there to make Blue Chip Growth look like a great value.
Navellier advocates in this book the strategy of investing in growth companies. He describes how he does it. He evaluates stocks by these eight "tried-and-true key fundamental factors that drive stellar stock price performance":
Book Review: The Little Book of Common Sense Investing by John Bogle
This is a catch-up review for The Little Book of Common Sense Investing by John Bogle. When this book first came out in 2007, I listened to the audio book version. I thought it's a great book but I never took the time to write a review for it. I read the actual book again last week.
I admire John Bogle. I thought he is the missing name on Forbes 400 List. He's the founder of The Vanguard Group. Vanguard is best known for its low cost index funds.
John Bogle has always been an advocate for investing in diversified, low cost index funds. The message in this book shouldn't be a surprise. It makes a great case for keeping it simple and buying index funds that own the entire market. The argument for not paying high expenses on mutual fund management is very compelling. The only reason for paying a high expense would be getting access to managers who beat the market. But there is no guarantee any manager can beat the market. Yes, some managers beat the market in the past, even after the high expenses were taken into account. But you are investing for the future. You don't have a time machine. Whether any manager is able to beat the market in the future is anybody's guess. Chances are not good because of high fees, turnover, and taxes. If you pay a high expense, you are paying for a hope, which may or may not be realized. Why gamble?
Book Review: The Little Book of Value Investing
This is another book in The Little Book series published by John Wiley & Sons. The title is The Little Book of Value Investing by Christopher Browne. I also reviewed these other books in The Little Book series:
- The Little Book That Beats the Market by Joel Greenblatt
- The Little Book of Bull Moves in Bear Markets by Peter Schiff
The author Christopher Browne is a Managing Director of Tweedy, Browne, which is a money management company with $7.6 billion under management as of the end of 2008. Tweedy, Browne boasts its 80-year history and its role as the broker for Benjamin Graham, the father of value investing. It is one of the most well known firms for following the value investing strategy.
Book Review: The Little Book of Bull Moves in Bear Markets
I read The Little Book of Bull Moves in Bear Markets by Peter Schiff. Peter Schiff is President of Euro Pacific Capital, a broker/dealer in Darien, CT specializing in international markets. He is known on Wall Street as a permabear which means he has been bearish on the U.S. economy and stock market for a long time. He also wrote the book Crash Proof: How to Profit From the Coming Economic Collapse in 2007 in which he predicted the economic recession in the U.S. We all know by now that prediction was correct. This new book The Little Book of Bull Moves in Bear Markets was written in the first half of 2008.
I picked up this book because I'm interested to see what Mr. Schiff has to say about what one should do in a bear market after he successfully predicted the recession and the bear market. If it delivers what the book's title says — bull moves in bear markets — everybody should want to know what those moves are. Unfortunately although he correctly predicted the bear market, his recipe for what people should do didn't turn out too well so far. Maybe those moves will eventually work, but we won't know until years later. It just shows how difficult it is to make predictions. You can see the recession coming but you can still prescribe the wrong moves. You have to be right in what will happen and in what to do. Being right in one but not the other doesn't help you make money. Here are a couple of things Mr. Schiff said in this book:
1. There will be hyperinflation in the United States. The U.S. dollar will collapse. Sell U.S. dollar-denominated cash and bonds. Foreign economies will decouple from the U.S. economy. Buy dividend-paying foreign stocks. Instead of hyperinflation, we are having deflation right now. U.S. dollar went up against most major foreign currencies. Foreign equities also dropped 40% or more, not much better or even worse than U.S. stocks. Staying in U.S. dollar cash and bonds would've been the correct move.
Magic Formula Investing: Will It Work?
Today I'm reviewing the idea of Magic Formula Investing (MFI) as introduced in the book The Little Book That Beats the Market by Joel Greenblatt.
The author Joel Greenblatt (Wikipedia bio) is a hedge fund manager. In this book he offered a "magic formula" that beats the market, or so he claimed. The underlying principles for the magic formula are very simple:
- Buy good companies
- Pay a bargain price
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