Jason Kelly sent me an updated version of his book, The Neatest Little Guide to Stock Market Investing: 2013 Edition*, to read and review. I finished reading it yesterday. It’s a short read, which is good because I’m a notoriously slow reader.
Overall, I liked the book and would recommend it to anyone just starting out on the road to investing. Jason covers most of the basics from defining what stocks are, how to open a brokerage account, how to buy and sell, and he even spends a good portion of the book offering tips from some of the well-known investors like Warren Buffett and Bill Miller (along with a few others). I always like reading about what successful investors have done. The one problem I have, though, is that they all seem to contradict each other. So, I’ll read about one and think, “Wow! That’s pretty cool.” Then I’ll move to the next one and it will contradict what the last one said in some way. It’s a bit overwhelming.
He moved on from there to talk about strategies from James O’Shaughnessy’s “What Works on Wall Street.” They sound great when you read stuff like, “From January 1, 1964, to December 31, 2009, the 25-stock Trending Value portfolio returned 21.2 percent a year…” SIGN ME UP! Unfortunately, these strategies are academic in nature (no real money was put into these strategies) and are difficult to practice in real-life (O’Shaughnessy had access to databases that the rest of us probably cannot afford). O’Shaughnessy manages a couple of mutual funds. As you can see from the following graphic, his results have been less than impressive.
Kelly moves on from there to talk about value averaging followed with a section on conduction research via magazines, newspapers, newsletters, and online tools to aid in that endeavor.
Finally, he closes out the book by walking the reader through his investing process with information on how to set up a “Stocks to Watch” worksheet (it’s a detailed process).
If this book has a shortcoming, it’s in the fact that he didn’t really talk about indexing. Indexing is the reality or most people. It’s simple and will most likely perform well enough to meet any realistic goal. This book is more about investing for those who like to conduct research and like a challenge of finding the next Apple or Microsoft (back when it was in its prime).
Like I said at the beginning of this review, this is a good book. It will give the beginner access to a lot of information. I would recommend reading it along with The Coffeehouse Investor* and Larry Swedroe’s books* and then decide which approach is best.