Debunkery Book Review

Debunkery

Learn It – Do It – and Profit From It

by Ken Fisher with Laura Hoffmans

Synopsis:

This book dispels 50 stock investing myths that eventually cost investors dearly in the end.

Fisher educates you on how to avoid making common investment mistakes that are based on some of the more widespread untruths, myths and misperceptions most investors fall prey to.

You will learn how to improve your odds and make fewer mistakes investing in the stock market by following Fisher’s research-based advice.

Author’s Credentials:

  • Bestselling author of 7 investment books.
  • Long-standing columnist of the “Portfolio Strategy” column in Forbes magazine.
  • Founder of Fisher Investments, an independent global money management firm.
  • Internationally renowned financial writer.

Top Section Take-Aways:

  1. The section “Basic Bunk to Make You Broke” gives you insight into those myths that are robbing you of your hard-earned capital. Fisher exposes the biggest misperceptions about the very fundamentals of the capital markets.
  2. In the second section, “Wall Street Wisdom”, the author shows you how the investment industry is set up in a way that it actually helps you fail as an investor.
  3. The third section about what “Everyone Knows” delves into common rules of thumb that while comforting may actually be harmful to your wealth creation.
  4. Fisher’s next section on “History Lessons” takes a look at how failing to verify what one believes as being true can be costly. He shows you how a simple scan of the actual historical records can be enlightening.
  5. The last section addresses the bunk that many people succumb to for not thinking globally and how you can develop your investment edge by doing so.

Possible Shortcomings:

  • Geared towards the actively engaged investor wishing to improve upon his or her performance in the markets.

Reviewer’s Opinion:

The author helps you improve your chances of being right more than being wrong when investing in the stock market.

Although this book does not provide you with a how-to system for beating the markets, Fisher will show you how to lower your error rate thereby increasing your probability of becoming a more successful investor.

You will find that the book is peppered with Fisher’s poignant humor that turns a somewhat serious topic, that of investing, into an entertaining and educational read.

Right from the get-go, Fisher provides you with a list of 8 steps that you can take in order to better assess if what you are reading or hearing has any credibility.

The book is laid out in short 3 to 5-page chapters that focus on one of the 50 myths being presented. This lends to making the book easy to read. You can quickly move around the various topics depending on your interest.

I benefited most from the 12 myths that are exposed in the section about Wall Street “Wisdom”. It was refreshing to see how Fisher dispels these misconceptions through his thorough research.

I would highly recommend that any stock investor pick up a copy of this book as a first step to becoming a better informed and empowered investor.

To learn more about how to create wealth in the stock market, check out Debunkery.

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How to Create a Diverse Stock Portfolio

Stock Investing World

Diversification means different things to different investors.

Many mutual fund advisers tout that diversification is best achieved by buying an index or basket of 100 or more stocks through some type of fund.

Others in the expert arena, such as Jim Cramer or Phil Town suggest holding a handful of stocks that have been personally selected.

So, how do you create a diverse portfolio of investments that provides both upside potential and downside protection of your wealth?

For the avid stock investor here are seven key factors to integrate into your investment portfolio in order to create an appropriate level of diversification:

1.   Diversification Across Asset Classes:

As a lifelong investor, your ideal investment portfolio should contain not only stocks, but also investments from other asset classes.

By investing in other asset classes such as real estate rental property, commodities like oil and gold, systematized businesses that run on their own, or fixed-income investments like bonds, you spread out your risk across various investment markets.

When one market is trending lower another unrelated one may be heading higher.

Investing in various asset classes creates a better balance in preserving your overall capital.

2.   Diversification Within the Stock Market:

When you invest in the stock market, your portfolio may benefit from being invested in various groups of stocks that are classified by size or characteristics.

For example, consider spreading your investment capital across such groups as dividend-paying large cap stocks and small or mid cap stocks.

Each group has its own unique characteristics that benefit from certain market or economic conditions.

3.   Diversification Across the 10 Economic Sectors:

By allocating no more than 20% of your investment capital to one of the 10 economic sectors provides you with better balance.

As one economic sector goes out of favor with Mr. Market, another will quickly take its place.

Spreading out your capital improves your odds of overall portfolio growth.

4.   Diversification Across the Globe:

Although the U.S. has the most vibrant stock markets in the world, you should actively seek out companies that have a global exposure.

This can be done with U.S. based companies that export more than 30% of their goods or services overseas or through ADR’s, foreign companies that trade on U.S. exchanges.

Consider exposing yourself to Canadian companies in the financial sector or base materials. Canada has a commodity based economy and strong financial system.

Also take a look at the BRICS countries, Brazil, Russia, India, China and South Africa, whose growing middle class are buying more and more local products and services, not to mention those of the international players.

5.   Diversification Across Time:

By investing on a regular basis, you are able to tap into opportunities as they present themselves.

Having cash on hand to take advantage of miss pricings in the market allows you to buy into positions with a certain margin of safety.

It is the velocity of your money through the stock market from one investment to a better one that accelerates your wealth-building potential.

The old adage of buy, hold and forget no longer works in today’s markets. You may be better served by moving your “dead money” into growth opportunities on a regular basis.

6.   Diversification Across Investment Accounts:

Not all investment accounts are created equal. A few allow you to grow your investments tax-free, others defer the tax you pay and some offer better investment choices.

You should try to diversify your holdings across 3 general types of accounts because of the advantages and limitations of each.

Many employed investors are familiar with the 401(k) which creates a tax deduction up front in return for taxable income once money is withdrawn at retirement. When employers are matching your contributions it makes sense to take advantage of the match up to the allowable maximum set up by your employer.

The Roth IRA is a tax-free account in which investment capital that has already been taxed can grow and compound over time to be used tax free at a future date. Self-directed IRA accounts have many more investment choices beyond just a small selection of mutual funds, ETF’s or bonds typically offered in 401(k) accounts.

Finally, an individual margin account allows you the greatest investment choice flexibility from stocks to options to commodities plays. This type of account gives you greater control over making money whether the market is heading up or everyone else is panicking in a sell-off.

7.   Diversification Across Investment Strategies:

It is well-documented that some investment strategies work better under certain economic conditions than others.

Attempting to use a few time-tested solid performers will help to boost your overall returns.

These strategies can be further explored by checking out the recommended readings at the end of this post.

By taking into consideration these various diversification factors, you will be in a more solid position to protect your downside while generating more consistent returns in the future.

Read more posts like this in our Investing Basics Category

To learn more about diversifying across investment strategies, check out these recommended books:

1.   What Works on Wall Street

      

2.   The Guru Investor

      

 


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Immediate Cash Flow from Your Stocks eBook

Would you like to know how you can generate immediate cash flow into your stock portfolio?.

Learn about The FAST Approach: Finding great stocks – Assessing their growth potential – Strategizing the best way to optimize profits and – Timing your entry and exit from your positions.

Empower yourself today by watching this short stock informational video.

 

 

Should you like to learn more about becoming a better do-it-yourself investor, then please pick up your complimentary copy of the eBook “Immediate Cash Flow from Your Stocks” at StockInvestingSimplified.com

Just click on the link below:

Stock Investing eBook

 

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Top 10 Reasons for Selling Your Stock

Top 10 Reasons to Sell Stock

There are many compelling reasons as to why you “could’ sell one of your holdings.

However, there are few reasons that justify why you really “should” cash out of your position.

So, when is an “appropriate” time to sell a stock?

Here are the top 10 reasons why you might consider closing out a position:

1.   Exceptional Stock Growth

Consider cashing out when your stock has done well and appreciated above your target price (e.g. 50% growth). It may be appropriate to take some money off of the table and look for the next winning investment.

2.   Poor Business

If the company fundamentals have changed for the worse and the stock is tanking, you’re better off quickly cutting your losses and repositioning your capital.

3.   Poor Performance

Similar to #2, if you find that the stock is not keeping up with the rest of the market over time and a better opportunity presents itself, jump at it.

4.   Dividend Cuts

Consider selling your stock if the dividend is cut or eliminated, which may be a red flag that the company will generate less income. Do so only if the general market is not experiencing a major correction.

5.   Can’t Sleep

When you have reached your risk tolerance level and your holding is keeping you up at night it may be time to liquidate your position and re-evaluate your investment portfolio.

6.   Reached Your Goal

It would be appropriate to move your capital when you’ve achieved your financial goal in the markets and would like to buy a house, fund a college education or build a business.

7.   Opportunity Knocks

At times, you may need the cash for another investment opportunity such as rental real estate, a systematized business or an angel capital investment.

8.   Retirement

Should you be in the enviable position to retire, you may wish to shift some of your capital into fixed income assets such as bonds or annuities during retirement.

9.   Portfolio Out of Whack

If your stock investment portfolio gets out of balance and you find that you are too heavily weighted in one industry or sector it may be prudent to sell your position.

10.   Unexpected Expense

As a last resort you may be faced with an unexpected medical bill or emergency that requires you to liquidate your stock holding. Not an ideal situation to be faced with, but nevertheless an appropriate one.

There you have it, a short concise list of the most common reasons why you might consider selling your stock.

Read more posts like this in our General Investing Advice Category.

To learn more about this specific topic, check out these recommended books:

1.   The Triumph of Value Investing

      

2.   Stock Investing For Dummies

      


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Stock Investing: The FAST Approach

Discover how you can increase the velocity of your money in the stock market and accelerate your ability to create wealth.

Learn about The FAST Approach: Finding great stocks – Assessing their growth potential – Strategizing the best way to optimize profits and – Timing your entry and exit from your positions.

Empower yourself today by watching this short informational video.

 

 

Should you like to learn more about becoming a better do-it-yourself investor, then please check out the complimentary 3-part video tutorial series

The FAST Approach at: StockInvestingSimplified.com

 

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