INTRODUCTION
WHY THIS BOOK?
Are you baffled by how the stock market works? Are you disappointed by the returns you have earned in the market? Do you want unbiased information about how the stock market really works? Do you want objective advice about how to invest your money? If so, I am writing this book for you.
In particular, I am writing this book for individuals who have little-to-moderate understanding of how the stock market works. You may be aware that you should be in the stock market but are afraid to take the leap because you are not sure where to start. Or you may currently be in the stock market but are disappointed in the returns you are earning and feel you are paying too much for the advice you are receiving. You may also want to have a deeper understanding of how the market works.
Your investment in this book may be one of the most rewarding investment decisions you will ever make. If you follow the principles outlined in this book, you can avoid the timing mistakes made by typical investors, and over a lifetime you can save tens of thousands of dollars in advisory fees. You may find this surprising, but once you understand the principles, you will only need to spend a few hours each year on your investment portfolio.
This book is meant to be a basic primer on how the stock market works and how to invest wisely. You may feel that the deck is stacked against the small investor when it comes to investing, but actually, nothing could be further from the truth. In fact, the deck is stacked against the pros who have hundreds of millions of dollars to invest and are trying to beat the market. They have huge salary and overhead costs that you can avoid. These professionals do not want you to know this fact because they make their living selling you advice and picking stocks for you; they need to make their yacht payments.
This book is written to give the small investor the knowledge I have gained over a lifetime of investing, reading about markets, helping others with their investments, chairing an investment committee at a major investment company, and teaching investment at the college level. This book is the accumulation of the best advice I have found over a lifetime of learning. I am going to provide you with the knowledge that has cost me tens of thousands of dollars in tuition payments and thousands of hours of reading and thinking about investment issues. It is somewhat embarrassing to admit that all of my time, effort, and money can be boiled down to a few simple rules that will allow you to be a savvy investor.
The world of investing can be a terrifying jungle of contradictory advice and incomprehensible jargon. If you walk into this financial jungle and buy stocks on your own, you soon realize you are competing with Wall Street professionals, and if you want to beat the market by selecting stocks, you must beat the professionals who are trained to evaluate stocks. You can try to level the playing field by turning to a professional investment advisor for help, yet most individuals who turn to advisors are dissatisfied with their returns. Financial advisors1 promise returns above the average market return. After all, who would pay an advisor who states, “All you will earn with me is the average market return”? Over the long run, however, these promises are rarely, if ever, fulfilled.
Although the theories behind investment can be very complicated, the individual investor does not need to understand these theories to outperform the return one expects from the experts. I will explain everything you need to know to eliminate the fees charged by the professional investment advisors. I will show you how to be a savvy investor without earning a PhD in finance. The most excellent news is that you can be an exceptional investor and spend only a few hours each year on your investment portfolio. It may sound too good to be true, but I am convinced that any individual who follows the advice in this book can earn a higher return than the vast majority of individuals who invest in the stock market.
