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The Only Three Questions That Count
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The Only Three Questions That Count

Investing by Knowing What Others Don't

Ken Fisher, Jennifer Chou and Lara Hoffmans
Wiley, 2006
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Editorial Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

Ken Fisher is one of the most famous market pundits and money managers in the United States, and one of the few to occupy a spot on the Forbes list of America's richest people. In this book, he debunks conventional wisdom and widely believed folklore about securities markets and the process of investing. He suggests a sort of investors' examination of conscience: They should routinely ask themselves three simple, straightforward questions to ensure that they are not falling into avoidable error: Which of my beliefs are false? What can I understand that others cannot understand? And, what cognitive illusions are fooling me now? He provides ample supporting research to buttress his assertions about the market and, more to the point, to topple the false wisdom that leads so many investors to failure. getAbstract finds that Fisher is lucid, strongly opinionated, sometimes a bit of a crank (a long tangent on Gertrude Stein seems particularly out of place in this book) but, on the whole, well worth reading.

Summary

Useless Information

Markets are very good at incorporating information into securities prices. Anything that you read in the newspaper or hear on television or radio, about any investing system, set of investing rules, guidelines or principles about earnings, prices, economic directions or management, is already reflected in the stock price. You cannot hope to gain an edge against the market by using information that the market already has. Most professional money managers and investors, notwithstanding their extensive educations, and expensive arsenal of computer power and databases, fail to match – much less beat – the market index.

Investing is not a craft. No skill set exists that you can simply master and then be assured of market-beating success. Consider the example of Warren Buffett. Many people think he is an outstanding money manager, however, Buffett actually is not a money manager. Rather, he is the head of an insurance company that happens to own some stocks. Berkshire Hathaway, Warren Buffett's company, has been a laggard stock of late. Moreover, those who modeled their investment approach on Mr. Buffett's tactics have not excelled either.

In fact...

About the Authors

Ken Fisher has written the "Portfolio Strategy" column for Forbes magazine for more than two decades. He is also founder, chairman and CEO of a money management firm with more than $30 billion in assets. Jennifer Chou and Lara Hoffmans are research analysts at Fisher’s company.

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