Book Review: The Tao Of Warren Buffett

The Tao Of Warren Buffet is written by Mary Buffett (former daugter-in-law of Warren) and David Clark (portfolio manager and lecturer). I found it to be a fun, quick read filled with golden nuggets of information. While many of the toughts it touches on is plain old common sense, it’s always more poignant when it’s on paper and coming from someone like Warren Buffett.

The book features 125 quotes attributed to Warren. Under each quote is a paragraph or two analyzing what he meant. For those of you like me, who prefer to read quick, to the point literature instead of drawn out chapters, the book fits that criteria to a tee.

I’ll list a few quotes below which will give you a feeling as to what the book is about:

• “Rule No. 1: Never lose money, Rule No. 2: Never forget rule No. 1″
  • The author go on to explain that the secret to getting rich is getting your money to compund for you, and the larger the sum you start with, the better. The larger the amount you lose, the greater the impact on your ability to earn money in the future.

• “It is impossible to unsign a contract, so do all your thinking before you sign”
  • Author writes: Warren has learned that once you sign, the deal is done. You can’t go back and rethink whether it was a good deal or a bad one. So do all your thinking before you sign.”

• “Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway”
  • Author goes on to explain that Warren finds it strange that highly successful and intelligent people, who have spent lifetimes making huge sums of money, will take investment advice from stockbrokers too poor to take their own advice. And if their advice is so great, why aren’t they all rich? It’s because they don’t get rich on their advice but off charging you commissions. More often than not, their agenda is to use your money to make themselves rich.

• “A public opinion poll is no substitute for thought”
  • Don’t chase today’s popular stocks. Look for stocks that are going through an unpopular phase, because that is where you are going to find tomorrow’s Mr. Popular selling at a discount. (Keep in mind though, that the fundamentals of the business have to warrant an investment.)

These are just a few of the quotes found in the book. As you can see, the subject matter relates to not just investing but business in general. Next time you’re at your local bookstore, try to pick it up. It’s a nice read.

Book Review: The Little Book That Beats The Market

The Little Book That Beats the Market is written by Joel Greenblatt, a hedge fund manager and adjunct professor at the Columbia University Graduate School of Business. The Wikipedia page on Greenblatt states that he started the hedge fund Gotham Capital with 7 million and in the 10-year period from 1985 to 1995, the fund achieved a surprising 50% annualized return (before fees were taken out).

In my mind, this gives Greenblatt and his book some creditibilty. I say this because any time I hear about some “magic formula” (which is the actual name for Joel’s system), I immiediately become skeptical and usually read the rest of the book with one raised eyebrow.

Another thing that suprised me is the fact that the website that is based around the book, magicformulainvesting.com, is free and does not requre any membership fees. When I first went there I did expect the website to be an “upsell” type of scheme that so many financial book have these days.

Now, on to the book itself. The foundation of the system talked about in the book is based around value investing (buying companies at a discount based on return on capital & earnings yield) and using the power of time to compound your returns. The book is written in a very simple manner which, as the author states, a sixth grader could understand.

Personally, I did not really find this book all that interesting. I thought the author’s humor came off as “trying too hard” and it didn’t really play towards mine. However, I did see the book as a good beginner’s primer on investing and, as such, it would be something that I would give my children to read so they could learn about the way the stock market works.

That being said, when I do give this book to my children I will definitely make it a point to tell them that while a “magic formula” sounds good on paper, the markets themselves are much more complex than that. It would also be wise to educate your children that many finance books play off gimmicks and systems that are designed to only make the author rich. Even if that may not be the case here.

So in conculsion, this book wasn’t really for me but I could see the it being useful for children or beginner investors.