What’s Behind the Numbers?: A Guide to Exposing Financial Chicanery and Avoiding Huge Losses in Your Portfolio by Tom Jacobs and John Del Vecchio
Summary: An excellence book written by 2 authors in completely different discipline giving the readers a chance to put some common sense on investing into their heads. Written with normal people in mind, the book is easy to understand with practical advices average investors can utilize immediately. Highly recommended for stock traders and investors.
What’s Behind the Numbers?: A Guide to Exposing Financial Chicanery and Avoiding Huge Losses in Your Portfolio
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First part of the book starts by debunking several myths spreaded by the investment industry. It then provides the background information on the techniques companies are using to paint their books. Tips are presented on which fundamental metric to pay attention to.
The authors point of view is clear – the goal is to exclude the potential bad apples froom your long candidate list first so that your portfolio will not suffer when these companies took a beating. These bad apples can also be used as your short candidates when you are prepared to invest actively.
Second part of the book offers a basic technical approach to filter out stocks that are less likely to payoff. Again, the goal is not to focus on specific projections or predictions of potential gains. The goal is to avoid putting money on dead stocks that are not likely to perform even though they are healthy companies.
The technical argument used in the book has a bull market bias issue worth mentioning here. During a bull market like environment, stock prices react better to technical setups than in a bear market environment. Hence the testing results presented in the book is not as robust as it should be. I lowered the usefulness score because of this issue.
Overall this book is a good read for all newcomers to stock investing or trading. The technical defects can be corrected later but a correct point of view in being defensive of your money has to be learned as early as possible.