A must read for all investors
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This is an investment classic. The first edition was published in 1973 and has been revised every few years. This 2007 edition is the 8th revision and includes a new chapter on Behavioural Finance.
The author says: "The message of the original edition was a very simple one: Investors would be far better off buying and holding an index fund than attempting to buy and sell individual securities or actively managed mutual funds. Now, over thirty-five years later, I believe even more strongly in the original thesis." And he gives data to evidence this.
The book describes the thinking behind technical and fundamental analysis, including simple expositions of complex subjects like Modern Portfolio Theory (MPT) and The Capital-Asset Pricing Model (CAPM). Whether you agree with the author or not, it would be well worth knowing why the author considers that it is very difficult to profit from either technical or fundamental analysis. For those who nevertheless cannot resist the temptation to pick their own stocks, he gives four rules though these are easier said than followed.
It is also a very entertaining read, e.g. he describes the various periods of speculative madness that have occurred - starting with the tulip craze and the south sea bubble to the more recent growth-stock/new-issue craze, the conglomerate boom, the concept stocks bubble, the nifty fifty "one decision" boom, the Japanese land and stock bubble through to the internet bubble.
The author also highlights other useful considerations, e.g. in the penultimate chapter "A life-cycle guide to investing", he highlights the importance of "distinguishing between your attitude toward and your capacity for risk".
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