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A review by bbuss
Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! by Phil Town
3.0
TL;DR: It's a good book if you don't take Phil's advice into how to start a portfolio and don't try to "time the market", focus on "time *in* the market" :)
The core concepts of Phil's investment strategy is sound, although a bit cheesy: Don't loose money.
Phil expect to do this by getting into companies which value will quadruple in 10 years on average (~15% compound annual growth rate) while also buying them when they are cheaper (or in Phil's words, buy a dollar bill for 50 cents). In the end, the goal is to even if your company don't growth with the perfect case you had in mind, you built enough margin of safety to be ok with it.
The way he find those companies is also reasonable, from getting a company that has meaning for you, to looking at a few (5) statistics from them - to either gauge if they are solid and if they can keep growing as expected - to finally doing a bit of research on their CEO to have a sense if it's someone you can trust or not. (As you can see, there is more here than what you can pack into 15 minutes a week, but I hope this don't turns anyone down from the book.)
I also really appreciate when Phil's goes on to explain why an individual private investor can actually get better results than professional fund managers. I think all of the reasoning here is pretty good.
Now, for the not so good parts there is two main ones that really bothered me:
1) Phil's advocate to time the market. Not only when to enter, as you are looking for a good price (and you can see how much Phil is passionate about *not* believing in the Efficient Market Theory, which I think it's fair to have opinions on theories) but also by moving in and out of your positions based on a few (3) technical indicators.
The second part bothers me, and everyone should be aware that "time *in* the market" beats by miles "time the market" by now. Unless your goal is to become a trader instead of an investor.
A last remark here is that it's highly dependent on the taxation regime of where you're investing, so take this with a huge bag of salt. For example in UK, one would need to pay 0.5% everytime they want to re-enter the position, not counting the capital gains realised of exiting them... which could kill any profit observed.
2) Phil really don't believe in diversification. For him, you use this super Rule-1 technique, find one good company and put all your money there (unless you have a lot of money). Sigh... this hurts.
What makes it worse is the example of a couple that wanted to retire in 20 years and realised they don't have enough money (their pot was something like 20k USD). And then Phil's advice was to put all 20k on a single good company (Cheesecake Factory) as the couple used his technique, it passed the checklists, the indicators, etc.
Now, imagine if for some crazy reason this particular company goes broke or something horrible happens (black swan events). This couple, will go from 20k to 0k. Really undermining their chances of building this up for their retirement.
I just cannot agree with this. I would prefer that they invest in 5 companies, maybe with a bit lower expected annual return rate (10% instead of 15%), that still passes all the Rule-1 checks, then putting everything like this into a single company.
The core concepts of Phil's investment strategy is sound, although a bit cheesy: Don't loose money.
Phil expect to do this by getting into companies which value will quadruple in 10 years on average (~15% compound annual growth rate) while also buying them when they are cheaper (or in Phil's words, buy a dollar bill for 50 cents). In the end, the goal is to even if your company don't growth with the perfect case you had in mind, you built enough margin of safety to be ok with it.
The way he find those companies is also reasonable, from getting a company that has meaning for you, to looking at a few (5) statistics from them - to either gauge if they are solid and if they can keep growing as expected - to finally doing a bit of research on their CEO to have a sense if it's someone you can trust or not. (As you can see, there is more here than what you can pack into 15 minutes a week, but I hope this don't turns anyone down from the book.)
I also really appreciate when Phil's goes on to explain why an individual private investor can actually get better results than professional fund managers. I think all of the reasoning here is pretty good.
Now, for the not so good parts there is two main ones that really bothered me:
1) Phil's advocate to time the market. Not only when to enter, as you are looking for a good price (and you can see how much Phil is passionate about *not* believing in the Efficient Market Theory, which I think it's fair to have opinions on theories) but also by moving in and out of your positions based on a few (3) technical indicators.
The second part bothers me, and everyone should be aware that "time *in* the market" beats by miles "time the market" by now. Unless your goal is to become a trader instead of an investor.
A last remark here is that it's highly dependent on the taxation regime of where you're investing, so take this with a huge bag of salt. For example in UK, one would need to pay 0.5% everytime they want to re-enter the position, not counting the capital gains realised of exiting them... which could kill any profit observed.
2) Phil really don't believe in diversification. For him, you use this super Rule-1 technique, find one good company and put all your money there (unless you have a lot of money). Sigh... this hurts.
What makes it worse is the example of a couple that wanted to retire in 20 years and realised they don't have enough money (their pot was something like 20k USD). And then Phil's advice was to put all 20k on a single good company (Cheesecake Factory) as the couple used his technique, it passed the checklists, the indicators, etc.
Now, imagine if for some crazy reason this particular company goes broke or something horrible happens (black swan events). This couple, will go from 20k to 0k. Really undermining their chances of building this up for their retirement.
I just cannot agree with this. I would prefer that they invest in 5 companies, maybe with a bit lower expected annual return rate (10% instead of 15%), that still passes all the Rule-1 checks, then putting everything like this into a single company.