Rule #1 : The Simple Strategy for Successful Investing--in Only 15 Minutes a Week!
Phil Town is now a very wealthy man, but he wasn't always. In fact, he was living on a salary of $4000 a year when some well-timed advice launched him down a highway of investing self-education that revealed what the true "rules" are and how to make them work in one's favor. Chief among them, of course, is "rule #1": "don't lose money." Other rules are: don't diversify...think like an owner, not an investor ... never, ever be seduced into thinking the market is efficient. Town also believes strongly in "betting on the jockey," putting your faith in managers who've proven their financial mettle. Not only does Town reveal fresh methods for identifying who the truly reliable managers are, but he shows you how to test whether they really have faith in the businesses they're running.
By far, the most controversial of the audiobook's assertions will be that giant 401(k) type mutual funds can't help but regress to the mean, and in the next twenty years, the mean could be very disappointing indeed. There's a very real chance that a 401(k) investor could see his holdings not grow at all in the next few decades. Fortunately, Town's stockpicking techniques are meant to walk investing phobes through the do-it-yourself process, equipping them with the tools they need to make quantum leaps toward financial security.
Rule #1 says something new, and it says it in a way that every listener can understand.
More About Rule #1 by Phil Town; Phil Town
- Publisher: Penguin Random House Audio Publishing Gr
- Date: Mar 2006
From the book
Table of Contents
Introduction: Make Money No Matter What 1
Chapter 1: The Myths of Investing 11
Chapter 2: Rule #1 and the Four Ms 33
Chapter 3: Buy a Business, Not a Stock 39
Chapter 4: Identify a Moat 53
Chapter 5: The Big Five Numbers 65
Chapter 6: Calculate the Big Five 95
Chapter 7: Bet on the Jockey 111
Chapter 8: Demand a Margin of Safety 132
Chapter 9: Calculate the Sticker Price 145
Chapter 10: Know the Right Time to Sell 172
Chapter 11: Grab the Stick 186
Chapter 12: The Three Tools 196
Chapter 13: Take Baby Steps 216
Chapter 14: Eliminate the Barriers 246
Chapter 15: Prepare for Your First Rule #1 Purchase 259
Chapter 16: Q&A 274
Chapter 1: The Myths of Investing
An expert is a person who avoids small error as he sweeps on to the grand fallacy. --Benjamin Stolberg (1891--1951)
The gold standard of low-risk investing is a ten-year United States Treasury bond, which, at the time of this writing, has a return of about 4 percent. Invest in nothing but these bonds and you're guaranteed a 4-percent haul. The only problem with such a strategy, especially for the millions of soon-to-be-retired baby boomers, is that, at 4 percent, it takes 18 years to double your money. In addition, after 18 years, even with a low inflation rate of 2 to 3 percent, most of the gain is absorbed by higher prices, leaving you with only slightly more buying power than you had 18 years earlier. Despite this reality, investors buy billions of dollars of these 4-percent bonds.
Why in the world would anyone want to own a bond that barely keeps pace with inflation and realizes almost no real gain in wealth? Because almost everyone is convinced that a higher rate of return necessarily means a lot more risk. And they're more afraid of losing money in an attempt to get a higher return than of their inability to retire comfortably.
The fact is, a higher rate of return is not necessarily contingent on incurring significantly more risk. Let me explain.
HIGH RETURNS DON'T NECESSARILY MEAN MORE RISK
During a talk at the America West Arena in Phoenix, Arizona, I asked the audience, "How many of you drove your cars here today?" Most people raised their hands. "Okay, almost everybody. And how many of you took a huge risk driving here?" A few hands went back up. "You guys took a huge risk driving here?" I asked incredulously. "Either you drivers didn't really take a risk and are just clowning around, or at last we've found the problem with Phoenix traffic--you people with your hands up don't know how to drive. Is that it?" Everybody laughed. "Okay, so it wasn't so terrifying to drive down here. But now imagine that you're coming here but instead of you doing the driving, it's your eleven-year-old nephew behind the wheel. Are you taking a lot of risk now?" People laughed and nodded yes. "The trip was the same--going from Ato B. But when you put someone in the driver's seat who doesn't know how to drive, a relatively safe trip becomes an incredibly risky trip."
Exactly the same thing holds true for your journey to financial freedom. If you don't know what you're doing, your journey is going to be either very slow or very dangerous. That's why most people think that going fast (going after a high rate of return) is dangerous--because they don't know how to drive the financial car, and not because going fast is necessarily dangerous. It's only dangerous if you don't know what you're doing. And the essence of Rule #1 is...
"Town's investment guide is manna from heaven... engaging and accessible... Town's ability to break down that philosophy into a detailed, step-by-step program that can be understood by any reader with basic math skills is unique... will leave readers feeling empowered and ready to manage their money themselves." - Publishers Weekly (starred review)
"Extraordinarily readable...provides investors with surefire tools to outperform costly advisors. Follow Town's simple, time-tested precepts, and even unsophisticated investors will leave most mutual fund managers in the dust." - Arthur Levitt, author of Take on the Street and former Chairman of the Securities and Exchang
"A really smart, homework-driven read that tells you precisely how to do it. Rule #1 may be the clearest and best book out there to get you on the path to riches. This one's special!" --James J. Cramer, host of CNBC's "Mad Money" - and Markets Commentator, thestreet.com
"Rule #1 is an investment Bible for our time. In fun, easy-to-understand words, Phil Town tells you how to buy quality stocks at a discount." - Rich Karlgaard, publisher, Forbes magazine, and author of LIFE 2.0
"For the individual investor, Rule No. 1 should be, 'Read Rule #1.' This book debunks a lot of myths in the market and provides pearls of common-sense wisdom...Indeed, Rule #1 rules." - Gene Marcial, Senior Writer, Business Week
"Rule #1's common-sense, pragmatic approach is money in the bank. This step-by-step guide is methodically researched and terrifically accessible ... Can you really beat the mutual fund mangers and so-called experts at their own game? Hell yes!" - Jonathan Hoenig, Portfolio Manager, Capitalistpig Hedge Fund, and regular contributor to Fox News Ch
"Rule #1 is probably one of the most inclusive, no nonsense, fundamental books about investing in the stock market I've ever read. This book is a must-read for everyone; from beginner students of the market to super know-it-alls." - Danielle Hughes, President and CEO, Divine Capital Markets LL