A useful guide to investing
Book review: Big Money Thinks SmallAn intelligent book on investing that will benefit the expert and the novice alike, says Matthew Partridge.
Columbia Business School Publishing, £24.95
Investment books tend to fall into one of two categories. There are those that are targeted at professionals and which tend to be narrowly focused on a particular approach. At the other end of the scale you have how-to guides aimed at the general public. This book aims to bridge the gap between the two extremes.
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Written by Joel Tillinghast, who has successfully run Fidelity's low-priced stock fund since 1989, it aims to give investors advice on how to go about finding stocks that can beat the market.
The book is divided into five sections. The first looks at how human biases affect investing decisions, and discusses the differences between gamblers, investors and speculators. It then moves on to more advanced topics, such as the value of economic forecasting and overseas investing. The third part deals with company management, and how bad managers can mislead investors. The fourth section looks at the lifespan of companies, from formation to bankruptcy. The final part examines the various ways to value a company, concluding by contrasting the value-oriented approach of Warren Buffett with the passive approach.
One of the most refreshing things about the book is that Tillinghast refuses to go down the well-trodden route of "buy a low-cost index fund and hold it until you retire". While he acknowledges that indexing can work for some, and agrees investors should focus on cutting costs, he considers that to be a "bland" approach that fails "when the market is not normal, but raving bonkers". He makes the case instead for a combination of research, intelligent analysis and a recognition of our own behavioural flaws to help investors get outsize returns.
Complete beginners to investing may need a more basic guide; more experienced hands may find it a little light in terms of data. Still, both will find it useful. It is an intelligent guide to stock selection and investment that deserves a place on everyone's bookshelf, whether they work in the City or just want to find some shares to put into their Isa.
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Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
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