Friday, December 15, 2006

Ken Fisher's "The Only Three Questions That Count: Investing By Knowing What Others Don't" - Book Review

The Only Three Questions That Count: Investing by Knowing What Others Don't

What Is It About?

The book rejects the premise that investing is a craft. A craft, like accounting or carpentry, is something that one can practice and obtain proficiency to meet any objective measurement of quality or standard. But, as the author asks, if investing is a craft, why do so very few smart professionals who practice the craft of investing fail to beat the market over time? That is after all the standard of measurement for the craft of investing.

What then is the book about? As the title indicates it is about Investing by Knowing What Others Don't. That is the author's secret, simply knowing what others do not is the way to beat the market. This book makes the case that asking and answering, what do I know that others don't?, is the only way to beat the market.

At its core, this book teaches the reader how to innovate. It does so by showing how an individual can develop their own technology to be a successful investor. This is done by asking three questions related to the primary question above. Those three questions are simply: what is it that I believe that is false, what is it that I can see that others don't, and what it is that I am doing that may be misleading me?

What Did I Get Out Of It As A New Investor?

In order to beat the market over the long term one must develop an investment or trading process which provides the ability to know what other's do not. It is not important to know everything, just those things that others do not. This simple message forms the heart of this book.

This book is not about telling you what tools to use or formula to follow in order to be a successful investor. As the author states in the preface, this book is not called Investing Made Easy. What the book does do well is help a new investor think about the stock market and approach it in a scientific manner.

The book explains in straight forward fashion that knowing what others do not does not require any special or inside knowledge. It simply requires an individual ask and answer three questions. The book details with explanations and examples the author's methodology in practice. Once you determine what is true, determine that others do not fathom it, and ensure that you are not impeding your own progress, you have gleaned an understanding of something that may be utilized to achieve positive results in the stock market. Of course it is easier to say than do, but the point is no other tool will assist you quite as well as the three questions.

It is clear that the author has been successful following the approach he advocates and as such the author writes in a matter-of-fact fashion with no apologies. Having a net worth of several billion dollars, it could be argued, empowers one to do so. But like all great works that seek transformational development of knowledge, as opposed to incremental steps, this book requires one to disavow and question beliefs and practices regarding the stock market. Therefore, this book should be read multiple times simply because the first reading challenges one to examine their investing beliefs, inciting an emotional response from the reader.

Subsequent readings allow for the proper examination of the material in a dispassionate manner. While any book that requires several readings to fully absorb may seem daunting, the hallmark of any book destined to be a classic is one that teaches you something new upon every reading. This one is no different.

The Good News

One of the best books I have read all year. Any choice of superlative is descriptive of this book. For those open and desirous of learning how to succeed in the stock market this book will provide knowledge not easily found elsewhere.

The Bad News

The book at times can seem long, as any book that actually teaches you something can seem. For those firmly devoted to a singular investing paradigm this book will seem heretical. If you do not like leaving your comfort zone and engaging in honest discourse this book may not be for you.

The Bottom Line

It would be a profound understatement to say that this book should be a part of your personal library. It really is a great book.

Other Related Reading:



A W Frey said...

There was an announcement earlier this week that Ken Fisher has a new book out. I work for Fisher Investments, and have found his books interesting and insightful. Check out the new book: Ken Fisher’s Debunkery: Learn It, Do It, and Profit From It.


Great reading excellent.