Friday, 12 March 2010
That this book is now in its 5th edition 30 years after its initial publication attests to its on-going value. It is an excellent primer and reference source for all investors, a good place to start, whether it is to read it from end to end as an introduction to investing or to brush up on a new topic. Though its intended audience and subject matter is American, it will be of great value to Canadian investors, because many of us do invest there directly and because things work pretty much the same on Bay Street as on Wall Street.
The approach is very descriptive, practical and intuitive, an everyman's way of thinking rather than academic or analytical. For example, the chapter on bonds explains very well how yield to maturity works in common language and then shows a bond table with prices for various maturities and yields with a note that the calculation is done with a calculator or computer. A more analytical text would have given the actual formula. As a practical matter, as long as one understands the concept of YTM, it doesn't matter too much since when one actually gets to buying a bond through a broker, the broker will tell you the yield.
Many simple examples illustrate and help explain the topics. In keeping with its updating to current times, many websites are given for access to data (though blogs are not mentioned at all!).
The book's small inaccuracies do not introduce any fatal flaws - such things as the index getting a bit out of sync in spots as a result of new material being inserted into this edition (basis points page ref in the index says p.183 but is actually 193), or the fact that the first successful ETF was launched in Canada (TIPS) NOT in the USA (SPY), or the implication that Canada's stock market is primarily mining and industrials (it's financials and energy). One change that would make the book more useful as a reference is to expand the index.
One topic (do the "Click to Look Inside" to see table of contents on Amazon) the authors do not cover is taxes. Though perhaps the omission of taxes is deliberate and understandable given the complexity of the topic, a broad coverage of investing must include a discussion of portfolio construction and diversification, which the book does not do. That would be far more useful than the concluding chapter on Wall Street personalities, which has no practical investing knowledge value and is not very entertaining either.
My rating: 4 out of 5 stars. Not a perfect book but very useful and practical.
Thanks to the publisher McGraw-Hill for providing a review copy and another copy for a ...
DRAW and GIVEAWAY!
I am giving away one copy of Understanding Wall Street to a blog reader. To be eligible for the random draw to be done amongst entries received by next Thursday March 18th midnight Eastern time, leave a comment on this post (perhaps suggest another book you would like me to review?) with some unique name (i.e. not anonymous). I will then announce the winner who should contact me with postal details to receive the book. That information will be used for no other purpose, nor passed along to anyone else.
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