Friday 12 March 2010

Book Review and Giveaway: Understanding Wall Street (5th ed) by Jeffrey Little and Lucien Rhodes

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 ...


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.


as said...

Not sure ever picks "1", but here it is... :-)

Unknown said...

I would like to see a review of Danille Park's book 'Juggling Dynamite'.

CanadianInvestor said...

>pfpulm, I already did a review a few years ago - see
In rereading that review I'd say now I am more inclined to believe in the possibility of long term market timing e.g. see my review of another book on that very subject by Ben Stein and Phil DeMuth -

>as, don't worry, my method is to pick a slip of paper with a name from a hat.

angel said...

If I were to wager a guess at why, I’d say that users don’t “browse” forms. The interaction style users engage in with forms is different, and requires its own study and design best practices. This is a very interesting post, and the comments are also fantastic to read. I’ll have poses to have a little re-think about my own contact form on our new website, as this some interesting questions!
study abroad

AC said...

Your doing some good work on this Blog. Its nice to have such great Canadian content! Thank you.

Luc said...

I'd like to read a review of "Tax Tips For Canadians For Dummies"

CanadianInvestor said...

and the winner is .... AC! Congratulations! All you need do now is contact me using the email link in the right margin of the blog page with your postal address and I will get the book off to you.

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