Weekend Book Review
Keep it simple stupid. KISS is one of those acronyms most of us will have heard during our lives and yet how quickly we forget it when looking for new investment strategies. It is often though that you have to find some niche market with a company nobody has ever heard of if you want to make a big profit, but John Cotter argues that sometimes the best investment ideas come from simply observing the world around you. He noted some personal examples of investment success stories like ASOS, getting the idea from seeing his daughters browsing the online retailer’s website, and easyJet after enjoying a number of pleasant flights with the airline (although some may argue that “easyJet” and “pleasant flights” do not belong in the same sentence).
The book goes on to describe simple fundamental investment techniques, such as analysing the hallowed PE ratio, as well as PEG, and goes on to discuss the pros and cons of dividend based investment strategies. Each chapter is relatively self-contained and Cotter provides numerous examples on how the techniques should be properly used.
While a fundamentalist at heart, Cotter is not above a bit of technical analysis and provides a brief introduction into some of the basic techniques, such as moving average charting. However, if you are looking for more information on the subject, this is probably not the book for you. He also talks about the importance of diversification across sectors, geographies and asset classes and discusses the importance of trading discipline, including sharing a few of his own mistakes, just to prove that nobody is perfect. There is also a twinge of the old Warren Buffett mantra which states that you should never buy shares in anything you don’t understand.
A very easy and informative read, this may be one of the best books for an investor taking their first step into the world of equities and also serves as a good reminder to experienced investors that it is sometimes better to stick with what you know than to try and emulate something that you don’t.
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