Monday, April 27, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (April 27, 1998) -- As you know by now if you've read this column for any length of time, I had enough blackmail material on the editors at Simon & Schuster that they consented to let me publish a book, The Unemotional Investor. And because of the electronic medium within which the Motley Fool exists, readers have the immediate opportunity to comment on the book (or any other topic on investing, for that matter), here in the Motley Fool and on other sites across the Internet.

Amazon.com has recently given my book quite a bit of notice (and a healthy discount at 40% off) and published an interview I did for them. Being the Internet company they are, Amazon also allows room for customers to post reviews of the books they've read online. Which brings me to today's topic.

Over the weekend the following review was posted about my book:

<<A reader from Portland, Oregon, 04/24/98, rating=1: Just another "New Era," "stocks-only-go-up" tract...

If you know nothing about investing (I do not mean saving), and you want to be a self-proclaimed investment genius, then buy this book and join the masses of savers-turned-speculators who have only recently discovered stocks during the waning months and years of the greatest stock market mania in the history of capitalism.

However, if you are a savvy "investor," this book is good for a laugh, as are the scores of other get-rich-with-stocks-and-retire-early tracts, which years from now will be scoffed out [sic] by baby boomers sitting in CDs after having lost half their life's savings or more in the next Great Bear Market.>>

At first I was hurt, naturally. As I mentioned last week, my Acme Author's Thick Skin is back-ordered and I'm facing reviews without the benefit of alcohol or illegal intoxicants, but after I read the review a second time, I realized it wasn't really a review of my book at all but a diatribe on investing in stocks overall.

If the reviewer had read my book (or read it carefully), it's obvious that nowhere do I claim any special genius. In fact, the whole purpose of the personal introduction was to demonstrate that one doesn't need a Wall Street pedigree or special genius to be a successful long-term saver. Hey, if I can do it, my theory goes, so can you, and you, and you, too.

The scare tactic the anonymous reviewer included about the next great Bear Market also flies in the face of history and reality. As I discuss at length in my book, the high-yield method I call the Unemotional Value approach (and we now call the Foolish Four approach) made money in 1973 and 1974, the worst bear market since the Great Depression. And it's made a whole lot more the rest of the time.

I don't apologize for claiming one can "get rich" by investing in stocks. Notice I didn't say "get rich quickly." Saving and investing in the best long-term investment vehicle available (common stocks) is exactly the formula savers/investors need for getting rich. I stand by that.

After all is said and done, then, the review is typical of the Wise's condescension towards individual investors. The fact that the market has been wonderfully positive in recent years is somehow a condemnation of the individual investor's stupidity and "mania?" And we're all road kill waiting to happen? Sounds like the arguments laid out by perennial bears in recent years. Does anyone really expect 20% annual returns for the Standard & Poor's 500 indefinitely? No one I've talked to, but the long-term returns for the S&P 500 (roughly 11%) beat the heck out of the alternatives historically. And if believing the last 70 years of market history is somehow an indication of where I should invest for the next 40 or 50 years is a bonehead move, then I'm guilty as charged.

I like going with the long-term odds. I don't waste money at the races betting on those high-odds long shots. For each one you hit, you'll miss a score of them. I'd rather look at the form book and place my $2 on a horse that performs well most of the time. Sure that means I won't take home the huge payouts on every race, but my odds of going home with more than I brought are much higher that way.

So, if you've read my new book, please post your comments here in the Workshop message board (good or bad) or on Amazon's site. If you think it's the worst book you've ever read on stock investing, I hope it's for a more relevant reason than that you think individual investors in stocks are guppies. I've undoubtedly made a worse mistake somewhere than simply to throw my lot in with the stock market. Fool on!

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[Robert Sheard is the author of The Unemotional Investor (Simon & Schuster, 1998) available now at Amazon.com and soon at your local bookseller.]