Friday, 21 March 2014

The Five Rules for Successful Stock Investing

This book was written by Pat Dorsey, an ex-director at Morningstar for over ten years. Another value investment book, it focuses on five simple rules:

1. Do your homework
2. Find economic moats
3. Have a margin of safety
4. Hold for the long haul
5. Know when to sell

The first half of the book focuses on basics such as analysing financial reports and introductions to key financial ratios to focus on. The second half of the book is divided into different industries in the market with explanations for each industry and on which financial ratios to focus on.

Dorsey's book is an excellent book for intermediate readers but may be a bit difficult for beginners. Explanations are succinct with examples to guide readers through. His explanation for reading financial statements is one of the clearest that I have come across. Not only are most ratios covered, Dorsey also explains to readers when to use them and when not to. The industry coverage chapters are excellent in showing how to apply the ratios in the first half of the book and give additional insight.This is easily one of the better books I have read. However, his writing style is rather dry, given the nature of the topic. The book has a conversational style which should help to ease reading (slightly).

I would recommend a buy on this book if anyone is building a library  ;)

Found in NLB: Yes
Recommended: Yes