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The Complete Idiot’s Guide to Value Investing

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The Complete Idiot’s Guide to Value Investing is exactly what it sounds like, a book that will teach you how to be a value investor, how to analyze industries and companies, how to dig deep into financial statements, and how to filter analysts (among other things). It’s written in the same easygoing style of the series and has little graphical clues to help anyone understand value investing. Value investing is one of the most popular investing “styles” out there and works off the notion that you can find good, solid companies that have had their share prices battered by the market. Their fundamentals are still strong but they’ve fallen out of favor in the marketplace so their share prices offer a good value, hence value investing.

It’s the style Warren Buffet built his fortune on. He calls it “cigar-butt investing.” Imagine yourself walking along the street, where there presumably aren’t any trash cans or simply a lot of litterers, and seeing half smoked cigar butts strewn about. “A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the “bargain purchase” will make that puff all profit.” (1989 Berkshire Hathaway Chairman’s Letter) Buffet has made a lot of profit off those puffs.

This book is especially timely because the market has probably over-reacted to the news and dropped the stock prices of a lot of companies. Many companies have hit decade lows on their share prices and some of them represent value plays that you might want to buy, even though the broader market is down. How do you know which ones to buy? You need to read books like The Complete Idiot’s Guide to Value Investing so you know how to properly analyze companies.

You’ll learn a lot reading this book but the one idea, and probably the most important idea, you have to learn is that investing is hard work. You have to analyze financial statements, read the news, listen to analysts (yes, even if they’re crazy), and take all that information, normalize it to the industry, and then make your decision. Fortunately, this book will give you all the tools and knowledge you need to make an informed decision if you do your research, even if you have very little experience in the stock market.

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3 Responses to “The Complete Idiot’s Guide to Value Investing”

  1. This looks like a very good read for many struggling with the decision of how to handle their retirement nest eggs and investment accounts. It’s hard to keep your head in the game when the stock market is collapsing and leaves us all wondering if we’re making the right choices.

    I think a book like this would help us to focus our analysis and make sure that what we’re investing in is truly valuable for the long run. Great review!

  2. I am glad you mentioned that investing is hard. Many people seem to think that investing is another get-rich-quick-scheme. It isn’t. However, there are some individual “investments” that are scams and get-rich-quick-schemes.

    Thanks,
    Nate

  3. thomas says:

    What? I thought we just put the money in Fidelity and then it magically grows every year forever! If it doesn’t, then the gov’t steps in and gives me money and makes everything fair.

    Is this not correct?…


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