With this review of David Gaffen's Never Buy Another Stock Again, I put a knife to my throat. Alas, I have been investing in individual stocks for over 23 years, and have done well the whole way. Is it time to abandon my craft?
No, and I think the author would agree. He is making a relative argument, but the title phrases it in absolute terms. On average, the advantage of investing in stocks is smaller than commonly believed, and for investors who can’t keep their wits about them when all is going wrong, the results are worse still.
This book attempts to infuse common sense (ordinarily sorely lacking in investments) into readers who are retail investors.
One nice feature of the book is that the author recapitulates everything in each chapter in a closing section entitled “Boiling It Down.”
Another nice feature is that the author interviewed clever asset managers to flesh out his own understanding of the topic. That helped produce a much richer book.
I don’t go in for using stop-losses. I analyze risk, and there will be a tiny number that really hurt, but the cost of using stop-losses is missing the frequent snapback rallies, which on average in my experience more than pay for the losses.
Also, in this environment where everything is so correlated because of ETFs, Gaffen recognizes the difficulty of achieving real diversification. But in his asset allocation advice, it is as if he forgot this. If I were rewriting his asset allocation chapter, I would have introduced the concept of the credit cycle, and why good asset allocators vary their positions based on the opportunity offered, rather than a more static view of asset allocation.
I also would have given a little more credit to value investing. If you are going to be anything but a trader, you may as well focus on value.
But on the whole, this was a very good book, and these are quibbles. He writes very well, far better than me.
Who would benefit from this book:
Most inexperienced to moderate investors would benefit from this book. It would help them to avoid common mistakes in investing, as well as make them aware of modern problems in investing that classic texts would not have been aware.
Full disclosure: This book was sent to me, because I asked for it, after the publishers offered me a copy.