The Neatest Little Guide to Stock Market Investing by Jason Kelly is arguably one of the best books ever wrote regarding stock market investing.
This book is great for beginning and advanced investors alike. Kelly not only teaches basic stock market strategies and terminology, but he also discusses advanced investing strategies in great detail.
This book is easy to understand and provides formulas for evaluating stocks along with step by step instructions for how you can confidently invest in the stock market.
If you’re looking to increase your investing knowledge this book is an excellent place to start.
Speak the Language of Stocks
In the first chapter of this book Kelly explains not only how the stock market works and how it can work for you, but he also breaks down investing terms in a way that you can actually understand.
I’ve never been able to so easily understand stock market concepts as I have in this book. Kelly does an excellent job of clearly explaining what you need to know about the stock market.
How the Masters Tell Us to Invest
In the Neatest Little Guide to Stock Market Investing Kelly takes a look at the investing strategies from six well known stock market investors.
To be exact, he highlights the strategies of (which are all part of the Top 10 Investors of All Time):
- Benjamin Graham
- Phillip Fisher
- Warren Buffett
- Peter Lynch
- William O’Neil
- Bill Miller
All of these investors have slightly different methods for evaluating stocks but they also have common advice.
Below is a summary of the advice from Warren Buffett, Benjamin Graham, and Peter Lynch.
Investing like Warren Buffet
According to Kelly, Warren Buffet’s investing strategy is a combination of growth and value investing. Buffet chooses quality companies but buys the stocks at a bargain price.
Instead of selling his shares of stock when prices increase he holds on to them for long term. Buffett believes that you should look at the shares of stock you own the same you would a business you own. If a division of your business is profitable you wouldn’t sell it. So, why would you sell your profitable stocks?
One of the key takeaways from Buffett is that you must understand your investments.
Investing like Benjamin Graham
Benjamin Graham, widely known for his successful book The Intelligent Investor, thinks similarly to Buffett in the sense that you should withhold your emotions when investing. Graham suggests setting a formula to find stocks. He insists that you should ignore headlines and water cooler talk and instead use measurable criteria to choose quality stocks.
Graham recommends purchasing stocks that are priced close to their business valuation. He also advises using a margin of safety to choose stocks, which is simply the difference between the company’s business valuation and market valuation.
Investing Like Peter Lynch
From 1977 to 1990 Peter Lynch managed the Fidelity Magellan Fund. He was able to grow this fund from $20 million to $14 billion during this time.
Lynch believes a good stock is one that will return 10 times your money. Lynch advises to invest in what you know and then divide your stocks into six categories: slow growers, stalwarts, cyclicals, fast growers, turnarounds, and asset plays. He advises to put stocks in categories so that upon selecting a new stock you know what you’re buying.
While this book covers the investing strategies of six different professionals it also highlights what all six investors agree on:
- Automate Your Strategy with Proven Criteria
- Look for Strong Income Statements and Balance Sheets
- Look for Insider Stock Ownership and Company Buybacks
- Compare Stocks with a Proven Profile
- Conduct Thorough Research
- Know Why to Buy
- Buy at a Price Below the Company’s Potential
- Keep or Buy More of What’s Working
- Take Advantage of Price Dips
History’s Lessons of the Stock Market
Jason Kelly takes a look at various works on the history of the stock market. At the end of the chapter he sums it up using a quote from James O’Shaughnessy; “the data proves the stock market takes purposeful strides. Far from chaotic random movement, the market consistently rewards specific strategies while punishing others.”
In this chapter Kelly also highlights the strategy used to choose the best value stocks. He goes in depth on several measurements you can use to determine stock values.
Kelly suggests that using value averaging (VA) is the best strategy for permanent portfolios. Unlike dollar cost averaging (DCA) value averaging is slightly more work, but according to Kelly, will help you to outperform the S&P 500’s long term rate.
Kelly goes on to suggest a couple different ETF’s and uses real examples to show how this works.
Kelly also explores investing in the Dow and his strategies for beating the market.
Investing and Researching Companies
If you’re a beginner investor Kelly shows you exactly where to go to get started. He also highlights where you should begin your research for choosing quality investments.
To summarize Kelly’s advice he suggests that you begin your research with the following:
- Personal Experience
- Experience of friends or family
- Value Line
- Company Investment Packets
- Plus more…
Don’t worry. If you’re just getting started investing Kelly will walk you through researching companies. But, just like the advice of the famous investors, in this book Kelly recommends that your best research starts with personal experience.
Building Your Investing Strategy
Now that Kelly has thoroughly explained stock market jargon, stock valuations, several investing strategies, and how to research companies he shows you how to build your own investing strategy.
This book comes with worksheets to aid you in choosing quality stocks and a very thorough description on how to fill them out. This chapter is very detailed and will walk you through the whole investing process.
I would highly recommend this book to anyone who is wanting to learn about investing in the stock market.
In The Neatest Little Guide to Stock Market Investing by Jason Kelly lays out an investing plan that is not only easy to understand, but with his thorough explanations, easy to implement.
Have you read The Neatest Little Guide to Stock Market Investing?