Legendary money manager Ken Fisher outlines the most common—and costly—mistakes investors make.
- Small cap stocks are best for all time. Bunk!
- A trade deficit is bad for markets. Bunk!
- Stocks can't rise on high unemployment. Bunk!
Many investors think they are safest following widely accepted Wall Street wisdom—but much of Wall Street wisdom isn't so wise. In fact, it can be costly bunk.
In Debunkery: Learn It, Do It, and Profit From It—Seeing Through Wall Street's Money-Killing Myths, Ken Fisher—named one of the 30 most influential individuals of the last three decades by Investment Advisor magazine—details why so many investors fail to get the long-term results they desire. The short answer is many investors fail to question if what they believe is true—and are therefore blinded by tradition, biases, ideology, or any number of cognitive errors.
Your goal as an investor shouldn't be to be error-free—that's impossible. Rather, to be more successful, you should aim to lower your error rate. Debunkery gets you started by debunking 50 common myths—but that's just the beginning. It also gives you the tools you need to continue to do your own debunkery for the rest of your investing career.
About the Author
KEN FISHER is best known for his prestigious "Portfolio Strategy" column in Forbes magazine, where his over 25-year tenure of high-profile calls makes him the fourth longest-running columnist in Forbes's 90-plus year history. He is the founder, Chairman, and CEO of Fisher Investments, an independent global money management firm with over $32 billion under management (as of 6/30/10). Fisher is ranked #289 on the 2009 Forbes 400 list of richest Americans, and #721 on the 2010 Forbes Global Billionaire list. In 2010, Investment Advisor magazine named him as one of the 30 most influential individuals of the last three decades. Fisher has authored numerous professional and scholarly articles, including the award-winning article, "Cognitive Biases in Market Forecasting," and has published six previous books, including the New York Times and the Wall Street Journal bestsellers, The Only Three Questions That Count, The Ten Roads to Riches, and How to Smell a Rat, all of which are published by Wiley. Fisher has been published, interviewed, and/or written about in many major American, British, and German finance or business periodicals. He has a weekly column in Focus Money, Germany's leading weekly finance and business magazine.
LARA HOFFMANS is a content manager at Fisher Investments, a contributing editor of MarketMinder.com, and coauthor of the bestsellers, The Only Three Questions That Count, The Ten Roads to Riches, and How to Smell a Rat.
Table of Contents
Introduction: Debunkery Made Easy xiii
PART 1 Basic Bunk to Make You Broke 1
Bunk 1 Bonds Are Safer Than Stocks 5
Bunk 2 Well-Rested Investors Are Better Investors 9
Bunk 3 Retirees Must Be Conservative 13
Bunk 4 Age Equals Asset Allocation 17
Bunk 5 You Should Expect Average Returns 20
Bunk 6 “Capital Preservation and Growth” Is Possible! 23
Bunk 7 Trust Your Gut 26
Bunk 8 One Big Bear and You’re Done 30
Bunk 9 Make Sure It’s a Bull before Diving in 34
Bunk 10 Growth Is Best for All Time. No, Value. No, Small Caps 39
Bunk 11 A Good Con Artist Is Hard to Spot 44
PART 2 Wall Street “Wisdom” 49
Bunk 12 Stop-Losses Stop Losses! 51
Bunk 13 Covered Calls . . . Gotcha Covered 54
Bunk 14 Dollar Cost Averaging—Lower Risk, Better Returns 57
Bunk 15 Variable Annuities Are All Upside, No Downside 60
Bunk 16 Equity-Indexed Annuities—Better Than Normal Annuities 65
Bunk 17 Passive Investing Is Easy 68
Bunk 18 Do Better With Mutual Funds by Sending Your Spouse on a Shopping Spree 72
Bunk 19 Beta Measures Risk 75
Bunk 20 Equity Risk Premiums—Forecasting Future Returns With Ease 80
Bunk 21 When the VIX Is High, It’s Time to Buy 84
Bunk 22 Be Confident on Consumer Confidence 88
Bunk 23 All Hail the Mighty Dow! 92
PART 3 “Everyone Knows” 99
Bunk 24 So Goes January 101
Bunk 25 Sell in May 104
Bunk 26 Low P/Es Mean Low Risk 107
Bunk 27 A Strong Dollar Is Super 112
Bunk 28 Don’t Fight the Fed 116
Bunk 29 Interest Pays Dividends 120
Bunk 30 Buy a 5% CD for 5% Cash Flow—Easy! 123
Bunk 31 Baby Boomers Retire, World Ends, Etc. 126
Bunk 32 Concentrate to Build Wealth 130
PART 4 History Lessons 135
Bunk 33 Pray for Budget Surpluses 137
Bunk 34 High Unemployment Is a Killer 143
Bunk 35 With Gold, You’re Golden 148
Bunk 36 Stocks Love Lower Taxes 152
Bunk 37 Oil and Stocks Seesaw 158
Bunk 38 Swine Flu, SARS, Ebola, and Other Viral Disasters Make Markets Sick 163
Bunk 39 Consumers Are King 167
Bunk 40 Presidential Term Cycles Are Stock Market Voodoo 172
Bunk 41 My Political Party Is Best for Stocks 178
Bunk 42 Stock Returns Are Too High and Must Fall 182
PART 5 It’s a Great Big World! 187
Bunk 43 Foreign Stocks Just Feel So . . . Foreign 189
Bunk 44 Who Needs Foreign? 192
Bunk 45 Big Debt Is National Death 195
Bunk 46 America Can’t Handle Its Debt 199
Bunk 47 Indebted to China 202
Bunk 48 Trade Deficits Make Deficient Markets 206
Bunk 49 GDP Makes Stocks Grow 211
Bunk 50 Terrorism Terrorizes Stocks 215
About the Authors 228
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"It's about time someone drove a stake into thefolklore that permeates Wall Street, and Mr. Fisher does it inconvincing-and often entertaining-fashion."—The Globe and Mail, November 2010