Book Review: The Neatest Little Guide to Stock Market Investing

By Jason Kelly. Penguin Group/Plume Books, 2nd Revised Edition, 2008. 276pgs. Link.

This is a very basic book geared to the beginner. His section on "How to Evaluate Stocks" is something everyone should read before they start investing. Though basic, it provides the fundamental information that you'll need to know to begin making choices about what stocks to buy. The 2nd chapter gives you a brief introduction to the investing styles of Benjamin Graham, Warren Buffett, Peter Lynch, William O'Neil, and Bill Miller. When he sums up each person he mostly just repeats verbatim things he just said in the previous two pages which made it very repetitive (he could have at least re-worded it).

Chapter 4 is entitled "Permanent Portfolios" and is somewhat misleading and I found it to be dissapointing. The chapter only discusses the Dow Jones Industrial Average. He offers "five popular Dow dividend strategies" based on listing all 30 stocks in the DOW by yield, and then taking the top 10:
- Dow 10 (divide your money equally into 10 stocks)
- Dow High 5 (divide your money equally into the 5 highest yielding stocks)
- Dow Low 5 (divide your money equally into the 5 lowest-price stocks)
- Dow 4 (put 40% on stock #2, and 20% on stocks #3, 4, and 5)
- Dow 1 (put all of your money on stock #2).

I will admit that I am relatively new to investing (about 8 months now) but I have never heard of those "strategies", and they really seem more like gambling than anything. It is interesting that in his example in the book, for Dow 1 he would have put everything in GM, which he lists with a book value of $30.72. It closed Friday at $3.65. The old saying of never putting all your eggs in one basket is still good advice. Personally I would advise either doing a portfolio of the entire Dow or even the Dow 10. What is also interesting is that he lists a table showing the performance of the 5 strategies he listed compared with the entire Dow, but he states the table "details price change only and does not take into account income from dividend payouts." Umm... doesn't he call these "The Dow Dividend Strategies"? Aren't the selections based off of the highest yields? Any proper comparison would have to include the dividends.

One of the most helpful sections of the book was Chapter 7, "This Book's Strategy," which goes through in relative detail how to how to evaluate stocks. Included in the end of the book are a few worksheets to use with this. It would have been helpful if they had provided a link to download them on the internet.

I was hoping it would go into more detail concerning the annual reports and 10-K/Q filings, but it didn't really go into any kind of detail.

All in all this was a decent book and the beginner will profit from reading it.