Friday, January 04, 2008

Investment Wisdom From Dick Davis

I've been reading The Dick Davis Dividend, a recent book written by the well-known market commentator, and have to say that it offers some of the sanest perspectives on trading and investment I've encountered in a while. Davis began his newsletter in 1982 and has been offering commentary on the markets for the past forty years. This book is a distillation of the wisdom he's acquired over that period.

The book is divided roughly into two portions. The first summarizes market lessons and truisms, including six market absolutes, seven core convictions, and thirty-five nuggets of perspective. Each of these is explained in a clear, no-nonsense way. Some of the topics that stood out for me were:

* We're Predisposed to Fail, But Not Predestined
* The Market is King--News is Mostly Irrelevant
* Asset Allocation is Key to Managing Risk (I really like that one)
* Proper Entry Level is Crucial
* Losses are Inevitable--A Big Loss Unacceptable
* ETFs are a Beautiful Thing
* Rising Dividends are More Important than Big Dividends

Although Davis is not a blogger himself, he liberally cites blogs and other resources for traders. This is particularly helpful for traders who want to pursue a topic in greater depth. One very nice citation is the portfolio work of Charles Kirk, which Davis contrasts with the stock picking of Jim Cramer.

The second portion of the book addresses the question, "So What Do I Do With My Money?" Davis contrasts active and passive investing, offering numerous examples of both. These include "lazy" portfolios constructed with index funds, active approaches with mutual funds, and active stock picking. He offers 18 key pieces of insight into mutual funds and explores several stock picking methodologies, including growth and value strategies.

This is not a book for daytraders, but it is a book that is relevant for all professionals who will be making decisions regarding the investment of their capital. There are very few 20-year periods in the history of the U.S. stock market that have not offered favorable returns, particularly when dividends are considered alongside capital gains. With the advent of ETFs, it is now possible for retail stock investors to create highly diversified portfolios that exploit the dynamics of international markets, U.S. equities, fixed income, currencies, and commodities. Amidst the hype and shrill promises of the financial media, the "straight talk" of Davis' book is a welcome tonic and an excellent resource for traders who want to invest in their financial futures.

1 comment:

the finance ninja said...

I read the Dick Davis interview done by Charles Kirk. It was very helpful and I plan to buy the book once I get back into port. I was told to check out your blog by Moom, an economist.

good post
-financeninja