Just One Thing

I just finished John Mauldin’s new book, Just One Thing. It took me only two days to read. I cannot enthusiastically recommend this book even thought there are some nuggets of wisdom in it. In the book, twelve investment writers each give their one best investment idea.

Some of the authors rambled and others (Bill Bonner, George Gilder, John Mauldin) did not have anything useful to say that you could not have already picked up from reading Mauldin’s email newsletter or other sources. For those who are not familiar with Dennis Gartman, James Montier, Gary Shilling, and Richard Russell, their chapters make good reading.

The two best chapters were Ed Easterling’s chapter on the capital asset pricing model (CAPM) and its faults and Rob Arnott’s chapter on non-market-weighted index investing. Easterling does a good job of explaining problems with how we look at risk. Arnott makes a good case for avoiding index investing in market-weighted indexes such as the S&P 500. In a market-weighted index, companies that are selling above their true value will be overweighted while companies that are selling below their true value will be under-weighted.

The solution is to invest equal amounts in all different companies. By investing equal amounts in the stocks in the S&P 500, you can average a return of 2% more per year over the market-cap weighted S&P 500. Of course, that is what investors in individual stocks should do. By putting the same amount of money into each stock, regardless of market-cap or price, investors lower their risk while increasing our returns.

Overall, Just One Thing is a decent book and a quick read. Consider buying it.

Disclosure: This review was originally written two years ago and published elsewhere.

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