Sunday, February 05, 2006
Personal Finance Book Review: “TheStreet.com Guide to Smart Investing in the Internet Era”
I came across last post’s article after looking around at TheStreet.com, in preparation of this book review. The next book that I will be reviewing is “The Street.com Guide to Smart Investing in the Internet Era”. This book credits Dave Kansas as it’s author, but it is really made up of contributions from the entire TheStreet.com team. For those not in the know, TheStreet.com is a website that provides a variety of information on investing (some is available for free and more can be obtained by paying a subscription fee). The website was co-founded by Jim Cramer, who also wrote the introduction to the book.
The book’s exciting introduction (by Cramer) and first chapter provide an exciting start to the book that left me eager to read more. Kansas stresses issues he finds with a lot of other books for investors. His main beef is that many books either discuss the basic principles and ideas ad naseum (that everyone knows and understands as it is), or go into unnecessary detail with high-level technical analysis/ mathematics. The reader is made a promise that the book will go over exactly what investors need to know, without discussing the basics ad naseum. While it is fair to say that the book does deliver on this promise, I believe it could be done much better. A major flaw with the book also deals with when it was written.
The book was written at the peak of the Tech bubble in early 2000. At that time, it appeared as if the Internet revolution had changed the stock market and North American economy as we knew it. The buzzword “the New Economy” referred to this new company structure that had no assets and was all about ideas and knowledge workers. Coming from an Internet journalism background, the writers of this book were even more optimistic than most about the affect technology would play in the economy of the future. While us in the present know all about the hard crash the NASDAQ took in mid-2000, the book illustrates how a newfound reliance on tech stocks should really change your entire investing strategy. Don’t diversify by asset class; diversify by sector (and have the vast majority of your investments in equity!). You can see how dangerous this advice is now, but at the time people really believed that “the new economy” would make the stock market less risky and more successful for investors. As proof of how different the stock market of today is compared to the time that the book was written, many of the examples that the book uses (such at GoTo.com) do not even exist today!
The book’s greatest quality is it’s chapters about analysis. Financial statement analysis, stock chart analysis and ratio analysis are all explained well, in easy to understand language. While the emphasis on technology stocks is outdated, the tools that the book provides readers with can be utilized with any business or stock. Furthermore, with an emphasis on using the Internet to research stocks, the necessary information is accessible to all readers (one of the great things about the internet is how it has levelled the playing field).
Overall, the book does have some great chapters, but make sure you keep in mind when this book was written. Do not take everything it says at face value; we already know what would have happened if someone had invested heavily in Internet companies in early 2000 (some of us probably know even better than others!). Also, a bias towards Thestreet.com is seen throughout the book. Of course, this is understandable as the authors are proud of their product, but it is important to remember that the Internet provides many different options for whatever it is that you are looking for or want to do. Perhaps the greatest lesson that the book teaches it’s readers is the importance of understanding what you are investing in. Too many people found out the dangers of investing in companies that were based on potential (which they never met) until it was too late.
The book’s exciting introduction (by Cramer) and first chapter provide an exciting start to the book that left me eager to read more. Kansas stresses issues he finds with a lot of other books for investors. His main beef is that many books either discuss the basic principles and ideas ad naseum (that everyone knows and understands as it is), or go into unnecessary detail with high-level technical analysis/ mathematics. The reader is made a promise that the book will go over exactly what investors need to know, without discussing the basics ad naseum. While it is fair to say that the book does deliver on this promise, I believe it could be done much better. A major flaw with the book also deals with when it was written.
The book was written at the peak of the Tech bubble in early 2000. At that time, it appeared as if the Internet revolution had changed the stock market and North American economy as we knew it. The buzzword “the New Economy” referred to this new company structure that had no assets and was all about ideas and knowledge workers. Coming from an Internet journalism background, the writers of this book were even more optimistic than most about the affect technology would play in the economy of the future. While us in the present know all about the hard crash the NASDAQ took in mid-2000, the book illustrates how a newfound reliance on tech stocks should really change your entire investing strategy. Don’t diversify by asset class; diversify by sector (and have the vast majority of your investments in equity!). You can see how dangerous this advice is now, but at the time people really believed that “the new economy” would make the stock market less risky and more successful for investors. As proof of how different the stock market of today is compared to the time that the book was written, many of the examples that the book uses (such at GoTo.com) do not even exist today!
The book’s greatest quality is it’s chapters about analysis. Financial statement analysis, stock chart analysis and ratio analysis are all explained well, in easy to understand language. While the emphasis on technology stocks is outdated, the tools that the book provides readers with can be utilized with any business or stock. Furthermore, with an emphasis on using the Internet to research stocks, the necessary information is accessible to all readers (one of the great things about the internet is how it has levelled the playing field).
Overall, the book does have some great chapters, but make sure you keep in mind when this book was written. Do not take everything it says at face value; we already know what would have happened if someone had invested heavily in Internet companies in early 2000 (some of us probably know even better than others!). Also, a bias towards Thestreet.com is seen throughout the book. Of course, this is understandable as the authors are proud of their product, but it is important to remember that the Internet provides many different options for whatever it is that you are looking for or want to do. Perhaps the greatest lesson that the book teaches it’s readers is the importance of understanding what you are investing in. Too many people found out the dangers of investing in companies that were based on potential (which they never met) until it was too late.
# posted by mikeyarmo @ 1:22 PM 
