Beat the Crowd: Book Review

2018-10-17T17:08:10+00:00
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beat the crowd book reviewTitle: Beat the Crowd: How You Can Out-Invest the Herd by Thinking Differently

Originally Published: 2015

Author: Ken Fisher

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About the Author

Ken Fisher serves as CEO of Fisher Investments and is the son of Phillip Fisher, a stand-out value investor in his own right. Ken Fisher is known for repeatedly outperforming the S&P 500 with his contrarian methodology. Fisher’s unique investing methods have helped him accumulate an approximately $4 billion net worth. He’s also published numerous books on the topic of investing. Beat the Crowd is Fisher’s eleventh such book.

A Brief Summary

The masses, or the herd as Ken Fisher calls them tend to base their investment strategies on commonly accepted ideas and media hype. The herd consists of uninspiring reactionary investors – exactly the type of investor Fisher wants to teach readers not to become. According to Fisher, the herd makes the mistake of chasing gains that have already come to fruition while running away from investments that the media deems too perilous.

In Beat the Crowd, Fisher introduces readers to a new mode of operation – the contrarian investor.

In Fisher’s words, contrarians regularly put commonly accepted investing strategies to the test to find out where the herd is wrong. By leveraging the falsehoods introduced by the media and perpetuated by the crowd, contrarians can unlock investing opportunities other investors can’t discern through distracting market noise.

According to Fisher, somewhere between 3 and 30 months of public information is priced into any given investment available on the open market. By understanding the limitations of market pricing, investors are better able to distinguish the information that matters from the information that doesn’t.

Are electric vehicles still five years away from becoming a real force in automobile marketplace? Will real estate prices be bolstered by population growth 10 years down the road? Neither of these speculations are priced into current stock prices. That’s because factors that are unlikely to take hold for at least 30 months will face a new world with potentially unknown variables. The market waits to price that information into its system until it can better calibrate stock values with all of the variables at play.

So how does a contrarian go about making investment decisions? Contrarian investors tend to be on the lookout for the following:

  • Conditions that will inevitably improve the value of a specific investment.
  • Artificial market price reductions that create buying opportunities.
  • Factors that are not already priced into a particular company or industry.
  • Conditions that are “elephants in the room,” yet not often discussed.

Simply put, Fisher believes investors are best served by ignoring what everyone is paying attention to and instead paying attention to factors the market is ignoring.

Key Takeaways

Ken Fisher has made a name for himself by busting some of the most prolific investing fallacies. His contentions teach investors to go a step further when researching investments. In understanding that most investors are not critical thinkers you also understand the manipulative power the herd has on market pricing. Popular information makes losers, not winners. And if you are listening to popular opinion it should be within a process of excluding ideas from investing consideration.

My Rating

In Beat the Market, Fisher takes a sour topic about finance, news, and politics and produces a truly enjoyable read. Fisher reviews numerous landmark events throughout market history, offering his perspective in the past, along with his hindsight lessons of the present. Applying contrarian teachings Fisher enlightens readers on an invaluable subject – knowing what to listen to and what to tune out.

I give Beat the Crowd a four-star rating, but with light caution to potential readers. This book is limited when it comes to supplying contrarian investment methods you can implement into your life. While it provides good food for thought for beginners, I believe this book is most useful for investors with 5-plus years of investing experience. There are countless concepts that Fisher just assumes readers will already understand; beginners might feel a bit lost. If you’re looking for an entry-level book covering investing theory and personal finance, I recommend starting with The Meaningful Money Handbook.

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About the Author:

Darian
Hi, I'm Darian! I am a twenty-something insurance professional working on my ultimate quest for financial freedom. I hope you enjoyed this article. Stick around to learn more about financial strategies to manage debt, save more, spend less, and live the life you want.