On my post titled Phil Town and Rule #1: Guide to Investment Success, I "joked" about Phil's investment "wisdom" of "Buy a dollar for 50 cents, sell for a dollar. Repeat till very rich." I had a couple comments to that post that I wanted to respond to. Here's the first:
To be fair, this is the core idea of Town's system: find a good company's stock that has been deeply discounted and buy it for half off. That's his "buy a dollar for fifty cents". It's a keen idea, but I don't know if his book does a good job of demonstrating that it can be done with reliable success.
I think Town's ideas sound keen, but I'm worried about how practical they are. I'd like to see more documentation and more examples of when his method worked and when it failed. As I say on my site, it seems to me that it would be a rather easy matter for somebody to plug data on a large universe of stocks into Town's formulas and then see if they do, indeed, work. Until I see this sort of info, I'm reluctant to buy into the advice.
First, I understand his underlying philosophy. I also understand that it's much easier said than done. Otherwise, wouldn't everyone do this? Yes, they would.
Second, I agree -- I'd like to see more documentation. Problem is, I don't think there is any. It's a great investment philosophy/strategy, but it takes lots of work, time, effort, dedication, patience, experience, information, etc. to pull off effectively. Town seems to think it can be done without much time commitment at all.
Next, I received this comment:
What's so wrong with that being the secret to becoming rich? It makes a lot of sense to me. Would you prefer the secret to becoming rich take 1,000 pages of densely theoretical description? I think the idea of most how-to books is to make complex problems simpler and easier to tackle for people, instead of vice versa. So in this case, yeah, the essence of his investing method is to buy low and sell high... which I think, if I'm not totally off base here, is what everyone is trying to do in the stock market.
Ha! My guess is that this commenter is under 30 and fairly new to stock investing. I was at this point in my younger days, so I understand where he's coming from, but I've learned a lot since then (from the school of hard knocks). That's why I'm now a fan of index fund investing.
Now if I have it wrong and this person's older, all I have to say is "yikes!"
The truth is, getting rich is pretty simple (not easy, but simple -- it's not easy to do the few tasks you need to do to become rich (you have to be disciplined, for example), but each of the tasks is simple and are steps anyone can understand and implement). But the "secret" is not in some pithy investing slogan that sounds great but is impractical. It's in the simple, step-by-step tasks we all can take to get rich slowly over time.
If you want some more thoughts on how getting rich isn't really that difficult, see these posts:
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