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Debunkery: Learn It, Do It, and Profit from It -- Seeing Through Wall Street's Money-Killing Myths

ISBN: 978-0-470-28535-0
256 pages
October 2010
Debunkery: Learn It, Do It, and Profit from It -- Seeing Through Wall Street
Legendary money manager Ken Fisher outlines the most common—and costly—mistakes investors make.
  • Small cap stocks are best for all time. Bunk!
  • A trade deficit is bad for markets. Bunk!
  • Stocks can't rise on high unemployment. Bunk!

Many investors think they are safest following widely accepted Wall Street wisdom—but much of Wall Street wisdom isn't so wise. In fact, it can be costly bunk.

In Debunkery: Learn It, Do It, and Profit From It—Seeing Through Wall Street's Money-Killing Myths, Ken Fisher—named one of the 30 most influential individuals of the last three decades by Investment Advisor magazine—details why so many investors fail to get the long-term results they desire. The short answer is many investors fail to question if what they believe is true—and are therefore blinded by tradition, biases, ideology, or any number of cognitive errors.

Your goal as an investor shouldn't be to be error-free—that's impossible. Rather, to be more successful, you should aim to lower your error rate. Debunkery gets you started by debunking 50 common myths—but that's just the beginning. It also gives you the tools you need to continue to do your own debunkery for the rest of your investing career.

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Acknowledgments ix

Introduction: Debunkery Made Easy xiii

PART 1 Basic Bunk to Make You Broke 1

Bunk 1 Bonds Are Safer Than Stocks 5

Bunk 2 Well-Rested Investors Are Better Investors 9

Bunk 3 Retirees Must Be Conservative 13

Bunk 4 Age Equals Asset Allocation 17

Bunk 5 You Should Expect Average Returns 20

Bunk 6 "Capital Preservation and Growth" Is Possible! 23

Bunk 7 Trust Your Gut 26

Bunk 8 One Big Bear and You’re Done 30

Bunk 9 Make Sure It’s a Bull Before Diving In 34

Bunk 10 Growth Is Best for All Time. No, Value. No, Small Caps 39

Bunk 11 A Good Con Artist Is Hard to Spot 44

PART 2 Wall Street "Wisdom" 49

Bunk 12 Stop-Losses Stop Losses! 51

Bunk 13 Covered Calls . . . Gotcha Covered 54

Bunk 14 Dollar Cost Averaging—Lower Risk, Better Returns 57

Bunk 15 Variable Annuities Are All Upside, No Downside 60

Bunk 16 Equity-Indexed Annuities—Better Than Normal Annuities 65

Bunk 17 Passive Investing Is Easy 68

Bunk 18 Do Better With Mutual Funds by Sending Your Spouse on a Shopping Spree 72

Bunk 19 Beta Measures Risk 75

Bunk 20 Equity Risk Premiums—Forecasting Future Returns With Ease 80

Bunk 21 When the VIX Is High, It's Time to Buy 84

Bunk 22 Be Confident on Consumer Confidence 88

Bunk 23 All Hail the Mighty Dow! 92

PART 3 "Everyone Knows" 99

Bunk 24 So Goes January 101

Bunk 25 Sell in May 104

Bunk 26 Low P/Es Mean Low Risk 107

Bunk 27 A Strong Dollar Is Super 112

Bunk 28 Don’t Fight the Fed 116

Bunk 29 Interest Pays Dividends 120

Bunk 30 Buy a 5% CD for 5% Cash Flow—Easy! 123

Bunk 31 Baby Boomers Retire, World Ends, Etc. 126

Bunk 32 Concentrate to Build Wealth 130

PART 4 History Lessons 135

Bunk 33 Pray for Budget Surpluses 137

Bunk 34 High Unemployment Is a Killer 143

Bunk 35 With Gold, You’re Golden 148

Bunk 36 Stocks Love Lower Taxes 152

Bunk 37 Oil and Stocks Seesaw 158

Bunk 38 Swine Flu, SARS, Ebola, and Other Viral Disasters Make Markets Sick 163

Bunk 39 Consumers Are King 167

Bunk 40 Presidential Term Cycles Are Stock Market Voodoo 172

Bunk 41 My Political Party Is Best for Stocks 178

Bunk 42 Stock Returns Are Too High and Must Fall 182

PART 5 It's a Great Big World! 187

Bunk 43 Foreign Stocks Just Feel So . . . Foreign 189

Bunk 44 Who Needs Foreign? 192

Bunk 45 Big Debt Is National Death 195

Bunk 46 America Can’t Handle Its Debt 199

Bunk 47 Indebted to China 202

Bunk 48 Trade Deficits Make Deficient Markets 206

Bunk 49 GDP Makes Stocks Grow 211

Bunk 50 Terrorism Terrorizes Stocks 215

Notes 219

About the Authors 228

Index 229

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KEN FISHER is best known for his prestigious "Portfolio Strategy" column in Forbes magazine, where his over 25-year tenure of high-profile calls makes him the fourth longest-running columnist in Forbes's 90-plus year history. He is the founder, Chairman, and CEO of Fisher Investments, an independent global money management firm with over $32 billion under management (as of 6/30/10). Fisher is ranked #289 on the 2009 Forbes 400 list of richest Americans, and #721 on the 2010 Forbes Global Billionaire list. In 2010, Investment Advisor magazine named him as one of the 30 most influential individuals of the last three decades. Fisher has authored numerous professional and scholarly articles, including the award-winning article, "Cognitive Biases in Market Forecasting," and has published six previous books, including the New York Times and the Wall Street Journal bestsellers, The Only Three Questions That Count, The Ten Roads to Riches, and How to Smell a Rat, all of which are published by Wiley. Fisher has been published, interviewed, and/or written about in many major American, British, and German finance or business periodicals. He has a weekly column in Focus Money, Germany's leading weekly finance and business magazine.

LARA HOFFMANS is a content manager at Fisher Investments, a contributing editor of MarketMinder.com, and coauthor of the bestsellers, The Only Three Questions That Count, The Ten Roads to Riches, and How to Smell a Rat.

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"It's about time someone drove a stake into the folklore that permeates Wall Street, and Mr. Fisher does it in convincing-and often entertaining-fashion."
—The Globe and Mail, November 2010
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October 12, 2010
Debunkery: Learn It, Do It, and Profit from it -- Seeing Through Wall Street's Money-Killing Myths

Ken Fisher’s DEBUNKERY

Learn It, Do It, and Profit From It—Seeing Through Wall Street’s Money Killing Myths 

By New York Times Bestselling Author Ken Fisher

With Lara Hoffmans 

Legendary investor Ken Fisher’s latest book DEBUNKERY: Learn It, Do It, and Profit From it—Seeing Through Wall Street’s Money-Killing Myths (Wiley; October 2010; $27.95; hardcover) challenges and refutes common, widely held investing myths and misperceptions; maxims that rob investors and kill profits. “Every investor, me included, makes lots of mistakes—but a huge part of success is avoiding common errors most investors make repeatedly—and that’s the focus of this book,” says Ken Fisher. 

“Folks have a romantic notion about ‘beating the market’,” says Ken Fisher. “A lofty goal—and possible, though difficult—but most investors not only don’t beat the market, they don’t match the market or come even close.”  DEBUNKERY shows readers why and how to avoid these oft repeated mistakes. 

DEBUNKERY comes in bite-size chunks---where you can read one chapter or many—and not necessarily in any given order. Readers should feel free to skip around and dive in anywhere. Ultimately, it is meant to deliver short, pithy lessons that are applicable immediately. 

Among many myths and superstitions, DEBUNKERY disproves:

  • One Big Bear Market and You’re Done. Bunk. The bigger a bear market, the bigger and swifter the returns can be—and usually are—off the bottom. Bear markets can be big, but don’t imply smaller subsequent bull markets—contrary to myth—just the opposite. .

  • Make Sure It’s A Bull Market Before Diving In. Bunk. There is never an “all clear” sign. If there were everyone would beat the market. The opportunity cost of missing a bull market’s first few months is massive and lasting. So be sure not to miss it—or you’ll regret it later.

     
  • A Good Con Artist Is Hard To Spot. Bunk. In reality, it is easy to spot a potential fraudster and Ken Fisher shows readers five sure signs to be on the lookout for, and details how to make sure what happened to Bernie Madoff’s victims never happens to you.

  • Covered Calls Have You Covered. Bunk. The name “covered calls” is comforting! But the truth is that, despite perception, covered calls are extremely risky. Debunkery proves it.

  • Sell in May. Bunk. Everybody’s heard, “Sell in May and go away.” But its provably wrong and bad advice. This is easy to prove but the tool Debunkery uses to prove it can be used to disprove lots of other common myths.  Learn it and have fun with it to your profit.

  • Low P/Es Mean Low Risk. More bunk. People tend to think low price-to-earnings (P/E) ratios mean low risk for single stocks and the market as a whole. It’s an almost universal, near-religious belief that “everyone knows.”  But it’s just wrong. Using P/E’s to forecast risk and return over any reasonable time period is about as useful as a Ouija board.

  • High Unemployment Is A Stock Market Killer. No. Unemployment is a late lagging indicator. It doesn’t predict anything. Ever!  See how and why!  High unemployment scares many from opportunities but it should always be ignored.  Debunkery shows the proof.

  • Stocks Love Lower Taxes. Bunk again. Folks love fretting over taxes. It’s a national pastime. But there’s no evidence that a tax cut or hike has a predictable outcome on future stock levels. Other forces are bigger.  You should skip taxes and focus where it counts.  

Once you intuitively accept that commonly accepted investing wisdom often isn’t wise and learn to debunk myths to avoid common and widely repeated mistakes, you improve your odds.  Through DEBUNKERY you will still make mistakes but your overall investing success should improve and your portfolio should look greener in the years ahead. Learn more at http://www.debunkery.com 

About the Authors

Ken Fisher is best known for his “Portfolio Strategy” column in Forbes magazine, where over 26 years of high-profile calls make him the fourth-longest-running columnist in Forbes’ history.  He is the founder, chairman, and CEO of Fisher Investments, an independent global money management firm managing over $37 billion (as of 9/30/2010). Fisher is ranked #252 on the 2010 Forbes 400 list of richest Americans. In 2010, Investment Advisor magazine named him one of the 30 past years’ 30 most influential industry individuals. He has written six prior books, including New York Times and Wall Street Journal bestsellers: The Only Three Questions That Count, The Ten Roads to Riches, and How to Smell a Rat. For more visit http://www.ken-fisher-investments.com

Lara Hoffmans is a manager and senior editor at Fisher Investments and co-authored The Only Three Questions That Count, The Ten Roads to Riches, and How to Smell a Rat. She graduated from the University of Notre Dame.

 

About Fisher Investments Press

Fisher Investments and John Wiley & Sons, Inc. launched Fisher Investments Press in 2007 to offer investing education for a wide and diverse audience.  The series offers the full spectrum of investors, from novice to professional to investing enthusiast, a tool set to help them become better investors. Fisher Investments Press has published 9 titles to date, including 7 investment sector guides. For more information visit http://www.fisher-investments-press.com

 

About Fisher Investments

Founded in 1979 by Ken Fisher, Fisher Investments is an independent, global money management firm headquartered in Woodside, CA. Fisher Investments currently manages $37 billion across two principal business units: Fisher Investments Institutional Group and Fisher Investments Private Client Group. These units serve diverse groups of global clients, including corporate, public and multi-employer pension funds, foundations and endowments, insurance companies, healthcare organizations, governments, and over 24,000 high net worth individuals. Fisher Investments is a registered investment adviser with the Securities and Exchange Commission under the Investment Advisers Act of 1940.  For more information visit http://www.fisherinvestments.com

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Debunkery: Learn It, Do It, and Profit from It -- Seeing Through Wall Street's Money-Killing Myths (US $27.95)

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