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4.6 out of 5 stars
4.6 out of 5
397 global ratings
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How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn

How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn

byAllan S. Roth
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Top positive review

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Jeanne C. Stein
5.0 out of 5 starsFrom the Mouths of Babes
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on January 30, 2015
Investment luminaries like John Bogle, Burton Malkiel, Charles Ellis, and a host of others, have written extensively about the keys to successful investing. The common theme running through their books and articles is easy to summarize: invest your money in a collection of broadly diversified, low cost index funds; allocate your dollars among these funds according to the risk you wish or need to bear; rebalance regularly; periodically add savings to your portfolio; maintain a long-term perspective; then go about living your life. Yet many investors unnecessarily complicate their portfolios with overlapping investments; sell in a panic when markets decline; trade too much incurring excessive costs; and generally earn below-market returns. Behavioral finance economists have a field day with them.

Maybe the human animal with its psychological quirks is unable to follow this advice. Perhaps we are hard-wired to needlessly complicate things. Not so, says author Allan Roth. There are people who invest this simple way and do quite well thank you. For an example, he introduces us to his son Kevin, a second grader at the time this book was written. Young Kevin began with a modest portfolio financed with a gift from his grandparents. It has done well over time, outperforming most professionals. How does Kevin do it?

Well, for starters. Kevin has certain advantages that adults lack. He goes to school, plays with his friends, and watches SpongeBob on TV. He doesn't fixate on his individual investments nor does he follow the market. He spends his time enjoying his childhood and wondering what he will be when he grows up. As a result, he doesn't churn his portfolio nor does he develop anxiety when the market drops.

Of course, Kevin is fortunate to receive sage advice from his Dad, a highly regarded financial adviser. But the reason he beats the Street is because he doesn't beat himself. Kevin ignores the daily dance of stock prices and lets his investments compound. In short, he behaves the way investment notables say we all should behave. We adults can learn a great deal following Kevin's example. And that is the point of the book.

Now some may complain that this is all too simplistic. A young boy doesn't have to earn an income to feed his family nor save for his children's education or his own retirement. And given his long investment horizon, he can afford to be nonchalant about the current value of his portfolio. But that misses the point. Wealth for both children and adults must be given time to grow; it usually does not come in a burst of good fortune. We often detract from wealth accumulation when we chase performance, sell in a panic, or bet the ranch on a few targeted investments. Building and maintaining a sound portfolio is not difficult and Kevin's Dad explains it clearly with a touch of humor. It may be humbling to us adults, but following the example of a second grader may just bring us closer to achieving our financial goals.
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14 people found this helpful

Top critical review

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Freysquire
3.0 out of 5 starsShould be titled: Golden Rules a Second Grader Can Learn
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on July 15, 2013
I still haven't found an investment book that is perfectly written for my demographic - an intermediate hobby investor. I am an attorney and invest on the side but I was never formally trained and did not attend business school. I've been looking for a book that can provide easily digestible information on investment. I found that this was overly simplistic with rules such as "diversify" and "buy low, sell high" and "pay off high interest credit cards first." I had hoped for something more advanced yet simplified - for example, hoped this could help teach techniques for identifying good stock selections or value stocks by summarizing what to look for in p/e without getting too technical. This was much too simple I think.
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One person found this helpful

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From the United States

Jeanne C. Stein
5.0 out of 5 stars From the Mouths of Babes
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on January 30, 2015
Verified Purchase
Investment luminaries like John Bogle, Burton Malkiel, Charles Ellis, and a host of others, have written extensively about the keys to successful investing. The common theme running through their books and articles is easy to summarize: invest your money in a collection of broadly diversified, low cost index funds; allocate your dollars among these funds according to the risk you wish or need to bear; rebalance regularly; periodically add savings to your portfolio; maintain a long-term perspective; then go about living your life. Yet many investors unnecessarily complicate their portfolios with overlapping investments; sell in a panic when markets decline; trade too much incurring excessive costs; and generally earn below-market returns. Behavioral finance economists have a field day with them.

Maybe the human animal with its psychological quirks is unable to follow this advice. Perhaps we are hard-wired to needlessly complicate things. Not so, says author Allan Roth. There are people who invest this simple way and do quite well thank you. For an example, he introduces us to his son Kevin, a second grader at the time this book was written. Young Kevin began with a modest portfolio financed with a gift from his grandparents. It has done well over time, outperforming most professionals. How does Kevin do it?

Well, for starters. Kevin has certain advantages that adults lack. He goes to school, plays with his friends, and watches SpongeBob on TV. He doesn't fixate on his individual investments nor does he follow the market. He spends his time enjoying his childhood and wondering what he will be when he grows up. As a result, he doesn't churn his portfolio nor does he develop anxiety when the market drops.

Of course, Kevin is fortunate to receive sage advice from his Dad, a highly regarded financial adviser. But the reason he beats the Street is because he doesn't beat himself. Kevin ignores the daily dance of stock prices and lets his investments compound. In short, he behaves the way investment notables say we all should behave. We adults can learn a great deal following Kevin's example. And that is the point of the book.

Now some may complain that this is all too simplistic. A young boy doesn't have to earn an income to feed his family nor save for his children's education or his own retirement. And given his long investment horizon, he can afford to be nonchalant about the current value of his portfolio. But that misses the point. Wealth for both children and adults must be given time to grow; it usually does not come in a burst of good fortune. We often detract from wealth accumulation when we chase performance, sell in a panic, or bet the ranch on a few targeted investments. Building and maintaining a sound portfolio is not difficult and Kevin's Dad explains it clearly with a touch of humor. It may be humbling to us adults, but following the example of a second grader may just bring us closer to achieving our financial goals.
14 people found this helpful
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ccapegirl
5.0 out of 5 stars A Simple Guide to Financial Investing - A Definite MUST READ!
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on January 14, 2016
Verified Purchase
I have read a lot of finance books through the years. One thing I notice is - generally, at some point in most or all of these books, I become confused. Sometimes the language is confusing, the recommendations too complex to follow, or the concepts don't make sense to me. I always try to take notes, create graphs, google all the concepts - and usually toss the book into a corner in frustration. My portfolio remains the same and I turn back to Amazon and my on-line library to search again. I also get the sense that the author either is trying to sell me something or is intent on proving him or herself as a wall street "wizard."

Then, a few weeks ago, I picked up Allan Roth's book. Mr. Roth has a engaging writing style - this book tells the story of his son, who received some money from a relative, and how he used this gift to teach him lessons about building a solid portfolio.

In How a Second Grader Beats Wall Street, Mr. Roth walks us through those same lessons: finding solid but reliable returns through no load mutual funds, keeping an eye on taxes while investing and staying the course by not jumping in and out of investments. Keep it simple, he says.

And so, for the first time, I discovered a book that made sense to me. I finished this small guide and was able to develop a very simple outline of what I could do with my savings and retirement funds. I feel comfortable with my decisions and now know the steps I needed to take to get my funds in the right places. I will be putting that plan into place this upcoming week and look forward to "staying the course."

If you are someone who is tired of trying to interpret thousands of financial "experts" recommendations into a simple and effective plan for your money, whether you have $1000 to spare or $10,000, buy this book. I think you won't regret it.
30 people found this helpful
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Divesh Singh
4.0 out of 5 stars brilliant book - must read
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on September 20, 2022
Verified Purchase
Must read
Great book on basics of investing.
Very important to take advantage of the current dip in the stock market
2 people found this helpful
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Marlowe Doman
5.0 out of 5 stars Great book on investing that answers a lot of questions
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on May 22, 2022
Verified Purchase
Iโ€™ve read a lot of books on investing and this was one of the best. I had a lot of questions that had not been resolved and Allan Rothโ€™s book provides a very simple set of rules that anyone can follow, and delivers them in an engaging way. He also explains the โ€œwhyโ€ behind each rule which is just as important, and gives pointers on asset allocation which are very insightful. Even though the book was written a few years back itโ€™s still highly relevant and useful. I would recommend it to anyone interesting in learning about financial management and investing.
3 people found this helpful
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Jane R.
5.0 out of 5 stars Dare to Stop the Game
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on August 11, 2009
Verified Purchase
Only read this book if you are willing to 1) learn something new, and 2) let go of old habits. I met Allan Roth when he taught a behavioral finance class for CPAs and attorneys at the University of Denver. I was so impressed by his presentation that I emailed him and asked if I could hire him as my financial advisor. I bought the book, which was pretty much the same as the class materials, but easier to carry around. I read the book several times and I still keep it out in my home office. His ideas are simple, logical, and completely contrary to everything I had ever heard about investing. Could this be why investing never made any sense to me? I used to think I was a weird CPA because I had no interest in finance. I wasn't interested because it made no logical sense to me, ever. I keep wonderfully detailed and useful spreadsheets (ask Allan, he'll agree) but I couldn't figure out what to do with this information. One thing I could certainly see was that...I kept losing lots and lots of money!! Suddenly, I didn't feel so dumb. I was right. Investing, as we know it, is a giant marketing scam. I turned my portfolio around and retired, as planned. I hope to never look back. I still find that I cannot discuss Allan's ideas with anyone because no one wants to listen to something so radical, so simple, and so logical.
I am following this up 2 years later, it is now Nov. 2011. I have kept all my investments as Allan designed them. Through all the chaos of the financial markets, my portfolio has held strong. I am still retired. What more could you want? I seek my thrills somewhere other than my financial portfolio.
30 people found this helpful
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Eric Beckstrom
5.0 out of 5 stars Clear and understandable
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on October 25, 2022
Verified Purchase
I liked the clear examples and explanations. Iโ€™m maxing out my 401(k) using the principles from the book. I recommend it!
2 people found this helpful
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The J Crew
5.0 out of 5 stars Did I have a lot to learn...
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on July 14, 2010
Verified Purchase
This book was recommended to me by a friend who was getting educated on 'index' investing. I must admit that I was not expecting very much. I was certain the stock advisors I had were giving me good advice and my returns were above average.

Boy did I have a lot to learn.

This book was extremely well written and can be followed by everyone from the most experienced investors to those whose investment experience ends with writing their check to their broker for their Yearly IRA contribution.

The concepts were eye opening. While I considered myself somewhat educated in the area of investing, the book lead me through concepts that my brokers had never introduced me to. (All the while explaining why my broker never introduced these concepts to me.)

I especially enjoyed the way he explained why Wall Street does what it does, and why investors respond the way they do. I also appreciated Allan's honesty about times he himself could not help 'placing a bet' on some single stock. (With the extremely small portion of his portfolio dedicated to playing the market of course...)

All in all, an excellent book for any investor who is new to index investing.

Real insight.
Real, easy to follow, examples.
Real advice on how to move forward.

All this and the price of the book is a great deal less than the 5% load I paid on my mutual fund purchases last year.

Thank you Allan for an excellent introduction to something that so many of us get so completely wrong.
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Iris Clark
5.0 out of 5 stars Safer, faster and better investing for most of us
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on March 31, 2009
Verified Purchase
Allan Roth's approach to portfolio management tickles my brain! His entertaining peeks behind the Wall Street curtain have opened my eyes to some of the dirty little secrets that plague not only me, but my widowed mother and other women who, unfortunately, seem unwilling to question their charming broker's claims to "beat the market." And, as Roth so elequently reveals, we end up paying dearly without even realizing the riches that have slipped through our fingers.

It's a good idea to keep a notepad handy as you read - not just for noting the easy changes you can make today that will make you real money tomorrow. You will find tons of those. But you will also come across thought provoking concepts such as behaviorial finance that you may want to store for later exploration. Or the neat bit on overcoming the "Google effect." (I'm not telling. You have to read the book.). And did you know that a small investment adjustment could save you more money than running your car on water?

Knowledge is power, and thank you Allan for arming me with the know-how to grow my investments faster, safer, better. No more the "ignorance is bliss" investment approach for me or my friends. I've become, not just a convert, but a disciple buying gift copies for friends and relatives. It's my bible of investing. If you find a copy in your next hotel room, you will know that I am making progress!
5 people found this helpful
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Craig N.
5.0 out of 5 stars The is the intro book to get you hooked on investing, for any age beginner
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on February 23, 2018
Verified Purchase
I have now read about 8 or so intro books into investing over the past few months. This was by far my favorite and a great intro or "gateway drug" book to get you interested in and excited about investing. Please read this before getting a financial advisor (if you even get one). No one will look out for you more than yourself. After reading this, you'll understand concepts like the rule of 72 (how long it takes your money to double) and why actively managed funds defy logic even though you will have them pushed on you at some point. This advocates a vanilla/simple form of low-cost index investing (which all of the other 7 books recommended as well) and later on rather than getting excited about picking random stocks (which is one of the dumbest things you can do), you will get excited about seeing how low you can your fees, which will directly turn into guaranteed more money for you.
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mullinc22
5.0 out of 5 stars Down to earth, solid advice
Reviewed in the United States ๐Ÿ‡บ๐Ÿ‡ธ on November 22, 2021
Verified Purchase
I have read a good deal of investing books lately and this is one of the best. I will probably keep it out to reread every once in a while. If you read this, some of the bogleheads stuff, and intelligent investor, you will be headed in the right direction.
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