# Rory Gillen's new book: 3 Steps to Investment Success



## Brendan Burgess

Askaboutmoney contributor  has published a new book 

[broken link removed]



> There are only three steps to making a success of investing  throughout your life time. The first step is to adopt an approach that  you can understand and that suits your temperament. This book includes a  number of easy-to-follow approaches including a time-tested approach to  selecting stocks in markets.
> 
> The second step is to understand why the markets are so volatile, and  to avoid letting the volatility interrupt your investment plans. The  third, and final, step is to have the patience to let compounding work  its magic over time.


Has anyone read it yet?  Care to write a review? 

*Testimonials

*
*3 Steps to Investment Success sets out, in the clearest of language, how  to avoid the herd mentality that still dominates the way most people  invest. There are no flashy get-rich-quick secrets revealed here, just  informed and sensible explanations about the mind-set you need to adopt  and the actions you need to take if you want to make money and avoid  losses

Jill Kerby
Personal Finance Columnist, Sunday Times (Ireland)
*


A good guide to successful approaches to stock market investment, highlighting common investing errors and debunking the myths


 
*Jim Slater *
_Author, The Zulu Principle_
A uniquely helpful book with excellent advice for investors, wherever they may live

*Jack Schannep *
_Author, Dow Theory for the 21st Century_



A well organised and practical manual for investing. Packed with  insights into value and investor psychology, it will appeal to private  and professional investors alike. Rory Gillen has a gift for explaining  the complex world of investing in clear and simple language

*Colin McLean *
_Managing Director, SVM Asset Management, Edinburgh
_


An excellent read for someone wishing to take a more pro-active interest in investing and the stock markets*

Harry Sheridan*



_Former Finance Director, CRH plc._


----------



## JR Rizzo

I aint read it, but I doubt any of those written Testemonials come from anyone who risked and won their fortune investing in stocks.

Is there anything really new and original in these books, its just same ideas re-hashed since Graham and Buffet??


----------



## Jim2007

JR Rizzo said:


> Is there anything really new and original in these books, its just same ideas re-hashed since Graham and Buffet??



There is nothing wrong with these ideas, it's getting people to follow them over the long run that is the problem.  There are not many people who will continue to buy or hold a stock as the price goes down by say 50%!


----------



## Rory Gillen

JR Rizzo,

If you take the time to google the individuals who provided testimonials you will find out that not only have they risked serious money but they are among the most successful. Jim Slater is well known and well respected in investment circles in the UK. Colin McLean is former Chairman of the CFA in the UK and manages money for real, everyday. If you haven't heard of Jack Schannap, his version of Dow Theory is, in my view, the best among Dow Theorists - one of the few medium-term market timing indicators I have time for, as the record is strong and unambiguous - and he and his family invest real cash accordingly. Harry Sheridan, and his sons, run a family investment business in Dublin.


Rory Gillen


----------



## RichInSpirit

I hope to buy it secondhand, if anyone is finished reading it and want's to sell it on i'm here !


----------



## Jim2007

RichInSpirit said:


> I hope to buy it secondhand, if anyone is finished reading it and want's to sell it on i'm here !



A yes, a value investor I see...


----------



## mercman

Jim2007 said:


> A yes, a value investor I see...



But with a difference. Not a Buy and Hold Investor -- Just bum it off anyone and hold Investor. Sounds like an Irish Banker at Xmas time.


----------



## leroy67

Rory's bonafides are beyond doubt, well worth the money


----------



## DMcL1971

I bought the book and am about a third of the way through reading it. So far, I can highly recommend it. It takes a very practical and common sense approach to investing. None of the get rich quick bull. Also, it's good to read a book from an Irish point of view. I am sick and tired of reading about putting my money in ISA's and 401K's and other such advice that does not relate to Ireland. 'Buy and hold' may not be a new idea but as Jim2007 says, it's sticking to it that is tricky.

I am new to investing and have so far only read about a dozen investment books, but so far this is the best one. When I am finished reading it I will post a longer review.


----------



## mercman

DMcL1971 said:


> I am sick and tired of reading about putting my money in ISA's and 401K's and other such advice that does not relate to Ireland.



Not to belittle Rory Gillen's book or himself, but in case you didn't realise the majority of large investors nowadays don't look at Irish equities. There are only a handful of Irish shares worth placing money in. Unfortunately the investment market in Ireland has more or less disappeared and for which I find the service I receive from the Irish Brokers I use as impeccable. Their analysis is top class and they work with their clients rather than making it a pure commission earning structure.


----------



## DMcL1971

I didn't mean to imply that the book only focussed on Irish equities or the Irish market. In fact the book focuses on diversifying across many geographical areas as well as asset classes. I only meant that many of the American investment books I have read have given advice that is only applicable to American investors. They also only give figures based on the U.S. market whereas Rory gives figures for U.S. and Europe.

Rory's book is well balanced and it is straight forward enough for a novice like myself to understand but also delves deep enough for a more experienced investor.


----------



## ALBERT*

Anyone have a link for a table of contents for this book anywhere. Haven't been able to find anything so far.


----------



## croker

> Their analysis is top class


Seriously? Do a google for Irish broker analysis of the Irish banks in 2007-2009 period and you'll find they had no clue! The facts speak for themselves.
The only defence one could make is to say the banks weren't telling the whole story to the analysts...but if the hedge funds could dig and find what was going on why couldn't the broker analysts? I have my own views on why but probably shouldn't say here. I can't believe the Irish brokers are still in business.


----------



## DMcL1971

I have now finished reading Rory’s book and can wholeheartedly recommend it. I have been steadily saving for a few years into various deposit accounts but now feel it is time to try and get a better return on my money. I have read several books on investing but have been unsatisfied by them all. They proved irrelevant due to being too US market centred, too complicated or just too plain long winded. Also, many of these books were written back in the 2000’s when everything seemed fine and the idea of a worldwide financial collapse didn’t seem possible.

  Rory’s book is extremely well structured. It starts off with the basics of both financial planning and investment. It then explains the various asset classes and the pros and cons of each and the risk and reward for each. It then tells you the different ways you can go about investing in each class. From there it shows you how to mix investments in the various asset classes so as to create a portfolio containing the amount of risk you are comfortable with and what kind of return you are trying to get. At this point you could stop reading if you wanted to, but the next section then goes into much greater depth for those who are interested in value investing in individual stocks rather than funds.

  It constantly contains warnings against speculating and taking on too much risk, which is sage advice considering the financial collapse over the last few years.   It promotes the idea that slow and steady investment over a medium to long term can produce very good results. This is no, get rich quick scheme, but rather a, slow and steady wins the race, plan.

  I intend to read the book again and start following its investment principles.


----------



## Rory Gillen

ALBERT* said:


> Anyone have a link for a table of contents for this book anywhere. Haven't been able to find anything so far.


 
In terms of the the 'Book's' content, the enclosed PDF should assist you. It also has some extracts along with the full testimonials etc. Like anyone who has put in the effort that is required to get a book like this completed, I am as anxious as the next fellow that it sells. Whoops I just noticed that I can't attach an PDF here. I will email you personally.

*Rory Gillen*


----------



## James Rice

*My 3 steps to getting investment*

1 - Find person with large amount of money...HARD PART!

2 - Promise them you will make more for them with project 

3 - Take the money ASAP before they are broke like the rest of us.


----------



## Rory Gillen

James Rice said:


> 1 - Find person with large amount of money...HARD PART!
> 
> 2 - Promise them you will make more for them with project
> 
> 3 - Take the money ASAP before they are broke like the rest of us.


 

All said in good spirit no doubt and here are the three steps referred to in the book;


Adopt a plan to investing based on values and diversify (the book shows you several easy-to-follow plans).
Understand why the markets are so volatile and that volatility is not the same as risk, which should assist you to avoid letting volatility interrupt your long-term investment plan.
Have the patience to let compounding work its magic over time.
Hope that adds some clarity.

*Rory Gillen
Founder
Gillenmarkets.com*


----------



## Duke of Marmalade

Where can you buy this book?


----------



## DMcL1971

In all good bookshops as they say.
There is a link in the first post of this thread to the Gillen Markets website where you can buy it directly. I have also seen it in Hodges Figgis and Dubray books. I bought the Kindle version on Amazon. However some of the graphs are a bit hard to read on the kindle.


----------



## Duke of Marmalade

DMcL1971 said:


> In all good bookshops as they say.
> There is a link in the first post of this thread to the Gillen Markets website where you can buy it directly. I have also seen it in Hodges Figgis and Dubray books. I bought the Kindle version on Amazon. However some of the graphs are a bit hard to read on the kindle.


I've already ordered it on Amazon. stg£24 including postage I decided to buy in sterling despite the huge exchange rate risk I am running. 3-4 days delivery they say. 

I can promise in advance that my critique will be negative. I have no doubt that it will live up to the glowing testimonials on this thread but I am deeply, deeply sceptical of stockmarket investment other than for say 10% of your portfolio. The last 10 years have discredited the cult. 

When the shoe shine boy is telling you to buy shares, time to sell. This is what has happened in recent history. For much of the 20th century equities can be seen with hindsight to have been cheap. But that is a function of supply and demand - when demand is limited to a minority of the population there is a good possibility of a cheap price. By the end of 20th century every Tom, Dick, Harry, Mary, Daphne etc. was piling into equities through various forms of highly promoted collective investments as well as through their pensions. Demand had pushed the prices to really silly levels with P/E's not possibly sustainable. Despite the bubble bursting prices and demand are still too high IMHO.

Finally, for the moment, volatility is very, very unsettling. It is very hard to feel sanguine about a 20% fall in the almost religous act of faith that in the long run it will all smooth out.


----------



## STEINER

I will buy this.  Its 19.95 inc delivery Easons online.  I have a 20% off voucher which can only be used instore so I'll wait til I visit.


----------



## LDFerguson

I'm told I'm very difficult to buy Christmas and birthday presents for, so I've helpfully put Rory's book on my Christmas list.


----------



## DMcL1971

Marmalade,

I understand your point, but I urge you to keep an open mind, as I think you will find the book very interesting anyway as it does agree with you in relation to the overvaluing of shares in the late 20th century. Prices certainly got out of hand and the burst of the bubble has brought things down to a far more reasonable level. Whether that level represents real value yet is certainly open to debate. The last section of the book directly deals with P/E levels and how they should be viewed to decide if a share actually represents a value prospect.

I found the book to be insighful because it has been written after the collapse. Whereas alll the other books were from before. It therefore emphasises being far more wary of taking on too much risk, as we can see where that got the world in the last decade, and to look for value in your investments.


----------



## Duke of Marmalade

I've read the book.

I promised you negatives and these I do indeed deliver below. However, to be fair, anyone reading the book should be able to garner an accurate flavour of just what are the limitations and possibilities of stockmarket investment. Lots of historical data to show that there are no certainties here. A reasonable indication is given of what constitutes the "long term" view. Chapter 9 is the most informative and Table 9.2 in particular is eye opening. At least two surprises here - bank deposits have over a long period beaten inflation by 1.8% - that seems good to me. Gold on the other hand has only beaten inflation by 1.3%. Gold worse over the long term than bank deposits!! Can't disagree with his endorsement of on-line investing in ETFs and his dismissal of on-line trading as a below zero sum game. His dismissal of commission based selling is also hard to argue with. 

However, I do have many criticisms:

Dollar cost averaging is hailed for its "power". That has been covered on AAM before but let me restate that this is a mere arithmetic truism. It has no economic substance whatsoever. He illustrates this power with two historic examples covering the first two 5 year periods of this century. That is not proof and it brings me to my second criticism.

Far too much reliance on "backtesting". The oodles of historical data is informative and maybe even useful but the next two criticisms are also related to an overreliance on backtesting.

He has a system for beating the FTSE index. Essentially keep rolling over into the cheapest stocks. Apparently it backtests well. But the inclusion of this "system" IMHO goes against his otherwise healthy and oft stated scepticism that there is "no silver bullet".

The chapter on technical indicators I found particularly unconvincing in this regard. Some of these "systems" are so contorted that they can only have possibly been derived because they backtest well.

Disappointed that there appears to be no reference to tax. To me tax is perhaps the most important factor - except of course for pension investors. (I accept that he probably did not wish to parochialise his message for to cover the many tax regimes would have been unwieldy.) Take his "buy the FTSE cheapest stocks" system, this is also presumably the least tax efficient as it should be correlated to high dividend yields and high dividends are a disaster from a tax point of view. 

Finally, I think his attack on Tracker Bonds is biased. He actually gets the metrics right. He says that these structures cost about 2% to 3% per annum. But Table 9.2 reveals that historically the cost of guarantees has been 3.3% (equities less deposits) so this looks like competitive charging for the guarantee. The bias pokes through rather nakedly when he states that his conclusion is that these products suit the seller not the investor! (sic) In fact the actual costs made by the seller are typically only 1% p.a. and your average broker shuns these products as they simply do not pay enough commission.

Overall summary: the correct messages and descriptions of what stockmarket investment really entails and the appropriate level of scepticism of the various conventional myths and the endorsement of online trading in ETFs should have earned an A+ but the criticisms above, including what seems like contradictions to this down to earth and straightforward message, are fairly serious shortcomings IMHO.


----------



## PMU

This is an excellent book, both for the novice and the more experienced investor.  Mr Gillen’s three steps are to (a) let compounding work over time; (b) adopt a value based approach to investing; and (c) not to let market volatility interrupt your investment plan.  


Mr Gillen then deals with investment theory; provides an analysis of different asset classes; and concludes with developing an investment strategy.

  The only place I would disagree with Mr Gillen is on his treatment of commodities.  While Mr Gillen correctly points out that commodity prices have failed to keep up with inflation over the past 50 years, this is not true of commodity futures.  The authors of Yale working paper “Facts and Fantasies on Commodity Futures” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=560042 point out that commodity futures have historically the same return and Sharpe ratio as equities, but are negatively correlated with equity and bond returns.  This diversification effect is one reason for investing in commodity futures.  The second is that part of your return is from the roll-yield (i.e the gains and losses on rolling over contracts), which is is theoretically uncorrelated with stock market returns, and so is a source of alpha return.  Also, there is no practical difficulty in investing in commodity futures; you can do it easily by ETFs, e.g. the Lyxor etfs that replicate the Jefferies CRB Total Return index.

For €19.95 (the price of 4 pints) this book is excellent value, well written, and I can recommend it thoroughly.


----------



## Monksfield

The paper PMU refers to is well worth reading. Theoretically there should be a return embedded in the commodity futures contract - and for long periods there has been (positive roll yield). In recent years this has not been the case for many commodities. Some very large disparities have arisen between returns delivered via futures and movement in the spot price(s).

Still, the case for using commodities as part of a portfolio is strong.

I have not read Rory's book but I am generally in agreement with his investment approach.


----------



## Marc

Agreed the Gorton and Rouwenhorst paper is about the best on the subject but it doesn't actually make many of the claims that some people infer from it.

Firstly, if I add up all the futures contracts in the world I get nothing. For every long there is a short. So, in just the same way that the market doesnt include bets on the all-Ireland it doesnt include commodities futures. You can think of these as bets. For you to win, I have to lose. Assets in zero net supply with costs is not investing - its speculating.

I'm also currently reading Rory's book and would echo Duke's criticism on the lack of tax coverage. It's actually not that difficult to deal with uk and Ireland taxation issues (I would have thought these are the main markets for the text) and their omission means that a novice reader of this book in either jurisdiction could easily lose their way very quickly or worse be hit with additional taxes to pay if they fail to file correctly.


----------



## mercman

Marc said:


> It's actually not that difficult to deal with uk and Ireland taxation issues (I would have thought these are the main markets for the text) and their omission means that a novice reader of this book in either jurisdiction could easily lose their way very quickly or worse be hit with additional taxes to pay if they fail to file correctly.



I find this perception extraordinary especially when Investment professionals allude to it.  A profit is a profit end of story. How one arrives at an eventual bottom line remains one's business. i.e. if a person decides not to declare their profit does it mean they made more money than somebody else that did declare it ?

In this country successive Governments carried on the Section 23/27 route to save peoples Tax, so much so that the sector used for regeneration has driven the country into a brick wall.

And as for the Tax amnesties ?? Sure this was the greatest game of charades ever. Pure madness. If an investor buys an investment at 1, then chooses to sell it at 1+. There's a profit. Now pay the taxes on the profit and move on to the next transaction. IMO.


----------



## Marc

I'm sorry but i don't understand your point here Merc. 

I was referring to the fact that if an Irish resident makes a hash of their tax filing or worse fails to disclose certain investment purchases then they suffer a penal rate of tax.


----------



## mercman

Marc,

And the point I was trying to make is Rory Gillen is an accomplished equities adviser who has written a book on the topic. He seems to be blamed on the book lacking on Tax coverage. Tax is a separate matter that is handled in other different books and in reality by other professionals. The title of the book is 3 steps to Investment Success. It is not meant to cover Tax issues.


----------



## Duke of Marmalade

_Mercman_,

I have three easy steps to investment success tax, tax and tax.  Gillen recommends a strategy of investing in FTSE low P/E shares.  That will mean high dividend yield.  Dividends are taxed at over 50%.  Post Office savings are tax free.  Anyone holding high dividend shares is plain silly unless of course they do so through their pension fund.


----------



## Marc

If I could ignore practical investment realities such as taxes it would be easy to write a three step investment book.

1) Go to local shop
2) Purchase lottery ticket with the following numbers 1,5,14,18,26,41,42
3) Collect winnings and retire

In the shops in time for Christmas price €5.


----------



## Rory Gillen

*Why No Coverage of Tax Issues*

I consciously left out tax implications for a number of reasons;

(i) I did not want the book to be seen as Irish-centric. Equally, I referred to the Irish Stock market on only one occasion for the same reason. 
(ii) I was also addressing an institutional audience (fund managers etc) and tax issues are irrelevant to them.

I wish the book to be reviewed in the UK and maybe even in the US and by private and professional investors alike. As we all understands, there is a small catchment area in Ireland for such a book, especially at this depressed time. I have no idea how to get the book outside Ireland so any contributions or suggestions in that regard will be gratefully received.

In relation to the FTSE 100 value-based approaches I might make two points;


They can be followed in a pension account without tax eroding returns, and my recollection is that I mentioned the limitation due to taxes outside a pension account in the book.
The returns highlighted in these approaches are not back-tested returns. They were tracked in real time using data that existed at the time i.e. I selected the stocks myself at the time, not in hindsight. And yes, I started that in 1995. There are plenty of articles in previous Irish newspapers from 1999 onwards where I outlined the approach.
Hope that clarifies a few issues referred to previously.

*Rory Gillen*
*Founder, GillenMarkets*


----------



## Mizen Head

I am a subscriber to Rory's site and have been since he started. I am very happy with my investing results.
However, I will try Marc's 3 step formula this weekend. I will send on the €5 to him on Monday.
Could I please ask other Askaboutmoney members not to do these numbers this weekend as I want to be a single winner. You can use the numbers next week, in turn. 

Marc hasn't said but I guess they will work on Wed as well as Sat draw?


----------



## RichInSpirit

Duke of Marmalade said:


> _Mercman_,
> 
> I have three easy steps to investment success *tax, tax and tax.*  Gillen recommends a strategy of investing in FTSE low P/E shares.  That will mean high dividend yield.  Dividends are taxed at over 50%.  Post Office savings are tax free.  Anyone holding high dividend shares is plain silly unless of course they do so through their pension fund.



2 Words "Spread betting " no tax.


----------



## Duke of Marmalade

Rory Gillen said:


> The returns highlighted in these approaches are not back-tested returns. They were tracked in real time using data that existed at the time i.e. I selected the stocks myself at the time, not in hindsight. And yes, I started that in 1995. There are plenty of articles in previous Irish newspapers from 1999 onwards where I outlined the approach.
> 
> 
> *Rory Gillen*
> *Founder, GillenMarkets*


I was unaware of that background and I accept that you didn't seek out the strategy with the benefit of hindsight.  

Nonetheless, as a subscriber to the _"you can't buck the market_" thesis, I find it hard to believe in any systematic method for outperforming.  The fact that it has worked for you in the past even if with foresight does not prove the system for the future, in short you were lucky (for example you would defo miss the dot com with this strategy).  That's unless you can give some economic or behavioural justification as to why the strategy did work and should work in future.

As a side point, and I didn't check this out,  if one picks the 15 lowest P/Es will there not be a tendency to be concentrated in low rated sectors and therefore lack considerable diversification.

Finally, not sure of the book's potential in the US market.  Those guys like to get rich quick.


----------



## Rory Gillen

Duke of Marmalade said:


> I was unaware of that background and I accept that you didn't seek out the strategy with the benefit of hindsight.
> 
> Nonetheless, as a subscriber to the _"you can't buck the market_" thesis, I find it hard to believe in any systematic method for outperforming. The fact that it has worked for you in the past even if with foresight does not prove the system for the future, in short you were lucky (for example you would defo miss the dot com with this strategy). That's unless you can give some economic or behavioural justification as to why the strategy did work and should work in future.
> 
> 
> *There is always the temptation to 'let one's own opinion cloud the facts'.*
> 
> We have a strange culture in Ireland. If I see a book on investing and it is dealing with an area I am interested in, I buy it and silently thank the author for speeding up my learning curve. Books on investing are prolific in the US and that's great because it allows everyone else to learn more quickly. Publish one in Ireland and...ummmh! Perhaps my having published one will encourage others in Ireland to think of publishing their own. If they do, I will probably be the first to buy it with the aim of learning something new.
> 
> The FTSE 100 value approach I outline in the book is based on solid observation over an 18-year timeline which included a bubble phase and two deep bear markets. Each reader can make up their own mind as to whether that is the long-term. I am in no doubt that the approach has been tested in all conditions. In reality, however, this FTSE 100 value approach to stock selection is far from simple. In tough conditions, you will distrust the approach. In tough conditions, your own emotional impulses will sow the seeds of doubt. Hence, it is the emotional side of our brains that let us down, and that is why markets are not efficient all the time. Stock market volatility is the undoing of many investment plans, but an understanding that volatility is not the same thing as risk can assist us, and there is a full chapter in the book on this most important issue. Education is an important first step to becoming a better investor, and my aim has been to assist as many as I can in that regard. I am extremely grateful for all the investment books I have been able to read over the years. I could not have learned without them.
> 
> I am grateful to Brendan for posting this string as it provides many others with the opportunity to hear about the book. I financed every cent of the publishing cost along with a launch. No publisher would touch it, seeing it as the wrong time and a niche subject. I totally disagree with the view that it is a niche topic. In my opinion, as a nation we did not know how to invest and as much as anything else this payed a significant part in the problems we have. I have always enjoyed learning the markets and investing, and I like to pass on what I can so others can also learn.
> 
> That said, the global credit crisis of 2008 was the ultimate learning experience. It humbled everyone involved in investing. As the front cover of the book says...'we seek returns but must control the risk'. I don't think I fully understood that until post 2008, but the book is so much better for the experiences of 2008.
> 
> 
> 
> *Rory Gillen*
> *GillenMarkets*


----------



## Marc

Imagine that God tells me that the strategy Rory is setting out has an expected premium of 4%pa above cash with absolute 100% certainty. However Rory thinks that it is 6%pa.

How long will it take Rory to find out with 95% confidence that it is more likely 4%pa rather than 6%.

The answer to this question is 400 years.

18 years of observations in market terms is really just " noise" and we can't really draw any reliable statistical inferences.

If I want to set out to show that I expect shares to beat cash I need about 60 years of data so maybe in 40 years time we might be able to show that there is something in this but we probably can't say it now.


----------



## Rory Gillen

David Dreman, the well-known US fund manager, has 27 years of additional data, and not overlapping. That's 45 years of data showing the same simple theme. That a concentration on value within the overall market, if well diversified, can, over time, improve returns.

45 years of data is not bad. Of course there are no certainities and 200 years would be better, and the book clearly outlines that there are no guaranties with the approach. Indeed, it is only one chapter in the book and the book provides other solutions for investing and controlling risk. 

However, doggedly holding to your view of an efficient market hypothesis, which has been debunked so many times that any self-respecting disciple of EMH would have abandoned it long ago, serves for no useful debate.

You'll probably now throw your risk/reward bible at me now arguing that the higher returns just reflect having taken higher risk. But even using your own measure of risk (volatility), these approaches have much lower 'volatility' than the market. So not only do they deliver higher returns but they do so with lower volatility (risk). 

Of course, volatility is not risk so this last line of reasoning is pointless anyhow. 

This is my last comment on this issue. I'd say most readers are bored senseless by now!


----------



## Marc

Rory,

I happen to prefer French wine to Spanish but equally that has nothing at all to do with my point either. 

I made the same point recently and you took the same tack. Perhaps we can stick to the issues....

This is a simple question of statistics. We want to know if there is true alpha in any strategy once we adjust for risk. By which I don't mean standard deviation from the mean incidently, as that would not pick up the value premium, but rather excess return as measured by growth stocks minus value stocks.

As I pointed out before ( http://www.askaboutmoney.com/showthread.php?p=1228515#post1228515) the UK value premium since 1955 has been about 3% above the FTSE. This is available to all investors essentially for free from following a diversifed value strategy. So, what i want to know is how much alpha does your strategy generate above this benchmark?


----------



## Rory Gillen

Marc said:


> Rory,
> 
> I happen to prefer French wine to Spanish but equally that has nothing at all to do with my point either.
> 
> I made the same point recently and you took the same tack. Perhaps we can stick to the issues....
> 
> This is a simple question of statistics. We want to know if there is true alpha in any strategy once we adjust for risk. By which I don't mean standard deviation from the mean incidently, as that would not pick up the value premium, but rather excess return as measured by growth stocks minus value stocks.
> 
> As I pointed out before ( http://www.askaboutmoney.com/showthread.php?p=1228515#post1228515) the UK value premium since 1955 has been about 3% above the FTSE. This is available to all investors essentially for free from following a diversifed value strategy. So, what i want to know is how much alpha does your strategy generate above this benchmark?


 
Enjoy the book, the answers are in it.


----------



## Firefly

Rory Gillen said:


> Enjoy the book, the answers are in it.


 
Hi Rory,

As a novice investor, I must say that this post will almost certainly mean I won't be buying your book this Christmas. 

Firefly.


----------



## LDFerguson

Firefly said:


> Hi Rory,
> 
> As a novice investor, I must say that this post will almost certainly mean I won't be buying your book this Christmas.
> 
> Firefly.


 
Hi Firefly, 

While I don't really know Rory - met him once recently - I suspect that his comment was just intended as an attempt to stop this thread veering too far from its original purpose - a review of his book.  

Marc and Rory have differing views on investing which have been aired at great length elsewhere on this site.  This wouldn't be the right thread in which to start yet another debate on the relative merits of the different investment theories recommended by each.


----------



## carpedeum

Just bought Rory's book for €16.49 with free delivery from www.bookdepository.co.uk/ through my membership of www.fatcheese.ie, giving a further 3% discount! I'm already ahead before I even open a page of this highly recommended book.


----------



## elacsaplau

Got this book for Christmas. Unlike the Duke, before reading it, I had anticipated finding much of interest in it. Like him, however, I found much of it disappointing.

The absolute low point of the book for me was the FAQ - "but if it is all so easy, why aren't the professional fund managers following these approaches?". Clearly, this is the key point and unfortunately, in addition to being insulting to trustees, the response is biased almost beyond belief from someone who ought to know better!!


----------



## Orga

First, well done Rory on your book. It is no small undertaking, it is a real accomplishment. I found the book to be well written, with a clear, and flowing style of writing. A reader could easily read and understand what you're communicating, and that's the starting point for all good books.

On the content side, I think that for a beginning investor the material is pitched at the right level. Delving deeper, there are some elements that made me think: "I'd love to discuss that with him to understand why he constructed it that way." For example, the principal investment idea seems to be that of investing using the P/E or value-based re-balancing approach (underpinned by the idea of diversification/risk reduction). Yet, an earlier chapter broached the concept of valuation and this was dealt with very lightly when you explained your selection system. Equally, you suggest omitting any consideration of economic backdrop, competition etc when valuing a company. Your reason is that there is a lack of data. I can't say that I would agree with that, as data is available to the average investor. Perhaps, the challenge for the investor is to know where to access the data. Equally, the terms you label as qualitative and quantitative factors are, in my opinion, more properly deterministic in relation to the qualitative and indicative in relation to the quantitative, in respect of future growth. Again, I appreciate that it's a judgement call as to what you leave in and omit, and this judgement has to have the audience in mind always.

A small point but I would have liked more visibility on how various calcs were completed. For example the ten year earnings to price calf on the FTSE. There are several confounding factors for this calculation. If you have any details on it that you can share then I'd be grateful to have a look.

All in all, it's a book I could give to my dad to read if he had questions about investing, or to anyone who is starting on the journey, or has traveled a while and wants to learn more, and I believe that they would learn from it and benefit from it. Well done!


----------



## Rory Gillen

elacsaplau said:


> Got this book for Christmas. Unlike the Duke, before reading it, I had anticipated finding much of interest in it. Like him, however, I found much of it disappointing.
> 
> The absolute low point of the book for me was the FAQ - "but if it is all so easy, why aren't the professional fund managers following these approaches?". Clearly, this is the key point and unfortunately, in addition to being insulting to trustees, the response is biased almost beyond belief from someone who ought to know better!!



Elacsaplau,

It is my experience that the vast majority of pension trustees know very little about the investment side, and what makes a good fund manager and what doesn't. No insult intended, just an observation. I read plenty of investment books myself, it's a hobby but also I find I learn something new every time. Also, I often find a better way to communicate a point, which is important for the 1-day investment training seminars I give. To read a book, select just one point and be wholly negative on it strikes me as rather defensive. Each to their own I guess.

 Rory Gillen
Founder, GillenMarkets


----------



## Rory Gillen

Orga,

I haven't been on this site for a while and hence the late reply. I appreciate the balanced review. One must accept the negative reviews with the positive ones. I choose, for mainly marketing purposes, not to avail of anonymity on this website. The GillenMarkets Investment Newsletter is the only one of its kind in Ireland and I'll market it whenever I can. In my view, private investors lack access to independent analysis, commentary and views on investing. The Internet has afforded someone with experience to provide such a service at a very affordable cost. Giving wholly critical or negative reviews while availing of anonymity is not a course I would choose to take myself. But each to his own!

I read James O'Shaughnessy's book 'Invest Like the Best' in the late 1990s and it opened my mind to an alternative way of selecting stocks. I remain very grateful for the opportunity to have read it.

The traditional way of selecting stocks is to know the company, market it is in and to assess the value on offer etc. and to then make up your own mind having assembled the facts. Nothing wrong with that! However, the fact is that you are most unlikely to beat the average returns available from equities doing it that way. None of us are Warren Buffett, myself included. Most professional fund managers approach stock selection in this way, and the entire industry of stockbrokers and analysts is geared to serving that need. That, however, does not make it the best way.

There is an alternative way, and Chapter 21 of the book *'Enhancing Returns: Value Investing in the FTSE 100 Index'* was simply included to demonstrate to readers that individual investors have choices in terms of how to build a portfolio of stocks. I also had hoped that such a chapter would have caught the imagination of the UK media to which I sent the book for reviews. Alas, I failed in that regard. They showed no interest, which in many ways tells me why such a simple approach can continue to outperform unnoticed. There are those on this website who argue that what I put forward cannot be so, as the markets are efficient. But they simply refuse to deal with facts.

One of the bugbears for all of us is our emotional responses to market and company events. We often panic at the wrong time and this leads to poor decision making. Using a simple robotic technique that, at its core, achieves good diversification and a value tilt is more powerful than many investors can imagine. It takes the emotion out of investing, and that's most of the battle. It has nothing to do with intelligence. The most intelligent of people often make a mess of stock market investing due to overriding emotional responses to volatility driven by negative near-tern news flow.

I said it in the book that it is management that generates the returns on the business's assets. The investor’s job is to obtain value on the way in. The simple fact is that investors over-react to short-term news flow in markets and the FTSE 100 Value approaches I have developed take advantage of this market anomaly or human behaviour.

It's important for readers on this website to understand that such an approach does not reflect my opinions, it reflects the facts that I have patiently gathered over the years. And let me outline the up to date statistics for those reading this blog;

The approach of buying 15 stocks on the lowest price-to-earnings ratio from the FTSE 100 Index and diversifying across sectors has delivered a 12.7% compound _per annum_ return over the 19-year period from 1995 to 2013 inclusive. In comparison, the returns from the FTSE 100 Index itself were 8.2% compound _per annum_ and 7.7% from the FTSE World Equity Index over the same period. That's 4-5% _per annum_ ahead of general equities by simply following, with discipline, some basic rules. 

To finish off, you made the following point: "_A small point but I would have liked more visibility on how various calcs were completed. For example the ten-year earnings to price calc on the FTSE. There are several confounding factors for this calculation. If you have any details on it that you can share then I'd be grateful to have a look." _

I don't follow the question but if you posted it again in a different way or emailed me to rory@gillenmarkets.com I'd be glad to clarify.

*Rory Gillen
Founder, GillenMarkets.com*


----------



## Jim2007

Rory Gillen said:


> It's important for readers on this website to understand that such an approach does not reflect my opinions, it reflects the facts that I have patiently gathered over the years. And let me outline the up to date statistics for those reading this blog;



Now seriously Rory, how long could it possibly have take you to replicate the Dogs of the DOW???  By 1993 I and several others that I know of were already replicating it on the DAX and the SMI.  I'm sure there have been many others doing the same over the years, because it is a widely know technique.


----------



## Rory Gillen

Jim2007 said:


> Now seriously Rory, how long could it possibly have take you to replicate the Dogs of the DOW??? By 1993 I and several others that I know of were already replicating it on the DAX and the SMI. I'm sure there have been many others doing the same over the years, because it is a widely know technique.



No one has said otherwise. It is not the same approach as 'Dow of the Dow' but there are strong similarities. In my book, I outline exactly where the approach has come from, and it is _'Contrarian Investment Strategies'_ as written by David Dreman. A great book. All I have done is to take Dreman's approach into the UK market, but in doing so I have gathered the data in real time methodically since 1995. That's useful data, in my view. And an understanding as to why a mechanical approach can work well is just as, if not more, important than the rules themselves be that 'Dogs of the Dow', Contrarian Investment Strategies or Joel Greenblatt's 'Little Book That Beats the Market'.

It seems to me that some on this site some see nothing but cynicism. But I would imagine that the vast majority are trying to learn a little, and I contribute for that reason.


----------



## AaronK

I've had this book on my shelf for 7 years and have just got around to reading it, how's that for procrastination! 
I found it very informative, I wonder though has anyone followed Rory's system of value investing in the FTSE 100? 
A few years have passed since publication so it would be interesting to know how the system has faired since then.


----------

