Investment Fables: Exposing the Myths of "Can't Miss" Investments Strategies

by Aswath Damodaran

The truth about 13 of today's most widely touted investment strategies. You've heard 'em. (Maybe even from your broker!) They're the "can't lose" investment stories that promise you a no-risk path to profits … And on, and on, and on … They sound good. But do they really work? You're about to find out. In Investment Fables, one of the world's leading investment researchers runs the numbers on 13 of today's most widely touted strategies, objectively answering the questions your broker can't answer. Has it worked over the long term? Over the short term? If it made sense once, does it still make sense? Are the promised benefits a statistical mirage? Could it work, as one part of your investment strategy? What are the downsides–and how can you mitigate them? If you want to make smarter investment decisions, you'll find this book utterly indispensable.

Genres: Finance, Business, Nonfiction, Personal Finance

539 pages, Paperback

First published March 12, 2004

About the author

Aswath Damodaran is a Professor of Finance at the Stern School of Business at New York University (Kerschner Family Chair in Finance Education). He is well known as the author of several widely used academic and practitioner texts on Valuation, Corporate Finance and Investment Management; as well as a provider of comprehensive data for valuation purposes.

Reviews

[Sam · Rating 4 out of 5]

Damodoran, a Professor of Finance, analyzes major stock market investing strategies: growth, value, contrarianism, momentum, etc. The "investment fables" have a kernel of truth but are difficult to execute, as stock market pricing is pretty efficient. For example, contrarian & value investors tend to buy "loser" stocks that have fallen in price. In theory this should work since stocks that have fallen the most over one five year period tend to outperform the market over the next five years.

Capturing this outperformance is difficult, though. Stocks that have fallen the most over six months to a year continue to underperform over the next period. They're also riskier, with higher volatility and more debt. Finally, much of the five year reversal comes from the extreme outperformance of just a few stocks. So a "loser" stock strategy is likely to fail if it doesn't include those few extremely successful stocks and even if it does succeed it will probably take years and require holding on through painful under-performance. (No wonder Warren Buffett would rather buy "a wonderful company at a fair price than a fair company at a wonderful price.)

Not everyone's gonna want to read all 500+ pages but investors should read the introduction, closing chapter & Damodoran's analysis of whatever is closest to your investment strategy.

[Grigory · Rating 5 out of 5]

Great book. More or less the same as in Damodaran's Corporate Finance and Investment Valuation books but a bit simpler.

A bit depressing though, since it kind of leaves an impression that there's nothing you can do.

[Vladimir Grigorov · Rating 4 out of 5]

Nice introduction in various investment techniques. Very useful for a beginer investor. Every chapter uses sample data from years 2002 - 2004, quite outdated in fact. Anyway, the main conclusions, the essence of the book remains valid for 2014, and hopefuly for many years to come.

[JG · Rating 5 out of 5]

Great, excellent, concise. Definitely a bedside book for all investors from beginners to experienced.