The Only Three Questions That Still Count: Investing by Knowing What Others Don't

Whatever philosophy about investing you may hold, Ken Fisher's "The Only Three Questions That Count: Investing by Knowing What Others Don't" will enrich your thinking and improve your performance. Make no mistake: this book is not just good; it's great! As the title implies, to get to the nuggets of truth--and superior performance--that others miss, you must ask three questions: what do you believe that is actually false; what can you fathom that others find unfathomable; and what the heck is my brain doing to blindside me? Fisher addresses these questions with wit and verve, writing in a breezy and provocative style that makes the reader want to keep turning each page. Fisher's argument begins with the efficient market hypothesis--that all information known by the investment community is already priced into the markets. Absent trading on inside information, which is illegal, how, then, can an investor beat the market? The answer, Fisher says, is to ask the first of the three questions and realize that much of what is believed by others is simply not true. Fisher shows this by testing the mathematical correlation between commonly held beliefs and subsequent investment returns. Are high P/E markets riskier than low P/E markets? Will government deficits lead to economic collapse? Will rising oil prices seal the doom of common stock returns? Analyzing the historical data, Fisher shows that each of these beliefs--and many others--is a myth. Once an investor accepts that the conventional wisdom is mistaken, he can next ask Fisher's Question Two and fathom what others find unfathomable by ignoring the noise and focusing on events and relationships that do correlate. The third and final step in Fisher's methodology (what the heck is my brain doing to blindside me) helps investors to avoid typical mental errors--overconfidence, hindsight bias, confirmation bias, and order preference. Many readers will be familiar with this material, which draws on the realm of behavioral finance, but Fisher's presentation is both crisp and enjoyable. At the conclusion of the book, Fisher instructs the reader on how to use the three questions to build a portfolio that beats the market. Distilled to its essence, his advice is to adopt a benchmark, think globally, and overweight or underweight when asking the three questions gives the investor an advantage over the market. The book is a treasure trove of keen insights. One piece of advice I found particularly helpful was Fisher's observation that the market offers just four possibilities: to be up a lot, up a little, down a lot or down a little. Only in the situation where an investor reasonably concludes the market will be down a lot does it pay to alter one's asset allocation and disfavor equities, since over long periods of time, the market moves inexorably higher, and in the other three scenarios, efforts to time the market may cause the investor to miss equity upsides when the downside risk

Full disclosure: I am a financial advisor. And I've read Kenneth Fisher's column in Forbes since he started writing it 22 years ago. This is a superb book. The sub-title is "Investing by Knowing What Others Don't" and it is the best book I've read on investing and asset managment in years. The author is an investment manager based in California, who also writes a monthly column in Forbes magazine. He's a pretty successful guy, ranked 297 on the latest Forbes 400 Richest American's list. Yup. That's successful allright. His father is Philip Fisher, also a pretty famous investment manager, who was known for recognizing good companies, and then buying and holding their stock - sometimes for decades. Lastly, Fisher has an interesting philanthropy - redwood trees. He has endowed the only university chair dedicated to a single species of tree. On to the book. Here's the only negative: Fisher has a slightly cute sense of humor, which I found a little annoying at times. But the pluses are huge. The three questions are: (1) What do you believe that is actually false? (2) How can I fathom what others find unfathomable? And, (3) What the heck is my brain doing to blindside me now? Each of the first three chapters is dedicated to explaining one of the three questions. The first chapter debunks many "facts" about markets that are actually wholly or partially incorrect myths. Here are two examples: High P/E markets are riskier than low P/E markets (P/E stands for price-earnings ratio and is one of the most fundamental valuation metrics for stocks) and a weak U.S. dollar is bad for stocks. In the second chapter Fisher makes the point that the only way to beat the financial market is to know something the market doesn't know, or at least ignores. This is pretty basic. The market (prices of stocks, commodities, currencies, bonds, etc) has already discounted in the underlying pricing known knowledge; to outperform the averages, you have to know something not widely known. The third chapter is how our mental processes frequently work against us in trying to sort through meaningful data and relationships. Fisher refers to the market as "The Great Humiliator" (TGH) where we are constantly at risk of allowing our emotions, like pride and regret, get in the way of rational decisions. For example "confirmation bias" where we seek evidence confirming our preset notions and reject contradictory evidence. And of course very applicable to other aspects of our life, besides our finances. The remainder of the book - six chapters plus a short and interesting conclusion - expands on the three questions. The chapters have titles like "Capital Markets Technology", "Shocking but True", and the last chapter "Putting it all Together." Much of the analysis is quite brilliant. For example I loved his examination of U.S. budget deficits, and why they are not negative for the financial markets - or for the country. COULD they be a negative - YES - but only if we do cert

I am an investment professional and partner in a firm with over $700 million under management. As such, I'm a guy who thinks about investing a minimum of 12 hours a day, most days a year, and has done so for 13 years now. I read a lot about my profession, because I assume that I will never know everything, so my entire career will be driven by continual education, So I hope it is clear to you that I take investing very seriously. Let me be very clear when I tell you that this book is really a masterpiece. It belongs in a very, very elite category of investment tomes. The "knock" on Fisher is typically wrapped around his firm's aggressive marketing techniques. These techniques irritate some of people, particularly his fellow professionals. Not me. I just see Ken's asset-gathering techniques as more evidence of this successful ability to "think different," and I suspect that some people in the industry are more than a bit jealous of Ken's enormous success in the last few decades. Anyway, buy the book. Read it once, then read it again. Read it if you are a beginner or a seasoned pro. You're going to learn some cool facts, and you're going to see some common investing myths "busted." This alone is worth the price of the book. But most importantly, you're going to learn how to think for yourself, which is very valuable indeed. In fact it's priceless.

In the Preface to The Only Three Questions That Count, Ken Fisher asks, "Who am I to tell you anything, much less anything that counts?" So, who am I to write a review? Well, for starters, I've actually read the book. And that must count for something! In this book, Ken Fisher brilliantly debunks common beliefs held by most of today's investors and blazes a new path for investment success based on his own time-tested strategies, "out of the box" thinking, and continual self-examination. There aren't many investment books out there that can have you laughing and scratching your head at the same time, but this book manages to do just that. My favorite subchapter: "Anything the French Can Do We Can Do Better." For a student of the market such as me, the countless charts and graphs throughout the book and the 40 pages of market data found in the Appendix (going back to 1830!) are worth the price of the book alone. But it's about much more than numbers and charts, it's about approaching the markets as a science, not as a craft, as most investors now do. This will be an uncomfortable leap for many readers because Ken Fisher asks you to put all of your previously held beliefs about the markets aside and to essentially start anew. And that starts and ends with the three questions. So, what are the three questions that count? 1) What do you believe that is actually false? 2) What can you fathom that others fund unfathomable? 3) What the heck is my brain doing to blindside me? For starters, he argues (and I would argue proves) that P/E ratios tell you nothing about risk, higher oil prices are good for stocks, and gasp, America actually doesn't have enough debt! How did he come to these conclusions? As he explains, by flipping things around, back testing ideas with historical market data, and making sure that anything found by looking at US markets can also be found in foreign markets. Example: The P/E ratio tells you nothing about market risks and opportunities, but the E/P (or earnings yield) of the market compared to global bond yields tells you a lot. At the end of the book, Ken Fisher urges any reader who can debunk one of his own beliefs by using a scientific, yet simple spreadsheet analysis (he actually explains in the book) to write him and share their findings. He is humble enough to admit that the book is much bigger than him. It's about using real science to debunk any market belief that is not rooted in truth, perhaps even one of his own. And for a man who manages more than $30 billion and doesn't seem to need our help, I simply find that unfathomable!

I read a review of Ken Fisher's new book The Only Three Questions That Count in the Financial Times in November. The book has only recently been published and I devoured my copy over a weekend. I have read many investing books, but to me, this book goes much farther than simply investing. Ken's book consists of three simple questions that he walks you through and he gives examples of how to use these three questions. He has charts, graphs, and lots of data to back up his arguments, but basically at the core, Ken gets to the heart of how you think and how to analyze why you think that. Ken Fisher is an interesting guy himself. He's on Forbes Richest Americans list, he's friends with Jim Cramer who wrote the foreword, he's a Forbes columnist, and he manages $30 billion for his clients. I thought the book was thoroughly engaging and I actually laughed in certain places. There are not many investment books out there that show you how to be a better investor, while being tons of fun to read. If you are a hard core investor - and been investing for years and years - or a neophyte - just starting to wrap your head around the big bad stock markets - I would highly recommend buying this book. It's a really intuitive, informative look at the markets and how they shape our world.