Wall Street Stripped Bare
January 2, 2003
Are you a trader, or even a gambler, without knowing it? In The Unbeatable
Market Ron Ross shows you how a person who intends to be an investor is
usually hoodwinked by the financial world into putting his money at unnecessary
risk while forgoing even an average rate of return. Just a few simple, but
extremely important concepts (which Ross thoroughly explains in plain enjoyable
English) woven together quite logically and well supported with facts, are
enough to expose how the brokerage business and the mutual fund industry,
through their own self-interest and without malice, tend to guide the investor
away from successful investing. If you read this book you will see behind
the illusion that has been created by marketing. Then, if you really want
to be an investor, you will be able to see where the true course of successful
investing lies, as distinguished from the disguised trading and/or gambling
into which most would-be investors have been lured. This is the best book
on investing I've ever read.
Clear and Pursuasive
November 8, 2002
Nobody can beat the market consistently, ron ross says, and so nobody should
really try. go with the market and you'll stay solvent even in the worst
of times. in clear, intelligent english, backing every argument with lots
of evidence, ron ross, once a professor of economics and now an investment
adviser, provides an overview of modern investment theory that actually
makes sense. if the last couple of years have blown your confidence in the
stock market, this book will restore your faith.
Look Out Wall
Street!
October 17, 2002
The Unbeatable Market is the clearest statement yet as to why using index
funds is the superior investment alternative. The Wall Street crowd will
hate this book. It exposes their doomed strategies and uses devastating
logic and scientific evidence to prove the case. This is a highly rewarding
book to read and quite thought provoking. The Unbeatable Market is destined
to become an extremely controversial book, although I feel sorry for anyone
taking the other side of the debate.
EUREKA — Ron Ross hopes his new book will appeal to those who don't trust Wall Street and are skeptical of the advice coming from market "gurus" who say it's possible to beat the market. The book is titled "The Unbeatable Market: Taking the Indexing Path to Financial Peace of Mind." Ross, a former economics professor at Humboldt State University, is a certified financial planner and local investment advisor and one of three co-owners of Premier Financial Group. He holds a master's degree and doctorate in economics from Oklahoma State University. The book is based on the premise that investing in index funds, in which earnings are based on the performance of an entire group of stocks rather than individual companies, is a safer method of investment and an easy way to diversify one's holdings. "This is the kind of investing our firm does but it goes against the grain of what most people usually do," said Ross in a telephone interview Wednesday. "It's not a good idea to try to beat the market, and everybody thinks that it is." Ross said it's counter-intuitive to attempt to beat the market, and that there's fairly clear evidence that shows it can't be done. "Let's say the market goes up 10 percent in a particular year," Ross said. "You have two choices: You can use a strategy that captures that 10 percent or you can try to exceed it. About 90 percent of all investors try to exceed it." The difference between the two strategies is the difference between "active" and "passive" investing. Trying to exceed the market is "active" investing. "The vast majority of mutual funds are designed to do that, but because the market is so competitive, the market is also efficient," said Ross. "In an efficient market it's extremely difficult to try to beat the other players." Ross said in an efficient market, to beat the other participants you need to buy a stock for less than what it's worth. "So you need to find a stupid seller," he said, "and later you need to sell it for more than it's worth, so you need to find a stupid buyer. You just can't rely on this happening." Indexing, on the other hand, is "passive" investing. The objective is to duplicate the market's rate of return. "If the market is going up 10 percent and you index (your investments), that's what you get, with 1 percent or so variance in either direction," Ross said. Index funds are a category of mutual funds, which are basically a way for people to pool their money and invest in a group of companies. The best known index funds are those based on a common market index such as the Standard & Poor's 500. An S&P 500 fund buys stock in the entire list of 500 companies that make up the index, in proportion to how large the companies are. In essence the "passive" part comes from the fact that the fund's earnings are based on the performances of all 500 individual stocks. While S&P 500 funds are based on the 500 largest companies, other index funds may buy the companies at the other end of the scale. "Some buy only small companies some buy foreign companies, it varies," Ross said. In general, you can recognize these types of fund by looking for "index fund" or "market fund" or "total market fund" in the fund description. Ross said it's important to realize that index funds do not protect you from what's called "market risk" —when the whole market goes up or down, that's what an index fund will do. "The S&P 500 is down about 40 percent for the last two and a half years, but there are a lot of the actively managed funds that went down 60 to 80 percent," said Ross. "So one of the main advantages of an index fund is that it's more diversified." Ross said that biggest error people have made in the last few years is not diversifying. "Almost everybody has heard that diversification is a good idea, but they get carried away, and start thinking that beating the market is a good idea," he said. "They fall in love with two or three companies, but as we've seen with Enron and others, very bad things can happen to a company." Ross said that even though index funds have gone down in the last few years, in all likelihood the loss is temporary. Conversely, if you lose money because you put all your eggs in an Enron or Global Crossing basket, he said, "you've probably lost it forever." Ross wrote a financial advice column for the Times--Standard for 10 years and for the North Coast Journal for six years. One reason he wrote the book is simple--the desire to communicate these concepts to those who normally might shy away from them. "I really like writing, and I think I do pretty well making complex topics fairly understandable to the average reader," he said. "This whole concept of market efficiency, taking index funds and looking at the long term perspective, has been discussed in other books, but not in enough depth." He started on the book about four years ago, and is pleased with the result. "It came out actually better than I anticipated, and the reaction I've been getting from people who've read it, most are surprised at how readable it is," he said. That readability comes in part from Ross' casual and sensible — and sometimes humorous — writing style. Consider, for example, these subheadings: "Hypothesis? We ain't got no stinking hypothesis!" and "Playing the stock market is a form of gambling that's legal in all 50 states and can be done from the comfort of your own home." "The Unbeatable Market" is available at Northtown Books and The Rookery in Arcata, at Booklegger and Waldenbooks (soon) in Eureka, or online at Amazon.com and Atlasbooks.com.
