Book Review > Online Investing on the Australian Share Market - 3rd Edition

The adjective that came to my mind while reading Online Investing in the Australian Share Market is ‘thorough’. The book is a product of thorough experience and thorough research. It contains comprehensive information for anyone interested in investing online. While the information could be somewhat overwhelming for a novice investor, Kinsky has anticipated this and in Chapter 1 provides a remedy for information overload:

There is a balance between insufficient information and information overload … There is no evidence to suggest that ‘more is better’ once you get past the optimum level so I suggest that you simplify your approach by concentrating on a few stocks that you know and understand well rather than trying to pick the best out of all the stocks available. I also advocate using a small number of financial and technical indicators that you understand well … (p. 8).

Applied to Online Investing this could mean: read the book, select the information you need and act on it.

For those who want to invest online, this book is a useful resource which can be kept at hand and consulted again and again. It contains comprehensive lists and descriptions of the facilities available online, including listed stocks, IPOs, market news, fundamental and technical information, and much more. Many investment websites are described and evaluated, particularly those that offer free services, and the various online brokers are compared and reviewed.

One of the book’s persistent messages is: have a plan. A chapter is devoted to ‘Planning Your Share Investment’, and Appendices A and B contain examples of trading plans for a speculative stock and a defensive stock. Another message is: manage risk. The chapter on managing risk describes and explains the various levels of the ‘risk ladder’ from risk in the global market, the Australian market, the sector, to risk in a specific stock, and outlines general strategies for minimising risk.

The book includes chapters on fundamental and technical analysis, including online services to facilitate such analysis. These chapters contain detailed explanations for each concept and require the reader’s full attention. A useful feature in the chapter on fundamental analysis is a suggested “Health Test for Stocks”. As could be expected, the chapter on technical analysis contains detailed information on many kinds of charts.

After the essential information about online investing has been learned and put into practice, one of the last chapters in the book guides the reader in ‘Monitoring and Improving Performance’. As Kinsky states: ‘proper management of your portfolio after you have set it up is a more critical factor in determining how much profit you will make from your share investments than the stocks in it’ (p. 283). He uses his own portfolio as an example of good online and off-line portfolio management, as always with extensive notes and explanations, including formulae for calculating profit and loss.

The final chapter (a new one, according to the back cover of the book) explains ‘gearing investments and trading derivatives online’ in order to maximise profit while minimising investment. While gearing increases risk, methods of minimising such risk are described, and novice investors are guided towards less risky approaches to gearing.

Throughout the book, Kinsky enlightens the reader using techniques such as:

• thorough explanations of difficult concepts
• plenty of examples, many from his own portfolio and experience
• restatement of key points at the end of each chapter
• references to other resources, including books by other authors
• good cross-referencing
• lists of advantages and disadvantages of different strategies and resources, including online research and investing
• comprehensive descriptions of resources available at the time of writing (2007).

As I did not want this review to be merely an advertisement for the book, I tried to find defects and came up with one criticism – a minor one: although each new term or acronym is defined in the text, a glossary of terms would be useful. Online investing requires some familiarity with often difficult terms and, for the novice investor especially, it would be handy to have definitions for all these concepts, acronyms and jargon available in one place.

The text on the back page calls the book a ‘complete guide to using the internet for trading and researching the Australian sharemarket’. The claim of ‘complete’ probably can never be fulfilled because, as Kinsky admits, there is so much information on the web, including information that has emerged after the book’s publication date. And, bearing in mind ‘information overload’, completeness is not necessarily a virtue.

Online Investing is a good quality paperback, designed not to be placed on a bookshelf but to be marked with highlighter and self-stick notes and kept by the computer to be used for online and off-line research, investing and record-keeping. It is written in a clear and comprehensible style and, I believe, contains all the information necessary for successful online investing in the Australian sharemarket.

Coral Leary is a member of the AIA.