Book Review > Getting Started in Shares for Dummies

This a new, pocket sized edition of James Dunn's 'Dummies' guide to shares (for a review of the first edition see Share Investing for Dummies). Since starting with computer guides in 1991, “For Dummies” is one of the most the most widely recognised reference series in the world with more than1,600 titles, all with a hallmark, easy to understand, style. The publishers provide an on-line 'cheat sheet' which contains a summary of this book's main points.

This edition is organised in four main sections:

• Part 1 Overview of shares and the share market.
  
  Here we are introduced to investing in shares as a concept and are given some facts and figures on share ownership, historical returns and the operation of the share market.

• Part 2 Investing strategies
  
  James explains that you should be aiming for success in the long run not instant wealth. You need to determine what kind of investor you are - from a trader to an income investor or retiree and what level of involvement you anticipate in managing your shares. He wants you to understand the level of risk that you would be comfortable with and says that 'The bad news - risk is inescapable; the good news - risk is manageable'. He discusses various sorts of risks that shares are exposed to from market risk (market crashes) through various other company specific risks to political risk e.g. your favourite mining company might be subject to a 'great, big, new tax'. He covers the need for diversification across asset classes and within Australian shares he looks at building a portfolio and choosing a range of shares or using managed funds.

• Part 3 Buying and selling
  
  He goes into some detail about the ASX including the CHESS system. There is a chapter on stock picking and a brief discussion on both fundamental analysis and technical analysis. James has a chapter entitled 'Buying what you know' on market categories such as blue chips, industrials, financials and listed property, utilities, consumer staples and discretionary, materials – with further depth on resources and minerals. He discusses Listed Investment Companies (LICs) and Exchange Traded Funds (ETFs). He then takes a chapter to discuss using stockbrokers and what the differences are between full service brokers and on-line offerings. He rounds out this section with a comprehensive explanation of dividends, franking credits and taxation issues.

• Part 4 Top ten
  
  The final section has two sets of top tens. His top ten famous investors and the approaches that made them famous and then his top ten things not to do, ever. This starts with 'Don't think you can get rich quick' and ends with 'Don't let yourself be churned' – that is don't blindly follow your stockbroker's every suggestion to buy or sell.

This is a good, clear, easy to read book firmly centred in the Australian context. He gives lots of local examples of the points he is making e.g. Flight Centre's performance as a 'growth' stock through the years. I particularly liked chapter 8 where he reviews the various sections of the market naming many of the companies that make up each section discussing for example, Telstra, in some detail. He also uses Telstra as an example in the section on legislative risk!

If you really were brand new to investing in Australia, this would be an excellent starting place and I learnt a few things as well. I can thoroughly recommend it.

My only quibble is that I am not sure that a novice investor would have the confidence to start investing with just the information here and that they would really need to do some more research so I would have liked to see some recommendations for further reading such as Roger Montgomery's excellent Value.able  for fundamental analysis or perhaps Alan Hull's or Daryl Guppy's books for those more inclined to technical analysis. I note that James himself has another related book On-Line Share Investing for Dummies just released as well. He could have also usefully commented on the various investment subscription services available such as Morningstar, StockAnalysis or The Intelligent Investor and, of course, a reference to The Australian Investor's Association wouldn't go amiss.