Book Review > Shopping for shares

Shopping for shares: The everyday woman’s guide to profiting from the Australian stock market

Shopping for shares isn’t like shopping for clothes: people won’t say “You look good in those shares”! However, with a bit of knowledge, timing and luck; you might get some nice feelings out of making money, and may soon be looking good from the results of your investments!

Author Tracey Edwards tells us that she wrote this book in a light-hearted chatty style that would appeal to women – as if she’s talking to an old friend. Phrases like ‘Think of it as trying on that sexy little denim mini’(p46) when choosing short  or long term investing, or ‘You marry these safe stocks rather than date them’(p50) for stock selection lighten up the text while providing learning along the way. The style borders on twee at times, but makes the text fun on a subject that might be otherwise hard going to novices.

The trend is for more women to get involved in investing as more women enter the workforce, marry later - if at all - and perhaps later deal with divorce settlements.  A beginner’s manual with a light tone is well suited to this group. The book is not meant to exclude male readers necessarily – more to veer away from the purely technical styles of financial books, of which many exist.

This book starts from the start – money required, creating a budget to save for money to invest, as well as equipment needed for trading. Explanations on investing for the long term (5 years) or short term (2 months) help to determine what type of share trader you might like to be, including a quiz(p40) to help you determine your preferred style.

Use of sidebox definitions throughout the text introduce trading terms to help novices get ‘the gist of the jargon’. Terms like ‘bullish, bearish, stop loss, ex dividend’ are well explained, and help beginners understand this new world.

Chapters 4&5 outline fundamental & technical analysis (not as boring as it sounds!), and provide some ‘rules’ for each style of investing – long or short-term - which are useful guidelines. For example, after outlining five rules for long-term investment, Edwards suggests ‘Usually the maximum price I am prepared to pay is 16 times earnings’ (p61). For short-term trading, Edwards says ‘I usually set my stop loss approximately 10 per cent below the price I paid for the share.’(p91). I imagine that there are few (if any) absolute rules in share trading, but a few ‘rules of thumb’ come in handy to stay on track – some are covered in this book.

Edwards even contends “I actually believe that the key to becoming a successful investor has nothing to do with your ability to choose the right stocks (although that helps), but everything to do with good money management techniques that include having a stop loss in place.’ (p131)

She also helpfully tells us that “The most important rule…is that cutting your losses early and letting your profits run is the real key to making money on the stock market.”(p172) Achieving that in reality is the tricky part, in my limited experience!

Clearly this book is popular, as it’s been re-printed three times since first published in 2006. Broadly speaking the same concepts apply, however it could do with an quick update of examples. Page 5 refers to ‘the main crash that people remember…October 1987’, whereas the recent GFC (Global Financial Crisis) in November 2009 is the one burned in most people’s memories now.  Edwards also says that you don’t have to be online to invest (p34) – you could do it with your own stockbroker and a telephone – which is true in theory. However, in these fast moving times, I would suggest that internet access would be highly preferred – to monitor prices, have access to the latest research and  information about companies, as well as cheaper trading options e.g. on-line trading accounts with cheaper brokerage because you do it yourself!.  I briefly questioned the accuracy of the book with these outdated examples,  but the majority of concepts in the book still apply– there will be good times and bad  in the stock market, and the ‘rules’ described form a good basis on which to invest. 

As Edward says(p51):
‘The reason most people fail in the stock market is not because they were ‘unlucky’ but rather that they didn’t have a set of rules to follow. Think of it as like following a recipe; if you add the right ingredients at the right time you have a pretty good chance of  getting a tasty meal.’

 As a woman who’s been actively investing in the stock market for 18 months, I found this book a bit basic for me - I now want the technical detail, so chapter 11 about ‘Option, warrants and futures’ provided a quick introduction to this area for me.

For anyone who has minimal knowledge of investing in shares, wants to find out more but is a bit scared of losing your money overnight on the share market rollercoaster, this book is a great introductory read for you!