Author: James Patterson, Jr.

Publisher: Trilogy Publishing   

ISBN: 978-0-989-546-416

How to Invest Like a Stock Market Pro by James Patterson, Jr., is a preeminently readable book on a subject that can easily get gummed up with a lot of statistics and formulas. Patterson starts were a good financial advisor must – with the reader investor. His style is conversational and down to earth. He begins with solid Dutch Uncle advice. He makes it clear that the most serious threat to successful investing is the person calling the shots. Managing investment is a serious matter of managing oneself first and the best protection anyone can set up is a solid rational approach to the process. Lacking that, the investor is easy prey for fear and greed to start taking over. When the emotions rule the results are always disappointing, if not disastrous, and Patterson sets out his warnings to the reader with patience and understanding.

I was especially impressed with Patterson’s book because I spent the last 15 years of my career as a financial advisor (stock broker) for a well-known national brokerage house. I have been on the phone with clients whose reasoning had been swept away by fear or an over-eagerness to reap profits. My job then was more that of a psychologist than an advisor. I often could not keep clients from selling into a plunging market or get them to be realistic about their expectations for returns. Author Patterson covers all the bases. Self-management is essential to effective investment management.

Patterson’s approach is coherent and easy to understand. Yes, he talks about price/earnings ratios, debt-to-equity rations, and several other shop worn tools of a broker, but he explains them in durable, plain English. Nothing esoteric. He provides systematic way to research companies as possible candidates for investment. I found when I was working with clients that knowing what to look at first saved me time. If I couldn’t find four very convincing indicators telling me that I was on the right track, I looked elsewhere. It simply didn’t make sense to try to redeem a weak idea when all the common sense indications were not lined up positively. Patterson takes the same approach.

I especially liked his concept of “fair value.” Through his research, he set a price for the stock he was considering that all indications pointed to as a price that reflected the worth of the company. It is not a matter, in other words, of taking flyers on some hot new idea but being sure the company is producing the numbers, hot new ideas being then a plus but not the principal reason for buying in. If the numbers aren’t right, little else matters. Fundamentals first offer protection. Hot ideas rely on fickle good luck.

Patterson explores the mutual funds, exchange traded funds, and other vehicles. He focuses on the important of asset allocation – not getting all the eggs in the same basket – and the need to diversify. If the book falls short in any respect, the discussion of asset allocations and its relationship to risk tolerance and the stage in life for the investor. In fairness, however, these are topics that need to addressed by a financial advisor and not promised by the title of the book..

Patterson has been thorough in providing other sources for assist the investor with the research tasks. He even goes so far as to recommend a trading site that offers online research and places trades at a reasonable pricing level. Investing isn’t for everyone. I no longer follow the market. My interests lie elsewhere. But I can see where, with the guidance Patterson provides, it can become a fascinating interest and become a personally very gratifying pursuit. Anyone wanting to give it a go should put Patterson’s book on the desk and keep it there. You would not need to look further.