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Book Review and Giveaway: The Seven Rules of Wall Street
Book publisher McGraw-Hill was kind enough to send me their spring catalog for me to choose which books I would be willing to read and review. Out of the many titles in the “finance” section, the book “The Seven Rules of Wall Street, Crash Tested Investment Strategies that Beat the Market” caught my eye. I mean, who doesn’t want to beat the market?
About the Author:
According to the book:
Sam Stovall, chief investment strategist of Standard & Poor’s Equity Research, serves as chairman of the S&P Investment Policy Committee, where he focuses on market history and valuations. He is the author of The Standard & Poor’s Guide to Sector Investing and “Stovall’s Sector Watch,” a column featured on www.spoutlook.com.
About the Book
As indicated by the title, this book is about the seven rules of wall street and how they can be used to beat the market. What rules might that be? They include:
- Let Your Winners Ride, but Cut Your Losers Short
- As Goes January, So Goes the Year
- Sell in May and Then Go Away
- There’s No Free Lunch on Wall Street
- There’s Always a Bull Market Someplace
- Don’t Get Mad – Get Even!
- Don’t Fight the Fed
As indicated by the short author biography above, Mr. Stovall is a specialist in sector investing within the S&P500. What are sectors? Out of the 500 companies listed on the S&P500, they are sorted in “sectors” such as information technology, consumer staples, utilites etc. In this book, Mr. Stovall goes through each of the “rules”, explains their significance, and creates mock portfolios including back tested returns (since 1990).
The strategies above all involve actively monitoring and trading your equity positions with the longest hold time of one year. Rule #5 involves fairly high turnover with potentially trading out of your positions every month.
What I Liked/Disliked About the Book
What I appreciated most about the book was that Sam Stovall went through each rule, explained the benefits/downfalls along with back tested returns (CAGR and risk adjusted) since the inception of “sectors” on the S&P500 (1990). In addition, he creates mock sector ETF portfolios to drive the point home.
The largest problem I see with his conclusions is that his sector data only goes back to 1990 which, when the book was written, is only around 18 years of back testing. This is a relatively small market sample in the grand scheme of investing.
Final Thoughts
Sam Stovall has some very convincing arguments in his book and shows some statistically impressive market beating strategies. His favorite strategy however, involves quite a bit of turnover which can generate unnecessary taxation in a taxable investment account. The obvious choice would be to use a tax sheltered account, but as his strategies involve US based sector ETFs, the exchange fees would impact returns (for Canadians).
Perhaps the best bet, if someone were to follow the strategies indicated in this book, is to open a Questrade RRSP account which allows the investor to hold US Dollars (which no other Canadian online stock broker allows).
Want a Free Copy?
McGraw-Hill was generous in offering Million Dollar Journey readers the chance to win 2 copies of the book. The details are below:
- Simply leave a comment and you’ll automatically be entered in the draw for a free copy.
- Follow me on Twitter for an entry.
- Please only 1 comment entry / person (please enter a valid email address).
- Only those with a North American mailing address may enter (publisher rules, sorry).
- Contest will end Friday 5pm EST June 19, 2009 and the winner announced shortly after!
93 Comments, Comment or Ping
1. The Financial Blogger
The problem by taking 1990 data is that the last 10 years has been completely out of any “market rules” we know. Economic cycles are smaller, volatility is higher and they didn’t have much Hedge Fund back n 1990 (thank god we got rid of some of them lately ;-) ).
Not sure that Sell in May and go away is a good rule:
http://www.thefinancialblogger.com/sell-in-may-and-go-away%E2%80%A6-should-you/
Jun 16th, 2009 @ 8:10 am
2. B
Best rule to beat the street? Get free stuff!!
Keep up the great work!
Jun 16th, 2009 @ 8:23 am
3. Rob
I’d love to win this book! Thanks MDJ for your effort on your site. I really enjoy reading it each day.
Jun 16th, 2009 @ 9:06 am
4. Philip in North York
I wonder if his arguments are relevant in other places such as DJIA, NASDAQ, or in other countries.
If there is no free lunch on Wall Street, then let me get a free book because I’m hungry.
Jun 16th, 2009 @ 9:10 am
5. Kirk S.
I agree with The Financial Blogger…with all of the wild volatility since electronic trading has begun it is hard to make rules based upon that. Either way, it sounds like an interesting read!
Jun 16th, 2009 @ 9:29 am
6. Andrew
“# Sell in May and Then Go Away”
Always thought this was a silly rule.
Jun 16th, 2009 @ 9:51 am
7. Alexis
please add me to the draw. Thanks
Jun 16th, 2009 @ 10:03 am
8. paulie
please include my entry for the seven rules of wall street. thank you. i enjoy this site immensely.
Jun 16th, 2009 @ 10:07 am
9. Aaron
Please enter me in the contest. Cheers!
Jun 16th, 2009 @ 10:09 am
10. Jared
I have previously added this book to my list of books to read.
Jun 16th, 2009 @ 10:11 am
11. telefantastik
I’m in too.
Thanks
Jun 16th, 2009 @ 10:14 am
12. Cola
I’d love to win this book. Please enter me in the draw.
Jun 16th, 2009 @ 10:20 am
13. Michael
Sign me up! I would love a copy of this book
Jun 16th, 2009 @ 10:22 am
14. RI
Welcome back, book review & giveaway!
Jun 16th, 2009 @ 10:33 am
15. CPS
Would love to read another stock book. Enter me in the contest!
Jun 16th, 2009 @ 10:36 am
16. Dave D
Sign me up for the draw. Thanks
Jun 16th, 2009 @ 11:04 am
17. clalc
sign me up for this one too !
Jun 16th, 2009 @ 11:05 am
18. Frank
Would love a copy thanks.
Jun 16th, 2009 @ 11:24 am
19. Nick
Please sign me up for the draw. Thanks!
Jun 16th, 2009 @ 11:41 am
20. Sean
Keep up the great blogs and book reviews. I appreciate hearing your opinions, and the opinions of your followers, on the many aspects of finance.
Jun 16th, 2009 @ 11:41 am
21. Jeff
Throw my name in the draw bin please!
Jun 16th, 2009 @ 11:46 am
22. Josee Guindon
I have been thinking of investing in stocks and such for a while. I think that I may feel more prepared to take the step if I win this book!
Jun 16th, 2009 @ 11:51 am
23. Barik
Would like to get a copy of the book
Jun 16th, 2009 @ 11:52 am
24. Steve Zussino
Sign me up to win this book (sounds interesting)
Jun 16th, 2009 @ 11:55 am
25. Allawi
pick me
Jun 16th, 2009 @ 11:57 am
26. Naveen
Free stuff is always good
Jun 16th, 2009 @ 12:07 pm
27. Rob
Sending in a comment so I can get entered in the draw but I was also wondering if anybody new about the witholding tax for american dividends if they are held in the TFSA. Do we still have to fill out that form? and would the dividends be tax free?
Jun 16th, 2009 @ 12:19 pm
28. Naumko
Sounds like an interesting read! Count me in!
Jun 16th, 2009 @ 12:34 pm
29. Brian
Sounds like an interesting read.
Jun 16th, 2009 @ 12:43 pm
30. Alex.
Here my comment and my ticket to a potential win.
Rob…. interesting question as I haven’t thought of this issue so far. Let’s see what Frugal Investor says.
Jun 16th, 2009 @ 12:49 pm
31. Sarlock
Sounds like an interesting read. I am a sector investor but usually with a longer time frame than a year. I try to spot macro trends occuring in the overall economy and go long (5-10+ years) on those.
Jun 16th, 2009 @ 12:53 pm
32. Neeraj
please count me in.
Jun 16th, 2009 @ 12:54 pm
33. Triple_Eh
Count me in.
Jun 16th, 2009 @ 12:55 pm
34. AndrewP
Sounds like a great book!
Jun 16th, 2009 @ 1:02 pm
35. Richard Murphy
I am overdue to read a good invest book , please enter my name
Thanks
Jun 16th, 2009 @ 1:03 pm
36. ldk
Please enter me for the draw as well! Thanks much~
Jun 16th, 2009 @ 1:07 pm
37. Bob
Sounds like a great read. Thanks.
Jun 16th, 2009 @ 1:10 pm
38. Matt
A friend told me about this book, it is on my reading list. Please count me in.
Jun 16th, 2009 @ 1:13 pm
39. Bill M
Please add my name to the draw. Thanks
Jun 16th, 2009 @ 1:14 pm
40. Oliver
In to win.
Jun 16th, 2009 @ 1:17 pm
41. LVJ
Please add my name to the draw…Thanks
Jun 16th, 2009 @ 1:20 pm
42. John
I’m always in to win!
Jun 16th, 2009 @ 1:27 pm
43. Kent
Time to learn more techniques to manage my personal financial. I hope I can win. lol
Jun 16th, 2009 @ 1:28 pm
44. Ace
I have been doing my own sector research. Would be better to read this book
Jun 16th, 2009 @ 1:39 pm
45. Ace
I have been looking at beating the market in dif ways. Would be better to read this book
Jun 16th, 2009 @ 1:42 pm
46. Elmanl
please enter me in the draw for the book !
Jun 16th, 2009 @ 1:43 pm
47. Josh Blacker
Always enjoy your MDJ insights. Got you fed right into Google Reader and enjoy keeping up to date. Wouldn’t mind giving the book a read – for free :)
Jun 16th, 2009 @ 1:47 pm
48. Adam
I’m interested. :)
Jun 16th, 2009 @ 1:47 pm
49. Troy W
please sign me up for the draw
Jun 16th, 2009 @ 1:55 pm
50. Cam Birch
I would love to win a copy of this book.
Jun 16th, 2009 @ 2:03 pm
51. Mark
Please include me in the draw. Thanks!
Jun 16th, 2009 @ 2:46 pm
52. Greg
Please enter me in the draw. Thanks.
Jun 16th, 2009 @ 2:56 pm
53. Rod Payne
But is there anything new and exciting in the book, or is it a rehash of previous similar books?
Jun 16th, 2009 @ 3:04 pm
54. Tin
I’m in! =)
Jun 16th, 2009 @ 3:05 pm
55. R I
Free book! Woo hoo!
I agree that 1990 is not enough data – in the US it covers one full recession and recovery, and a single cycle is not enoguh to draw anything conclusive. I am curious though about how a portfolio can succeed with reasonable probability in a down market.
Jun 16th, 2009 @ 3:10 pm
56. Vince
court me in please..
Jun 16th, 2009 @ 3:24 pm
57. cannon_fodder
Thank you for the review and the opportunity to win this book.
Jun 16th, 2009 @ 3:35 pm
58. Keith
“His strategies involve US based sector ETFs”
Could you to adapt to the strategy to Canadian ETF’s Canadian sector ETF’s. iShares has sector based ETF’s for energy, financial, gold, income trusts, materials, REIT, and technology. And Claymore has sector ETF’s for water, agriculture, infrastructure, oil sands, mining, and real estate.
Jun 16th, 2009 @ 3:37 pm
59. Andrew
I enjoy reading your site and would welcome a new book!
Jun 16th, 2009 @ 3:37 pm
60. tetsuo69
Actually Questrade is not the only online brokerage that allows USD accounts. Tradefreedom allows one to hold both CAD and US dollars in an investing account all with one application.
Jun 16th, 2009 @ 4:44 pm
61. Jimmy
sign me up for the book !
Jun 16th, 2009 @ 4:45 pm
62. bob
here is my ticket for the draw…
Jun 16th, 2009 @ 5:57 pm
63. Jesus
Count me in for the draw
Jun 16th, 2009 @ 6:27 pm
64. Darryl Lapaire
Sign me up for the draw. Even with just a short history that he’s using to prove his points, I think there is likely some wisdom to be gained…
Jun 16th, 2009 @ 11:58 pm
65. MultifolDreams
Count me in
Jun 17th, 2009 @ 12:27 am
66. khai
trying my luck in a contest. thanks.
Jun 17th, 2009 @ 12:46 am
67. P
i’m in
Jun 17th, 2009 @ 12:49 am
68. BBQ
I’m interested.
Jun 17th, 2009 @ 2:07 am
69. Barry Fence
I think this is the only investment book my Dad doesn’t have, so please enter me in the draw. Thanks!
Jun 17th, 2009 @ 3:08 am
70. Wealthy Immigrant
Thanks for the contest!
Jun 17th, 2009 @ 8:08 am
71. DG
Me too!
Thanks,
Dan.
Jun 17th, 2009 @ 10:56 am
72. Finance Matters
Why not!
Jun 17th, 2009 @ 11:17 am
73. Satin005
Let`s see if I have a chance
Jun 17th, 2009 @ 11:25 am
74. CANADIANSTOCKSTRADER
Please enter me in the contest. THANK YOU!
Jun 17th, 2009 @ 12:25 pm
75. Marianne O
This would be an interesting read, though I don’t know if it would lure me away from my “couch potato” setup right now. Maybe if I had a small side pot of funds to play with.
Jun 17th, 2009 @ 1:06 pm
76. Tom @ Canadian Finance Blog
Interesting book, but I agree that the data timeline might be an issue.
Jun 17th, 2009 @ 1:45 pm
77. lindahfx
This sounds very interesting. I’d love to win a copy! Thx.
Jun 17th, 2009 @ 1:58 pm
78. Rishi
I’m in
Jun 17th, 2009 @ 3:33 pm
79. Amit
Please count me in! Sell in May and go away only made sense for northern hemisphere and when we didn’t have emerging markets or southern hemisphere booms. Now, based on the weather, when some industries/sectors are down in northern hemisphere, they are doing well in the southern hemisphere, and vice-versa. You could always change it “Sell US stocks in May, buy Latin America, Australian stocks, sell them in October, buy US stocks again”.
Jun 17th, 2009 @ 7:14 pm
80. Susan
This sounds great!
Jun 17th, 2009 @ 7:31 pm
81. Finance Guy
Wow, I didn’t think you’d actually review all the points. Great job! I think I’ll pass on this one seeing as you weren’t blown away by it. It doesn’t really outline anything of interest that I haven’t read elsewhere.
Jun 17th, 2009 @ 8:34 pm
82. SE
Love the MDJ blog. Would love to get the book. Just opened a questrade acct looking to take matters in my own hand ala Derek Foster
Jun 17th, 2009 @ 9:34 pm
83. Linda Hamilton
I would love to win this book. I have been following your blog for a few weeks now.
Jun 18th, 2009 @ 2:24 pm
84. Sean
Count me in for the draw, and keep up the good work.
Jun 18th, 2009 @ 4:57 pm
85. Senk
Please enter me in the draw.
Jun 18th, 2009 @ 5:59 pm
86. Neeraj B.
Looks like the book is more focused on seasonality and technical analysis than on fundamentals.
Looks like an interesting read….please throw my name into the hat as well
Jun 18th, 2009 @ 6:22 pm
87. Sajal
Please enter me!
Jun 18th, 2009 @ 8:23 pm
88. karash
PLEASE COUNT ME IN..!
Jun 19th, 2009 @ 12:30 am
89. Terri
Me too! I love this blog!
Jun 19th, 2009 @ 12:42 am
90. Mr. Mo
In for the contest.
Jun 19th, 2009 @ 10:17 am
91. Chris
Sounds good.
Jun 19th, 2009 @ 2:15 pm
92. Father of Five
I would love a book. Keep up the great work!
Jun 19th, 2009 @ 4:48 pm
93. Blogging Banks
Sign me up!
Jun 21st, 2009 @ 12:11 pm
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