Buying better business books

Ashley Milne-Tyte Jun 23, 2006

TEXT OF STORY

KAI RYSSDAL: Americans have always been big on self-improvement and we love to spend money on “how to” books, like “how to” handle our finances. Business is the second-largest part of the publishing industry. Fiction’s first, in case you were curious. Last year, booksellers sold more than a million and a half books on investing alone. But with all those titles, how’s a would-be investor supposed to tell which ones are best? And could some of the advice in ’em be plain wrong? We sent Ashley Milne-Tyte to find out.

ASHLEY MILNE-TYTE: Smack in the middle of the aisle at a Barnes & Noble in Chelsea in lower Manhattan, there’s a stand that’s bursting with business titles. There’s Suze Orman’s latest, as well as investment bestsellers “Rule Number One” and “‘Rich Dad, Poor Dad.” Perfect for the shopper in a rush, but don’t assume the bestsellers are the best in the category.

ADRIAN ZACKHEIM: These books are here for the most part because the publisher has paid for them to be here.

Pubblisher Adrian Zackheim says companies have been paying for extra in-store attention for their books for years. He works at Portfolio. That’s Penguin’s business imprint. Zackheim’s job is to decide which books to distribute. He says for him that comes down to clicking with an author’s idea. But what about vetting an author’s investment advice? He says no publisher wants to put out a book that might get potential investors in trouble.

ZACKHEIM: We do have to make a judgment about whether the author’s ideas are on the level, and whether his advice makes sense and seems responsible, but we also need to make a decision about whether it’s a scheme that’s gonna appeal to readers as something that they want to try or something they could believe in.”

In other words, something that’ll sell.

Eric Tyson is a former financial adviser and the author of “Investing for Dummies,” and other finance books. He says just because a book gets published doesn’t mean it contains sound advice.

ERIC TYSON: In prior years, Wade Cook was a bestselling author who had a number of books on investment bestseller lists like “Wall Street Money Machine” and on the back cover of the book it says double your money every two and a half to four and a half months with stocks and then below that it says get 14 to 34 percent monthly returns consistently, I mean that’s ludicrous.

The reality is stock market returns have averaged about 10 percent annually over the long haul. Tyson says readers should ignore any book that promises market-beating returns and investigate an author before they buy.

TYSON: What’s their background, what are their credentials, what was their motivation for writing the book? Some books do provide information and useful advice, other books are nothing more than infomercials for something else that’s expensive like a high-priced investment seminar.

But a lot of readers go for familiar faces.

[ Jim Cramer’s CNBC show: The alcohol, tobacco, and firearm stocks — I’m going to tell you all about those stocks and will let you know what the best of breed that you need to think about owning. ]

Jim Cramer’s CNBC show can make you dizzy, and not just with the promise of riches. The swings of the camera mirror Cramer’s frenetic hosting style. He screams. He waves his arms. He picks winner and losers. His investment book “Jim Cramer’s Real Money” is on bestseller lists thanks to fans of the show.

Charlotte Abbott is an editor at Publishers Weekly. She says these days publishers are in the celebrity game like everyone else. They’re going after famous investment types with name recognition. She says an authors’ celebrity raises questions.

CHARLOTTE ABBOTT: Landing that series on Oprah or getting that PBS pledge drive together or planning a regular TV show, that may take them away from the hardcore investment expertise that brought them into the limelight in the first place.

Still, a well known author sells books. But the rule of research still applies no matter how famous the face.

For example, take a look at some of the reviews and not just the ones on the back cover. If you’re checking out Amazon reader reviews, dig deep. Instead of scanning just the first few posted, sort them in order of best or worst. That gives you an idea of how many there are of each type.

Also, bear in mind one person’s investing bible isn’t necessarily another’s. Your personality matters.

ANTHONY DiTOMASSO: I consider myself somewhat of a frugal person and I never felt that everybody selling, you know, sexy stories was actually gonna fly.

Anthony DiTomasso works in the financial services industry. He’s been a longtime admirer of Warren Buffet. Buffet buys on the cheap. He looks for undervalued companies with high growth potential. He snaps them up at a low price then watches that stock take off. Several years ago DiTomasso bought a book called “How to Pick Stocks Like Warren Buffet,” by money manager Timothy Vick.

DiTOMASSO: This one seemed like a really good one because it kind of gave a lot of detail, a lot of specifics about this is what he looks for, these are the metrics that he measures a company by. So it gave a lot of nuts and bolts as well as the kind of, the more the subjective things that he’s looking for.

He tried to follow the book’s advice. So far it’s worked. He bought some stocks a few years ago and they’ve appreciated 200-300 percent. Still, he doesn’t assume he’ll reach Buffet-like brilliance.

And that’s fine, says “Investing for Dummies” author Eric Tyson. He says too many books try to convince readers that by mimicking the author’s tactics they can achieve their success. He says there are plenty of worthy books out there, like Burton Malkiel’s “A Random Walk Down Wall Street” or Jeremy Siegel’s “Stocks for the Long Run.”

TYSON: They offer investment advice that’s timeless and is based on research and common sense and just a wealth of market data.

It may sound dull. But he says in the end, if something sounds too good to be true, it probably is.

I’m Ashley Milne-Tyte for Marketplace Money.

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