Book Review: The Little Book of Market Wizards

Book Review: The Little Book of Market Wizards by David Merkel, CFA of The Aleph Blog

Over time, I have reviewed a decent number of “Little Books.”  I have a theory as to why I like some of them, and not others.  I like the ones that take a relatively narrow concept and summarize it.  An example of that would be Mark Mobius’ book on emerging markets, or Vitaliy Katsenelson’s book on sideways markets.

But when a concept is broad and not friendly to summary, a “little book” is not so useful.  As examples, John Mauldin’s book on Bulls Eye  Investing went too many directions, and Scaramucci on Hedge Funds could not adequately summarize or describe a large topic.

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There are other “Little Books” that I have read that did not even get a review… probably about 10% of the books I read in entire never get the review written because they were so bad, or just hard to decide what the book was.  (What do you want to be if you grow up dear? )

Sorry, too much intro.  For those at Amazon, there are useful links at my blog.

Jack Schwager is generally a good writer, and expert at talking with clever investors in order to break down the main points of how they invest (without giving away the store).  In this “The Little Book of Market Wizards” he goes a different direction, and looks for commonalities among various clever investors, with each chapter covering a different topic.

My view is that most clever investors fall into one of a bunch of categories, much of which boils down to time horizon for the preferred investment.  Going down the continuum: day trader, swing trader, longer-term trader, momentum-oriented growth investor, growth investor, growth-at-a-reasonable-price investor, and value investor.  After that, you might differentiate between those that go for relative vs absolute returns.

As such, The Little Book of Market Wizards posits a bunch of topics that apply to different groups of clever investors.  I think it would have been better to have segmented the book by classes of investors, because then you could have a coherent set of commonalities for each main investor type.

As it is, The Little Book of Market Wizards relies heavily on anecdotes, which isn’t entirely a bad thing; nothing motivates a topic like a story.  But if you were reading this to try to develop your own philosophy of managing money in order to fit your own personality, you might have a hard time doing it with this book.  I think you would be better off reading one of Schwager’s longer books, and reading about each clever investor separately.  At least then you get to see the full package for an investor, and how the different aspects of investing in a given style work together.


Already expressed.


If you just want a taste of what a wide variety of different investors do to be effective, this could be the book for you.  For most other people, get one of Schwager’s longer books, and read about the different investors as individual chapters.  If you still want to buy it, you can buy it here: The Little Book of Market Wizards: Lessons from the Greatest Traders.

Full disclosure: I received a copy from the author’s PR flack.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

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David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.