September 07, 2006


The 7 Deadly Sins of Investing: How to Conquer Your Worst Impulses and Save Your Financial Future. By Maury Fertig. AMACOM. $23.

     Every investment book needs a gimmick.  Maury Fertig’s is an unusually good one.  Fertig, a registered investment advisor and bond expert, takes the old concept of the Seven Deadly Sins and applies it to investing.  Those sins, in case you have forgotten, are Pride (the same as Vanity, says Fertig), Envy, Lust, Avarice (same as Greed), Anger (Wrath), Gluttony and Sloth.  Fertig argues that he is “in a good position to preach against [investment] sin” because of his extensive training, his decades of investment experience, and his personal investment success: 16.1% a year for the decade through the end of 2004, nearly five percentage points ahead of the S&P 500.

     Fertig is not the only author with solid credentials in this field, but his enthusiasm – which approaches fire-and-brimstone intensity at times – puts his book well above many others.  He starts by explaining how each financial sin affects performance.  Envy has to do with the fact that no matter how good you are, someone else is better, so you try to emulate that person.  Pride or Vanity is a matter of false confidence.  Lust has to do with “falling head over heels in love with a stock or a trading pattern.”  Avarice or Greed may seem obvious, but Fertig gives it a specific meaning: lapses in judgment that lead an investor to keep trying to get more and more until further success is impossible.  Anger or Wrath has to do with self-destructive behavior through taking market trends personally.  Gluttony relates to serial investing and short-term trading.  And Sloth is a matter of investing without making an effort to investigate each potential investment thoroughly before committing money to it.

     In the best part of this book, Fertig gives a chapter to each of these investment sins, explaining how they manifest themselves in market behavior and giving specific examples (with names changed, of course) of investors who have committed each sin.  These chapters, it should be noted, do not really contain any new or unusual advice – the book’s main flaw is that, for all its clever repackaging, it is essentially a repackaging of well-worn investment truisms.  However, Fertig’s plainspoken style and careful working-through of the “sin” motif make it easy and even pleasant to follow what are essentially old arguments.  For example, he says that someone suffering from Pride or Vanity may possess an unbalanced portfolio because “the vain investor often feels that the rules that apply to other investors don’t apply to him” – and may convince himself or herself that a single stock or trading system, which no one else knows, is perfect.  Overcoming pride, Fertig says, requires realizing that “sooner or later, the market humbles everyone.”  Therefore, says Fertig, there are three approaches to use: seek out advice and knowledge from others; “substitute change-awareness for ego in making investment decisions”; and do not try to outsmart the market.

     None of these solutions is new, and not even Fertig’s clever packaging can conceal the fact.  Indeed, The 7 Deadly Sins of Investing is far more successful as a descriptive book than as a prescriptive one.  The approach does allow investors to see their market mistakes in a new way, and may therefore get through to people in a way that other books (with essentially similar advice) do not.  But when it comes to learning how to sin no more, Fertig falls flat.  There is nothing inherently wrong in his recommendations, but there is nothing in them that is not an oft-told tale.  Therefore, readers who find themselves looking at their problems in a new light because of this book will be disappointed to find nothing really new in the way of suggested solutions.  No wonder some people, when their portfolios decline, do no more than pray for them to recover.

No comments:

Post a Comment