Book Review: Rule #1, by Phil Town

Rule #1 is another entry into the 'How to get rich playing the stocks' library, but in this case, that's a good thing. Phil Town takes you step by step through his formula for successful investing, and it's a formula easy enough to make work, even for the inexperienced investor.

Rule #1 is pretty simple in itself, Don't lose money. Unfortunately for the average investor, that's easier said than done. While Jim Cramer teaches you the ins and outs of the investing world, Phil Town teaches you a more specific plan, his plan, for identifying the best companies in which to invest. He shows you what to look for when you're reading through the companies financial reports and gives you the formula to predict how much growth (or not) you can expect from the company. Once you've identified your ideal stock price for your investment of choice, he tells you to purchase your shares when that company's stock drops 50% from the price you set as fair value.

If you read Rule #1 as someone not too familiar with the market as a whole, this book will probably come off as 'just another get rich quick' scheme. I'm usually pretty suspicious of people trying to sell their 'formulas' for success or their stories of 'How I made it big, and I'll tell you if you buy my story'. I'm thinking, 'if you made it so big why the hell do you need to sell your story?' They only want to 'help' you to get to your money. Rule #1, however, is an escape from that norm, as it actually does teach you a great strategy for making money in safe stocks. I haven't personally followed his plan down to the detail in which he tells you to, but I've combined what he has to say with other sources of information, added experience and it all started coming together.

One note, don't be bought into the fact that his strategy will take only 15 minutes a week, as it states on the cover. What he means by that, is after you've done all your research and set up your watch list, you can look at that watch list once or twice a week and you'll see if any stock has reached your buy price and that will take you 15 minutes a week. That's all fine and dandy, but even though you've researched the companies enough to put on your watch list, you're an idiot if you cease to continue research on those companies. Generally, I go by what Jim Cramer advises, spend at least ONE HOUR per week researching EACH STOCK you own. So if you own 20 stocks, that's 20 hours a week you should be 'studying'. This should apply to a stock in your watch list as well, if you're following Phil Town's formula. Your money is way to valuable to only spend 15 minutes a week managing it.

Don't be scared away from following Phil Town's formula, and don't be scared away from managing your own money. These days the little guy gets all the information we need from sites like Yahoo finance and MSN money. The little guy can actually move in and out of stocks quicker than the big guy can. Combine the lessons in Jim Cramer's Real Money with Phil Town's Rule #1 and you're well informed to start your own investing.

VFC gives Rule #1 3.5 dollar signs, only because Phil Town comes off as a used salesman trying to sell his story at some points.