The Only Three Questions That Count
Encyclopedia
The Only Three Questions that Count: Investing by Knowing What Others Don't is a book on investment advice. It was released in December 2006 and spent three months on The New York Times
list of "Hardcover business bestsellers"
. It was also a Wall Street Journal and a BusinessWeek best seller.
magazine. In the book, he maintains that because the stock market
is a discounter of all widely known information, the only way to make, on average, winning market bets is knowing something most others don’t. The book claims investing should be treated as a science, not a craft, and details a methodology for testing beliefs and uncovering information not widely known or understood. The book’s scientific method consists of asking three questions:
The first question addresses common investing errors, the second shows how to try and find bettable patterns which others may misinterpret, and the third deals with behavioral finance
, pointing out cognitive errors such as overconfidence and confirmation bias
.
Other issues covered include high P/E ratio
s; debt
; the federal budget, trade
, and current account
deficits; the U.S. dollar
; high oil prices; emerging markets
; gold
; and the U.S. economy.
Please note that the Fisher Investments performance numbers published in the Appendix K of the book are for the years ending on June 30th (instead of December 31st).
Book reviews have also appeared in the Financial Times, Forbes Magazine and Canada's National Post.
The New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
list of "Hardcover business bestsellers"
. It was also a Wall Street Journal and a BusinessWeek best seller.
Overview
This is the fourth book by Fisher, a longtime columnist for ForbesForbes
Forbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
magazine. In the book, he maintains that because the stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
is a discounter of all widely known information, the only way to make, on average, winning market bets is knowing something most others don’t. The book claims investing should be treated as a science, not a craft, and details a methodology for testing beliefs and uncovering information not widely known or understood. The book’s scientific method consists of asking three questions:
- What do I believe that’s wrong?
- What can I fathom that others can’t?
- What is my brain doing to mislead me?
The first question addresses common investing errors, the second shows how to try and find bettable patterns which others may misinterpret, and the third deals with behavioral finance
Behavioral finance
Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...
, pointing out cognitive errors such as overconfidence and confirmation bias
Confirmation bias
Confirmation bias is a tendency for people to favor information that confirms their preconceptions or hypotheses regardless of whether the information is true.David Perkins, a geneticist, coined the term "myside bias" referring to a preference for "my" side of an issue...
.
Other issues covered include high P/E ratio
P/E ratio
The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share...
s; debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
; the federal budget, trade
Balance of trade
The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...
, and current account
Current account
In economics, the current account is one of the two primary components of the balance of payments, the other being the capital account. The current account is the sum of the balance of trade , net factor income and net transfer payments .The current account balance is one of two major...
deficits; the U.S. dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
; high oil prices; emerging markets
Emerging markets
Emerging markets are nations with social or business activity in the process of rapid growth and industrialization. Based on data from 2006, there are around 28 emerging markets in the world . The economies of China and India are considered to be the largest...
; gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
; and the U.S. economy.
Please note that the Fisher Investments performance numbers published in the Appendix K of the book are for the years ending on June 30th (instead of December 31st).
Book reviews have also appeared in the Financial Times, Forbes Magazine and Canada's National Post.