Phil Town’s rule #1 investing

Rule #1 by Phil Town is not a general personal finance book, and it's not a book for beginning investors — it turns a lot of conventional investment wisdom on its ear. The book explores a philosophy ascribed to Columbia University's Benjamin Graham (author of The Intelligent Investor), and popularized by Graham's student, Warren Buffet (perhaps the most successful investor of all time).

What is The Rule? "There are only two rules of investing: Rule #1: Don't lose money [...] and Rule #2: Don't forget Rule #1." Town writes: "Most Americans are trapped in mutual funds that, at best, ride the waves of the market." He believes that his method can help investors break free from these cycles.

At its heart, Town's philosophy is simply "buy low, sell high". He's not pushing a get-rich-quick scheme (though at times, especially early in the book, that's exactly how it comes across). But he's certainly encouraging his readers to abandon traditional "get rich slowly (and surely)" techniques.

Town argues that there are three myths of investing:

  1. You have to be an expert to manage money.
  2. You can't beat the market.
  3. The best way to minimize risk is to diversify and hold for the long term.

Dollar-cost averaging will not protect you, he says. These statements may make some nervous about Town's philosophy. In the recent Wall Street Journal article about personal finance books, one expert cautioned:

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