Phil Town’s Rule #1, Part #1

As cynical as I am, there are still forms of human gullibility that surprise me. For example, I am forced to conclude that those Nigerian emails promising tens of millions of dollars must somehow snare a few people, otherwise they wouldn’t get sent. And don’t get me started on Bernie Madoff. I guess it is my dim view of my fellow man that has me scratching my head. I just can’t believe anybody is really that optimistic.

So you will understand how stupefied I am at the sales of the many books that claim to contain a sure-fire way to get rich in the stock market. Individual titles come and go, but there always seems to be a few members of this sub-genre haunting the bestseller lists. (Although at the moment they are relatively less popular. Go figure.)

Hundreds of thousands of people spend hard earned money on these books. Difficult as it is for me to contemplate, it seems inevitable that some of those people read this blog. So with uncharacteristic patience, I am going to review one of the more popular of these tomes, Phil Town’s Rule #1, The Simple Strategy for Successful Investing in Only 15 Minutes a Week. I will do this in several installments, and, just to make it clear now, I will not have anything nice to say.

Hard sales figures for books are hard to come by, but it is clear that Mr. Town has done very well by this, his first book. He can safely be put into the growing club of those who have become rich by selling advice to others on how to become rich. Somebody should tell the Nigerian scammers about this. If only they charged money for their emails.

You do not need to open Rule #1 to know that it most certainly does not contain a recipe for wealth. None of these books do. They can’t. If this is not immediately obvious to you, consider the following.

Suppose you stumbled on a “simple strategy for successful investing” that allowed you to consistently make money in the stock market. Of course, you wish to profit from your discovery, and two possible ways to do that occur to you. You could a) make millions by writing a book that explains your method or b) make billions keeping your mouth shut and running a hedge fund. Which would you choose? Hint: a billion is a thousand millions.

Put another way, suppose you developed a way to play golf especially well. Would you teach it to others at the local country club or join the PGA Tour?

The bottom line is that everybody who can really beat the market does that for a living. They do not write books. And they rarely give interviews. In fact, people with effective schemes for making money in the stock market are generally very secretive about how they do what they do. If everybody knew and used the trick(s) they wouldn’t work so well. Indeed, Madoff could get away with what he did because it is common for hedge funds to disclose very little about what they do, even to their own investors.

Investing may be the ultimate “those that can, do, those that can’t, teach” subject. Because doing just pays so darn well. I know I am being a wet blanket. I just can’t help myself.

Still, I am sure that there is an optimistic fool or two reading this that hopes that maybe Rule #1 will be the exception. Town’s picture on the cover just looks so trustworthy. So in the rest of this series of posts I will methodically examine his simple strategy and I will show how Phil Town is the only person who will ever make a dime from it.

[Links to parts of this review: Part 1, Part 2, Part 3, Part 4, and Part 5]

14 Comments

  • By Anonymous, February 4, 2009 @ 3:05 pm

    I think you’re wrong about that… if you follow his blog at all, a lot of people seem to be making money following his techniques. More than their fund managers make for them, anyway.

  • By Frank Curmudgeon, February 4, 2009 @ 6:00 pm

    Alas, I do not follow his blog.

    Stay tuned and find out why I say these terrible things about Mr. Town.

    And thanks for the comment.

  • By Tom, April 13, 2010 @ 2:09 pm

    what has always puzzled me is why these persons who purport to know how to make easy millions in real estate or the stock market waste their time and energy trying to sell me their system. why not just implement the system themselves, full time? wouldn’t that be far easier and more lucrative than convincing me?? hmmmmmm

  • By Rikk, December 30, 2010 @ 2:35 pm

    This is a position and Im reading through your posts. I was wondering why the silence from Tom. Ive read both his books as well as others. Your claim that no one would ever help anyone else make money is a basic human flaw. You state it as a fact that there is no reason anyone would write a book to help others invest and its all about greed until you achieve all the money you could lay your hands on. I bought the book because I think your wrong. Someday there might be one person out there if they have enough that has an interest in teaching others. Thats my opinion of him. It sounds like he made enough and now hes trying his hands at something different. Educating the masses. Ill keep reading.

  • By Professor Lembach, March 11, 2011 @ 2:36 am

    Rikk – There are truly altruistic people out there, but those concerned with making money are never concerned with anything (or anyone) other than that.

    A person who had such a “simple strategy” may indeed write a book, but because more people in the market means more money for him to make.

    Who on Earth really cares if some random yahoo you’ve never met makes a dollar? And if he really did care so much, why is he charging you in order to help you?

  • By شات, April 15, 2011 @ 9:18 am

    دردشة

  • By dunc., November 11, 2011 @ 12:41 pm

    This is opinion of Phil Town’s book is pathetic. He is the absolute best person out there for the small investor. His methodology allows small investors to know what they are doing. I’ve had HUGE success following his investing strategy. I especially like his 2nd book – Payback Time. Phil Town has already made millions on investing his own money. He’s still making money investing today! You missed the whole damn point of the book. There is no reason he can’t help others learn and invest himself – small investors can’t moev the markets.

  • By Really?, December 3, 2011 @ 9:10 pm

    I quote from you “The bottom line is that everybody who can really beat the market does that for a living. They do not write books. And they rarely give interviews. In fact, people with effective schemes for making money in the stock market are generally very secretive about how they do what they do.”
    Gee I believe Warren Buffett has a few books out and I saw an interview he did recently. You just completely lost all credibility by making a blatantly ignorant statement. Whatever, you sound like sour grapes. You’re just a sad human being. Do a reality check on yourself!!

  • By chance, January 2, 2012 @ 3:24 pm

    I disagree that if your making money you don’t try something else. my father makes millions doing construction. He’s writing a book on the business. why? no one does that right? He must not be making money…WRONG. He likes to write, and he loves to teach. Also he will sell his book. why? he likes money and business. I’m not saying Phil is doing this but to say no one would sell something that works or good advice is simply not true. Read it, try it on paper for a while and make your own conclusion. Stop procrastinating ! do it..!

  • By Newday, July 2, 2012 @ 1:08 pm

    I’ve just finished attending a 3 day seminar given by Phil Town and his team. I came away from it knowing that if I educate myself more on finance, I don’t ever have to worry about money again. Sure he’s got money, but he came from being dirt poor and some rich guy he met taught him how to make money. He’s now doing the same. The book is just one tool in changing your life…..Phil offers an arsenal of information for anyone who chooses to take advantage of it. I’m changing my life, and Phil was the kick in the butt that made me know it’s possible.

  • By ya, September 27, 2012 @ 11:29 pm

    I think a lot of people (the author included) are missing the point, rule #1 investing is primarily about not losing money, the secondary (and subsequent) goal is making it. Some trades roughly net 0, but sometimes they go on runs that gain quite a bit. The key is that if you follow the rules you will never ride a stock to the bottom. So by minimizing the downside and capitalizing on the upside, you make small gains where you can it begins to add up, Overall it will outperform managed funds that ride the tides of the market. Anyone who tells you they can buy at the bottom and sell at the top is full of crap, but you can ride the trends-getting in when they are good and out when they are bad. You don’t hit the peaks or valleys but you rarely end up wondering what the hell happened to all your money. You should be out well before then. I can’t say the same about my mutual funds.

    Also while the comments about fees are legitimate and must be considered, you only pay taxes if you make money. While understanding and employing good tax strategies is advisable, holding bad positions to avoid taxes is stupid, and is not a legitimate argument against any investment strategy.

    (Currently or recently long AAPL, GOOG, CTSH, CEO, SYK)

  • By CarlosH, January 18, 2013 @ 4:38 pm

    Read his 1st book, reading payback time. One: He advises to paper trade until you feel fully ready (definetely sounds like a scam…. NOT) Two: Strategy is based off of best investor ever (Buffett) Three: Most logical system in my opinion; mathematical… (not emotional, as even the pro’s do from time to time) Four: Lets see, makes money in market… why should he want to write a book (book sales make money too) I am a middle class man and I share what I consider my experties with others, why? its human nature and most men… Even the Buffetts of the world do it!!!

  • By Riggo, March 18, 2013 @ 6:35 pm

    Fools, never does Phil Town claim his method is EASY! It’s the oppossite. He’s legit because he specifically says it takes hard work. He just shows you the proper way to work (research) and then it’s up to you to become a good investor.

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