Book publisher McGraw-Hill was kind enough to send me their spring catalog for me to choose which books I would be willing to read and review.  Out of the many titles in the “finance” section, the book “The Seven Rules of Wall Street, Crash Tested Investment Strategies that Beat the Market” caught my eye.  I mean, who doesn’t want to beat the market?

About the Author:

According to the book:

Sam Stovall, chief investment strategist of Standard & Poor’s Equity Research, serves as chairman of the S&P Investment Policy Committee, where he focuses on market history and valuations.  He is the author of The Standard & Poor’s Guide to Sector Investing and “Stovall’s Sector Watch,” a column featured on www.spoutlook.com.

About the Book

As indicated by the title, this book is about the seven rules of wall street and how they can be used to beat the market.  What rules might that be?  They include:

  1. Let Your Winners Ride, but Cut Your Losers Short
  2. As Goes January, So Goes the Year
  3. Sell in May and Then Go Away
  4. There’s No Free Lunch on Wall Street
  5. There’s Always a Bull Market Someplace
  6. Don’t Get Mad – Get Even!
  7. Don’t Fight the Fed

As indicated by the short author biography above, Mr. Stovall is a specialist in sector investing within the S&P500.  What are sectors?  Out of the 500 companies listed on the S&P500, they are sorted in “sectors” such as information technology, consumer staples, utilites etc.  In this book, Mr. Stovall goes through each of the “rules”, explains their significance, and creates mock portfolios including back tested returns (since 1990).

The strategies above all involve actively monitoring and trading your equity positions with the longest hold time of one year.  Rule #5 involves fairly high turnover with potentially trading out of your positions every month.

What I Liked/Disliked About the Book

What I appreciated most about the book was that Sam Stovall went through each rule, explained the benefits/downfalls along with back tested returns (CAGR and risk adjusted) since the inception of “sectors” on the S&P500 (1990).  In addition, he creates mock sector ETF portfolios to drive the point home.

The largest problem I see with his conclusions is that his sector data only goes back to 1990 which, when the book was written, is only around 18 years of back testing.  This is a relatively small market sample in the grand scheme of investing.

Final Thoughts

Sam Stovall has some very convincing arguments in his book and shows some statistically impressive market beating strategies.  His favorite strategy however, involves quite a bit of turnover which can generate unnecessary taxation in a taxable investment account.  The obvious choice would be to use a tax sheltered account, but as his strategies involve US based sector ETFs, the exchange fees would impact returns (for Canadians).

Perhaps the best bet, if someone were to follow the strategies indicated in this book, is to open a Questrade RRSP account which allows the investor to hold US Dollars (which no other Canadian online stock broker allows).

Want a Free Copy?

McGraw-Hill was generous in offering Million Dollar Journey readers the chance to win 2 copies of the book.  The details are below:

  1. Simply leave a comment and you’ll automatically be entered in the draw for a free copy.
  2. Follow me on Twitter for an entry.
  • Please only 1 comment entry / person (please enter a valid email address).
  • Only those with a North American mailing address may enter (publisher rules, sorry).
  • Contest will end Friday 5pm EST June 19, 2009 and the winner announced shortly after!

93 Comments

  1. The Financial Blogger on June 16, 2009 at 8:10 am

    The problem by taking 1990 data is that the last 10 years has been completely out of any “market rules” we know. Economic cycles are smaller, volatility is higher and they didn’t have much Hedge Fund back n 1990 (thank god we got rid of some of them lately ;-) ).

    Not sure that Sell in May and go away is a good rule:
    http://www.thefinancialblogger.com/sell-in-may-and-go-away%E2%80%A6-should-you/



  2. B on June 16, 2009 at 8:23 am

    Best rule to beat the street? Get free stuff!!

    Keep up the great work!



  3. Rob on June 16, 2009 at 9:06 am

    I’d love to win this book! Thanks MDJ for your effort on your site. I really enjoy reading it each day.



  4. Philip in North York on June 16, 2009 at 9:10 am

    I wonder if his arguments are relevant in other places such as DJIA, NASDAQ, or in other countries.
    If there is no free lunch on Wall Street, then let me get a free book because I’m hungry.



  5. Kirk S. on June 16, 2009 at 9:29 am

    I agree with The Financial Blogger…with all of the wild volatility since electronic trading has begun it is hard to make rules based upon that. Either way, it sounds like an interesting read!



  6. Andrew on June 16, 2009 at 9:51 am

    “# Sell in May and Then Go Away”

    Always thought this was a silly rule.



  7. Alexis on June 16, 2009 at 10:03 am

    please add me to the draw. Thanks



  8. paulie on June 16, 2009 at 10:07 am

    please include my entry for the seven rules of wall street. thank you. i enjoy this site immensely.



  9. Aaron on June 16, 2009 at 10:09 am

    Please enter me in the contest. Cheers!



  10. Jared on June 16, 2009 at 10:11 am

    I have previously added this book to my list of books to read.



  11. telefantastik on June 16, 2009 at 10:14 am

    I’m in too.
    Thanks



  12. Cola on June 16, 2009 at 10:20 am

    I’d love to win this book. Please enter me in the draw.



  13. Michael on June 16, 2009 at 10:22 am

    Sign me up! I would love a copy of this book



  14. RI on June 16, 2009 at 10:33 am

    Welcome back, book review & giveaway!



  15. CPS on June 16, 2009 at 10:36 am

    Would love to read another stock book. Enter me in the contest!



  16. Dave D on June 16, 2009 at 11:04 am

    Sign me up for the draw. Thanks



  17. clalc on June 16, 2009 at 11:05 am

    sign me up for this one too !



  18. Frank on June 16, 2009 at 11:24 am

    Would love a copy thanks.



  19. Nick on June 16, 2009 at 11:41 am

    Please sign me up for the draw. Thanks!



  20. Sean on June 16, 2009 at 11:41 am

    Keep up the great blogs and book reviews. I appreciate hearing your opinions, and the opinions of your followers, on the many aspects of finance.



  21. Jeff on June 16, 2009 at 11:46 am

    Throw my name in the draw bin please!



  22. Josee Guindon on June 16, 2009 at 11:51 am

    I have been thinking of investing in stocks and such for a while. I think that I may feel more prepared to take the step if I win this book!



  23. Barik on June 16, 2009 at 11:52 am

    Would like to get a copy of the book



  24. Steve Zussino on June 16, 2009 at 11:55 am

    Sign me up to win this book (sounds interesting)



  25. Allawi on June 16, 2009 at 11:57 am

    pick me



  26. Naveen on June 16, 2009 at 12:07 pm

    Free stuff is always good



  27. Rob on June 16, 2009 at 12:19 pm

    Sending in a comment so I can get entered in the draw but I was also wondering if anybody new about the witholding tax for american dividends if they are held in the TFSA. Do we still have to fill out that form? and would the dividends be tax free?



  28. Naumko on June 16, 2009 at 12:34 pm

    Sounds like an interesting read! Count me in!



  29. Brian on June 16, 2009 at 12:43 pm

    Sounds like an interesting read.



  30. Alex. on June 16, 2009 at 12:49 pm

    Here my comment and my ticket to a potential win.

    Rob…. interesting question as I haven’t thought of this issue so far. Let’s see what Frugal Investor says.



  31. Sarlock on June 16, 2009 at 12:53 pm

    Sounds like an interesting read. I am a sector investor but usually with a longer time frame than a year. I try to spot macro trends occuring in the overall economy and go long (5-10+ years) on those.



  32. Neeraj on June 16, 2009 at 12:54 pm

    please count me in.



  33. Triple_Eh on June 16, 2009 at 12:55 pm

    Count me in.



  34. AndrewP on June 16, 2009 at 1:02 pm

    Sounds like a great book!



  35. Richard Murphy on June 16, 2009 at 1:03 pm

    I am overdue to read a good invest book , please enter my name
    Thanks



  36. ldk on June 16, 2009 at 1:07 pm

    Please enter me for the draw as well! Thanks much~



  37. Bob on June 16, 2009 at 1:10 pm

    Sounds like a great read. Thanks.



  38. Matt on June 16, 2009 at 1:13 pm

    A friend told me about this book, it is on my reading list. Please count me in.



  39. Bill M on June 16, 2009 at 1:14 pm

    Please add my name to the draw. Thanks



  40. Oliver on June 16, 2009 at 1:17 pm

    In to win.



  41. LVJ on June 16, 2009 at 1:20 pm

    Please add my name to the draw…Thanks



  42. John on June 16, 2009 at 1:27 pm

    I’m always in to win!



  43. Kent on June 16, 2009 at 1:28 pm

    Time to learn more techniques to manage my personal financial. I hope I can win. lol



  44. Ace on June 16, 2009 at 1:39 pm

    I have been doing my own sector research. Would be better to read this book



  45. Ace on June 16, 2009 at 1:42 pm

    I have been looking at beating the market in dif ways. Would be better to read this book



  46. Elmanl on June 16, 2009 at 1:43 pm

    please enter me in the draw for the book !



  47. Josh Blacker on June 16, 2009 at 1:47 pm

    Always enjoy your MDJ insights. Got you fed right into Google Reader and enjoy keeping up to date. Wouldn’t mind giving the book a read – for free :)



  48. Adam on June 16, 2009 at 1:47 pm

    I’m interested. :)



  49. Troy W on June 16, 2009 at 1:55 pm

    please sign me up for the draw



  50. Cam Birch on June 16, 2009 at 2:03 pm

    I would love to win a copy of this book.



  51. Mark on June 16, 2009 at 2:46 pm

    Please include me in the draw. Thanks!



  52. Greg on June 16, 2009 at 2:56 pm

    Please enter me in the draw. Thanks.



  53. Rod Payne on June 16, 2009 at 3:04 pm

    But is there anything new and exciting in the book, or is it a rehash of previous similar books?



  54. Tin on June 16, 2009 at 3:05 pm

    I’m in! =)



  55. R I on June 16, 2009 at 3:10 pm

    Free book! Woo hoo!

    I agree that 1990 is not enough data – in the US it covers one full recession and recovery, and a single cycle is not enoguh to draw anything conclusive. I am curious though about how a portfolio can succeed with reasonable probability in a down market.



  56. Vince on June 16, 2009 at 3:24 pm

    court me in please..



  57. cannon_fodder on June 16, 2009 at 3:35 pm

    Thank you for the review and the opportunity to win this book.



  58. Keith on June 16, 2009 at 3:37 pm

    “His strategies involve US based sector ETFs”

    Could you to adapt to the strategy to Canadian ETF’s Canadian sector ETF’s. iShares has sector based ETF’s for energy, financial, gold, income trusts, materials, REIT, and technology. And Claymore has sector ETF’s for water, agriculture, infrastructure, oil sands, mining, and real estate.



  59. Andrew on June 16, 2009 at 3:37 pm

    I enjoy reading your site and would welcome a new book!



  60. tetsuo69 on June 16, 2009 at 4:44 pm

    Actually Questrade is not the only online brokerage that allows USD accounts. Tradefreedom allows one to hold both CAD and US dollars in an investing account all with one application.



  61. Jimmy on June 16, 2009 at 4:45 pm

    sign me up for the book !



  62. bob on June 16, 2009 at 5:57 pm

    here is my ticket for the draw…



  63. Jesus on June 16, 2009 at 6:27 pm

    Count me in for the draw



  64. Darryl Lapaire on June 16, 2009 at 11:58 pm

    Sign me up for the draw. Even with just a short history that he’s using to prove his points, I think there is likely some wisdom to be gained…



  65. MultifolDreams on June 17, 2009 at 12:27 am

    Count me in



  66. khai on June 17, 2009 at 12:46 am

    trying my luck in a contest. thanks.



  67. P on June 17, 2009 at 12:49 am

    i’m in



  68. BBQ on June 17, 2009 at 2:07 am

    I’m interested.



  69. Barry Fence on June 17, 2009 at 3:08 am

    I think this is the only investment book my Dad doesn’t have, so please enter me in the draw. Thanks!



  70. Wealthy Immigrant on June 17, 2009 at 8:08 am

    Thanks for the contest!



  71. DG on June 17, 2009 at 10:56 am

    Me too!

    Thanks,
    Dan.



  72. Finance Matters on June 17, 2009 at 11:17 am

    Why not!



  73. Satin005 on June 17, 2009 at 11:25 am

    Let`s see if I have a chance



  74. CANADIANSTOCKSTRADER on June 17, 2009 at 12:25 pm

    Please enter me in the contest. THANK YOU!



  75. Marianne O on June 17, 2009 at 1:06 pm

    This would be an interesting read, though I don’t know if it would lure me away from my “couch potato” setup right now. Maybe if I had a small side pot of funds to play with.



  76. Tom @ Canadian Finance Blog on June 17, 2009 at 1:45 pm

    Interesting book, but I agree that the data timeline might be an issue.



  77. lindahfx on June 17, 2009 at 1:58 pm

    This sounds very interesting. I’d love to win a copy! Thx.



  78. Rishi on June 17, 2009 at 3:33 pm

    I’m in



  79. Amit on June 17, 2009 at 7:14 pm

    Please count me in! Sell in May and go away only made sense for northern hemisphere and when we didn’t have emerging markets or southern hemisphere booms. Now, based on the weather, when some industries/sectors are down in northern hemisphere, they are doing well in the southern hemisphere, and vice-versa. You could always change it “Sell US stocks in May, buy Latin America, Australian stocks, sell them in October, buy US stocks again”.



  80. Susan on June 17, 2009 at 7:31 pm

    This sounds great!



  81. Finance Guy on June 17, 2009 at 8:34 pm

    Wow, I didn’t think you’d actually review all the points. Great job! I think I’ll pass on this one seeing as you weren’t blown away by it. It doesn’t really outline anything of interest that I haven’t read elsewhere.



  82. SE on June 17, 2009 at 9:34 pm

    Love the MDJ blog. Would love to get the book. Just opened a questrade acct looking to take matters in my own hand ala Derek Foster



  83. Linda Hamilton on June 18, 2009 at 2:24 pm

    I would love to win this book. I have been following your blog for a few weeks now.



  84. Sean on June 18, 2009 at 4:57 pm

    Count me in for the draw, and keep up the good work.



  85. Senk on June 18, 2009 at 5:59 pm

    Please enter me in the draw.



  86. Neeraj B. on June 18, 2009 at 6:22 pm

    Looks like the book is more focused on seasonality and technical analysis than on fundamentals.

    Looks like an interesting read….please throw my name into the hat as well



  87. Sajal on June 18, 2009 at 8:23 pm

    Please enter me!



  88. karash on June 19, 2009 at 12:30 am

    PLEASE COUNT ME IN..!



  89. Terri on June 19, 2009 at 12:42 am

    Me too! I love this blog!



  90. Mr. Mo on June 19, 2009 at 10:17 am

    In for the contest.



  91. Chris on June 19, 2009 at 2:15 pm

    Sounds good.



  92. Father of Five on June 19, 2009 at 4:48 pm

    I would love a book. Keep up the great work!



  93. Blogging Banks on June 21, 2009 at 12:11 pm

    Sign me up!