Book Review: The Only Three Questions That Count

Over the holidays, I read Ken Fisher's newest book, The Only Three Questions That Count. This book is quite simply the single best tome on investing that I have read in years.

If you consider yourself a serious investor (here's a secret that lots of this site's advertisers already know: since you're here, you are by definition a serious investor), you should buy a copy and read it as soon as you can. As our own Jim Cramer says in the forward to Three Questions, "This book may be the single best thing you could do this year to make yourself a better investor." I could not agree more.

Three Questions, at its core, is a book about the absolute necessity of constantly and rigorously questioning conventional wisdom. Universally held beliefs cannot result in market-beating returns, because markets are efficient discounters of known information. If a lot of people "know" something, that knowledge is almost immediately priced into the market. So if you want to beat the market over the long term, you must figure out a way to make investment decisions by "knowing what others don't."

Fisher details three basic questions that must be answered to result in actionable market-beating ideas. The first question is, what do I believe that is actually false? Second, what can I fathom that others find unfathomable? And third, what the heck is my brain doing to mislead and misguide me now?

In my experience, many if not most investors are comfortable with the concept of questioning. But in practice, the process of questioning becomes too personal for most folks -- particularly professionals. It implies uncertainty, which to some people connotes incompetence, and perceived incompetence almost always leads to some form of fear.

Fisher wants us to be comfortable with asking questions, even about our own beliefs. To do so, he recognizes that we have to strip emotion from the process. We have to be scientific about it. So he proceeds to use his three questions to blow apart a bunch of widely believed market myths in a scientific and unemotional way.

To view Gregg Greenberg's interview about better investing with Ken Fisher, please click here.

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Norm Conley is president and chief investment officer of JAG Advisors, a St. Louis-based money-management firm. As co-manager of JAG's Large Cap Growth separate account product, with more than $175 million in assets, he's a long-only investor who focuses on growth companies with favorable fundamental and technical characteristics. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Conley appreciates your feedback; click here to send him an email.