Book Review: Yummi Yoghurt

Richard Gill, CFA, reviews Yummi Yoghurt, a first-stage, easy to read guide to stock market investment for beginners, written by Lord Lee of Trafford.

As discussed in last month’s book review, being a good investor isn’t the only factor crucial in building up wealth over your life. Due to the powerful effect of compounding, how long you invest your money for is also a critical component. 

Take someone who invests £1,000 a month, starting at the age of 35, and makes a return of 5% per annum, compounded monthly. By the time they reach 65 their fortune would have grown to just over £835,000. However, someone who starts investing at 18 on the same terms would have a portfolio worth £2.27 million – that’s almost three times higher due to the magic of compounding.

Given how important financial skills are in life, it’s surprising how little schools have taught on the subject over the years. At the age of 15 I was learning about the formation of oxbow lakes and how to calculate the angles of a triangle, hardly practical skills for most areas of life. The only real knowledge about money I gained came from business studies, and only as a small part of the course. 

While financial education became a statutory part of the national curriculum in 2014, it seems that many youngsters are keen to get more involved. According to last year’s annual Young Persons’ Money Index, 82% of students surveyed said they want to learn more about money in school. But now they can learn more about money at home following the publication of John Lee’s book on stock market investment, Yummi Yoghurt, written especially for teenagers and young first time investors.

Author John Lee, also known as Lord Lee of Trafford, started buying shares at an early age having caught the investment bug from his father. His first purchase was £45 worth of shares in shipping company Aviation & Shipping. Despite that investment sinking, he was not deterred, going on to become the UK’s first ISA millionaire in 2003 using a value based stock picking approach. Lord Lee was also a Conservative MP for 13 years and currently sits in the House of Lords as a Liberal Democrat peer.

From farm to fridge

Yummi Yoghurt is a first-stage, easy to read guide to stock market investment for beginners, told through the story of a farming family who take their yoghurt business from a small side project through to being a public company. The first part of the book takes readers through the family’s decision to take the business public, along the way introducing the company’s financial statements and various parties involved in the IPO process such as accountants, bankers, stockbrokers, lawyers, public relations and the like. Lord Lee also explains exactly what the stock exchange is, and its use as a venue for companies to raise money for expanding their operations.

Lord Lee has done an excellent job at describing the basics of stock market investment through a short but entertaining and informative story.

Meanwhile, the teenage children of another family have inherited a modest amount of money from their grandfather and are mulling over where to invest it. Attracted by Yummi’s growth prospects, low valuation and impressive dividend yield they apply for a modest amount of shares in what turns out to be a heavily oversubscribed offer. On the first day of public trading the children are very pleased to see that the shares open up by 20%, already giving them a decent return on their investment. 

The next few sections cover topics which teens definitely won’t learn at school. Going deeper into the workings of the stock market, Lord Lee provides readers with ten reasons why shares might go up and ten reasons why shares might go down, helping them gain a better understanding of how the markets work. Then we get an introductory lesson on company valuation, with the ubiquitous price-earnings ratio explained. 

At the climax of the story, Yummi Yoghurt has grown consistently over the years, despite some setbacks, and is fortunate enough to be taken over by a global food business at over four times its initial worth. The founders exit with a multi-million pound fortune and happily retire, while other investors are more than pleased with their profits. While this has been somewhat of an idealised story, Lord Lee reminds readers of the risks that the stock market brings and that they might be very fortunate to find another investment as good as Yummi Yoghurt.

The final few sections of the book contain more useful information including a glossary of key stock market terms and a brief guide on how the makeup of the stock market has changed over the decades in terms of sectors. Perhaps most valuable, Lord Lee uses his decades of experience to provide 12 recommendations on how budding investors can make more profitable decisions and how to avoid losses. Finally, a range of sources are given for those who want to learn more about finance and those who feel ready to make their first investment decision.

Cream of the Crop

Lord Lee has done an excellent job at describing the basics of stock market investment through a short but entertaining and informative story. Not only does he explain how investors can benefit from investing in shares but also how businesses create value for a range of stakeholders in society including owners, employees, communities and the tax man. While the book is aimed at younger investors, any beginner to the stock market will find it useful.