Personal Finance and Investing

December 28, 2012

Our ‘Favorite’ Business Books of 2012

Filed under: Big Ideas,Blog,History and Biographies,Leadership,Personal Development,Personal Finance and Investing,Social Responsibilty,Technology,Thought Leaders,Uncategorized — Tags: Antifragile, best of, Bitter Brew, book list, favorite books, Fine Print, five books, Global Odds, Quiet — Sally @ 11:53 am

Last week, we released our picks for the Best Business Book of 2012 as well as the eight category winners. Following in the footsteps of the New York Times, if we may, who asked a few of their esteemed book reviewers to reveal a list of their favorite books of 2012 (“Favorite is not synonymous with best, so this process can be painful. Brutal honesty is required. We pick what we actually liked, not what we only admired, although ideally our favorites fit both descriptions” writes Janet Maslin. And also, “In the midnight hour these 10 Favorites — not 10 Bests — call for a gut check. Bottom line, for each of us: Is this a book I’d give to a friend?”), we’ve decided to also share with you a list of our ‘favorite’ business books. For us, we decided this list should consist of books that are square pegs that don’t quite fit into the business book genre’s round holes. Books that are valuable and interesting to the business and/or nonfiction reader, but might have more universal application than the books that were picked for our annual awards. And so…our editorial staff’s favorite books of the year:

Sally – Quiet: The Power of Introverts in a World That Can’t Stop Talking by Susan Cain from Crown Business

The secret to life is to put yourself in the right lighting. For some it’s a Broadway spotlight; for others, a lamplit desk. Use your natural powers–of persistence, concentration, insight, and sensitivity–to do work you love and work that matters. Solve problems, make art, think deeply. [...] Figure out what you are meant to contribute to the world and make sure you contribute it. If this requires public speaking or networking or other activities that make you uncomfortable, do them anyway. But accept that they’re difficult, get the training you need to make them easier, and reward yourself when you’re done.

Dylan – The Fine Print: How Big Companies Use ‘Plain English’ to Rob You Blind by David Cay Johnston from Penguin Portfolio

How the promise of cheap, competitive and unlimited telecommunications service has been turned into a reality of expensive, monopolistic and limited service is just one part of the larger transformation in the American economy since the late 1970s. A host of large industries, including banks, credit card lenders, electric utilities, health care, oil pipelines, Hollywood studios, property insurance, railroads and water companies, all have worked quietly to rewrite America’s economic playbook in their favor. [...] In The Fine Print, we’ll look at how legislatures have rewritten basic business laws, some whose principles date back thousands of years.

Michael – Beating the Global Odds: Successful Decision-making in a Confused and Troubled World by Paul Laudicina from John Wiley & Sons

Today’s leaders and citizens have to accept a world fraught with volatility and disruptive change, and they have to realize that inaction is not a good option. It’s not all bad: This unprecedented volatility is accompanied by an equally unprecedented and compelling convergence of doing well with doing good–a blending of the pursuit of enlightened self-interest with the pursuit of the common good….By leveraging new technological capabilities and employing more dynamic ways of thinking and inspiring the future, we can beat the global odds.

Jon – Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb from Random House

Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, and risk, and uncertainty. Yet, in spite the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it anti-fragile. [So...] The best way to verify that you are alive is by checking if you like variations. Remember that food would not have a taste if it weren’t for hunger; results are meaningless without effort, joy without sadness, convictions without certainty, and an ethical life isn’t so when stripped of personal risk.

Jack – Bitter Brew: The Rise and Fall of Anheuser-Busch and America’s Kings of Beer by William Knoedelseder from HarperBusiness

Thanks to their beer, the Busch family had tasted all that America ever promised the immigrant class from which they sprang –wealth almost beyond comprehension, political power that provided access to presidents, and a lifestyle rivaling that of history’s most extravagant royals. Along with that, of course, came a king-sized portion of heartbreak, scandal, tragedy, and untimely death. But they had endured…. Of the brewing giants that boomed after Prohibition…only Anheuser-Busch remained as a free-standing, independent company, still operated by the family that founded it.

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March 5, 2012

168 Hours and All the Money in the World

Filed under: Big Ideas,Personal Development,Personal Finance and Investing — dylan @ 10:09 pm

Robert Benchley’s Law of Distinction states that “There are two kinds of people in the world: those who believe there are two kinds of people in the world, and those who don’t.” If that statement made any logical sense, I would count myself among the latter. Yet I do think it’s a rare mind that is both expansive and practical at the same time, and that is what makes Laura Vanderkam so special.

Many of us are practical, workaday folk who do our best to carve out a decent life and make due with what we have—the strong backbone, whatever collar worker. And many others of us are “big idea” people, constantly wandering around the world of ideas, chasing life’s big questions without a clear destination or map for getting there—the struggling artist or absentminded genius. That’s a gross oversimplification, but practical visionaries, people who challenge the status quo by practically, calmly and coolly shattering the sense that it’s inevitable or even logical, people like Laura Vanderkam, really are rare. She explores big, important life questions and, lucky for us, puts those explorations down in writing. Her latest, All the Money in the World: What the Happiest People Know about Getting and Spending, was released last week by Portfolio.

Her first book, 168 Hours: You Have More Time Than You Think, was ostensibly about time management, and this new one is ostensibly about personal finance, but these are not just time management or personal finance books. These are philosophy books, and there is a consistent thread running through them—the power of choice. In the ChangeThis manifesto she wrote for 168 Hours, she wrote.

When you spend your time nurturing your career, your family and yourself, and outsource, ignore or minimize everything else, you’ll discover that 168 hours is plenty of time to live the life you want. So whenever you find yourself saying “I don’t have time to do X, Y, Z,” try changing your language. Instead, say “I don’t do X, Y, and Z because it’s not a priority.”

Often, that’s a perfectly adequate explanation. I could tell you that I don’t play the violin because I don’t have time, but that’s not true. I have time. In any given week, I have 168 hours. If someone offered to pay me a million bucks to learn how to play the violin, you can bet I’d sign up for lessons! Since that’s not going to happen, I can acknowledge that I don’t think learning to play the violin is the best way I could be spending my time.

But playing a musical instrument is one thing. Let’s raise the stakes. It requires more courage to say “I don’t play with my children because it’s not a priority.”

If it’s true, then it’s true, even if it’s not politically correct to say. Be honest. Own that truth. Maybe you don’t like being around your children. Maybe they don’t like being around you. Maybe your spouse is already doing a great job in this department. Maybe you honestly believe that the income you provide, the service you do for society, or the joy you gain by working during the entirety of your children’s waking hours is a bigger priority than interacting with them. There could be many good reasons for this. There are probably some bad ones too. Nonetheless, this is a choice, and not a matter of lacking time. When you say “I don’t have time,” this puts the responsibility on someone else: a boss, a client, your family, capitalism, society. The power slips out of your hands.

Early in All the Money in the World, she writes of “The Bauble Economy,” documenting the fascinating and strange social history of diamond engagement rings, and redefines it and other cultural norms as choices and priorities couples make:

Many couples feel as if there’s no money for luxuries or romantic extras.

Except once there was.

Remember those rings? With the same $5,392 the average couple spends on an engagement ring, a set of new parents could pay a babysitter $50 a night for 107 nights so they could have time to themselves or go neck in the car like teenagers.

The $12,124 The Knot reports the average couple spends on a reception venue could cover a $100 housecleaning service, twice a month, for the entire five years many two-couple couples spend in that sticky stage when children spill milk just to see what will happen.

The average $1,988 florist and decor bill could be doled out, instead, as 198 thinking-of-you $10 bouquets—a once-a-month gesture of love for a solid 16.5 years.

Indeed, the couple could elope, purchase a giant cubic zirconium ring to one-up the Joneses, and invest the whole $26,984 cost of a wedding in creating a “freedom fund” designed to give the couple more financial security and flexibility in their career, long after the guests would have thrown out the Jordan almonds somebody decreed are a wedding necessity

None of these are choices Vanderkam is suggesting we make—in fact, she talks in the book about the expenses she’s happy she made at her own wedding and the primary importance to her of spending as much time with her children as possible—but it’s important to remember that they are your choices. We do many things in life because they’re easy or because they’re expected of us, or simply because “it’s what we do.” It could be as small and simple as watching Morning Joe or stopping for a cup of joe on the way to work. The point is that “what we do” is not always what we would want to do with our time or resources, and what most of us want to do with both is more. I truly believe that when most of us think of more, it’s not quantity, but quality. I think we all know this deep down, but reading Laura Vanderkam’s books focuses our attention on how we’re using our lives and resources, helps us ask ourselves the right questions, resets our priorities and live our lives more deliberately. As she writes:

After all, no matter how much or how little we have, none of us will have it forever.

As James Stewart and Jean Arthur taught us so long ago, You Can’t Take It With You, and even if there are two kinds of people in the world, each of us only gets one shot at it.

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December 28, 2011

Addressing The Behavior Gap in the New Year

Filed under: Personal Finance and Investing — dylan @ 6:03 pm

We don’t recommend too many personal finance titles around here. The last one I can remember us being really excited about was Lee Eisenberg’s The Number, which came out in 2006 and didn’t do as well with the general readership as we thought and hoped it would.

Financial literacy is a immensely important topic, but most personal finance books are rather dense—as well-written, easy-to-understand and exciting to read as the assembly instructions to the bar stool you just got for Christmas. They’re also very often written by folks who are just “selling water by the river,” bottling a resource you could easily get for free if you’d just take a few more steps. And at other times, their message just seems to be painfully obvious—such as in the lovely little video below.

And that’s the honest ones. The darker side of the field is filled with get-rich-quick schemes and late-night infomercial charlatanry.

But every once in a great while a diamond comes out of the personal finance rough. The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money by Carl Richards is one such gem. And if getting your finances in order is on your list of resolutions for the New Year, it’s coming at the perfect time—January 3rd.

You may know Richards from the Bucks Blog over at The New York Times. If so, you know what to expect: a calm, clear, honest and reasonable voice that peppers its insights with “back-of-the-napkin” sketches and diagrams. (If you’re not familiar with him, take a peak at A Plan for 2012 That You’ll Actually Follow to get an idea of what you’ll be getting into here.)

Richards coined the term “behavior gap” to describe the difference between average investment returns and investor returns, which are much lower. And he makes a persuasive case that closing this gap doesn’t require learning a secret financial formula or finding the perfect investment—which he argues does not exist abyway—but overcoming irrational instincts and finding balance.

I don’t believe that there is a secret to getting rich. But in the end, financial decisions aren’t about getting rich. They’re about getting what you want—getting happy. And if there is a secret to getting happy, it’s this: be true to yourself.

That sounds somewhat out of place in a book about finance, but it’s a vitally important core to have. (And, though this book doesn’t address larger financial issues, I think the same could be said for the finances of any company large or small, and any country in the world.) Perhaps the best advice he gives in he book is to “Focus on your own behavior, not the market’s behavior:”

“Have you seen what the market is doing?” People often say this when they are in a state of shock or exhilaration. They’re ready to go to cash until things “clear up,” or they’re preparing to load up on stocks before it’s “too late.” Notice the implication that the market is “doing” something right now. In reality, we only know what the market has already done.

The Behavior Gap won’t show you how to predict the market or get rich quick—not financially anyway. You’ll learn what financial matters you can control and which you can’t, what you should plan on and what you shouldn’t, and that it’s okay to make mistakes from time to time, because you will. It provides a framework and a mindset with which to approach your financial life that enriches the quality of your life as a whole—the best return on investment I think you’ll be able to find. Instead of providing easy answers, it prompts you to ask the right questions. After all, only you can be an expert on what you want, and only you can find it.

It won’t identify your behavior gaps, but it will help you identify them for yourself. He addresses this reality in the book’s conclusion:

I wish I could be more specific about how to solve your problems, but because I don’t know you personally, I can’t give you specific advice about your individual behavior gaps. Remember: taking financial advice from a stranger is dangerous.

It is that honest, sober and reasonable assessment&mash;along with the questions and tools he provides for you to make your own personal assessments—that makes The Behavior Gap so valuable.

I don’t know about you, I’m tired of personal finance (all finance, really) being treated as if it’s a game we’re all playing, tired of all the yelling, bells-and-whistles, irrational exuberance and (by-turn) panic. I’m tired of feeling as if I need to be plugged into the news 24/7, seeking out the advice of analysts and gurus who seem to be only pretending like they know what they’re talking about to keep my head above water. That makes some people happy, and I wish those people all the money and happiness they can possible hold onto, but it makes me nauseous. As Dan Heath says in his blurb for the book, “Carl Richards is the anti-Jim Cramer,” and that’s exactly what I’m looking for.

If you feel similarly, and improving your financial outlook (in the best sense of that word) is on your list of resolutions for the New Year, The Behavior Gap is the first book you should pick up in 2012.

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August 8, 2011

Invest Like a Girl

Filed under: Book Reviews,Personal Finance and Investing — dylan @ 2:27 pm

634 points. That is quite a dramatic drop. How should we react? How can we react? LouAnn Lofton has some sound advice: Invest like a girl. In the first chapter of her book, she recalls the panic that swirled around the 2008 financial crisis and one man’s reaction to it—a reaction that provides a good lesson for us today (and for when markets open tomorrow):

Through it all, a man sat far removed from the hubbub of New York City and Washington, D.C., in the Midwest, in quiet, placid Omaha, Nebraska. He watched, as he’d watched so many times before, as the world was seemingly coming to an end. He heard the shrill voices on the TV and even he probably couldn’t escape the daily, even hourly, deluge of photographs of Wall Street traders looking horrified, frazzled, or just plain resigned to it all.

Then, he did what any rational person should have done in the face of so much fear. He took a deep breath, steadied himself, and started buying stocks, putting $20 billion to work in companies like Goldman Sachs and General Electric. It took courage, fortitude, and an ability to look past the current crisis to the eventual recovery of American business and the world economy.

It took the right temperament. Warren Buffett, our man in Omaha … didn’t panic and sell. He remained calm, and he assessed the situation. And when he did, he acted from a place of certitude, backed up by years of experience. He encouraged others to do the same, reminding them that we’d been through tough times before and we’d come out ahead each time. He also reminded investors that the best time to buy stocks was when everyone was fleeing the market, leaving bargains galore ready for the taking. [...]

The only thing I disagree with her on is the crazy idea that Omaha, Nebraska is in the Midwest. (I believe Meghann Marco settled this matter in 2006 when she penned her classic States I Refuse To Acknowledge As Midwestern.) Lofton’s Warren Buffet Invests Like a Girl: And Why You Should, Too tells the story of the Sage of Omaha, and stresses that the right temperament is crucial for investing success. And she makes the case that the right temperament is one that is far less testosterone-fueled than the one so prevalent on Wall Street. And, after making the case that the more traditionally macho temperament of Wall Street is largely to blame for many of the problems our markets face today, and is not good for the long term stability of individual portfolios, she delves into the research on investing patterns and tendencies.

Studies have shown that women have a different approach to investing than men do. They think long-term and don’t trade as much. They eschew risk more than men do. They’re better able to think for themselves and not bend to peer pressure. And they have much less testosterone, which affects markets in ways we are still discovering, thanks to new developments in the field of neuroeconomics. The way that women tend to approach investing is healthier and calmer, and it’s the way we should all approach investing, both men and women alike.

Lucky for all of us, we have an outstanding model to guide us … Warren Buffett. When compared to the research on men’s and women’s investing styles, and the differences between them, Buffett’s investment style looks very similar to those strategies employed by women. [...]

And if there’s any doubt as to the validity of this style and temperament versus something a bit more, say, macho, allow me to point you in the direction of his returns versus those of the investment houses on Wall Street in 2008 and beyond. Buffett’s been Buffett for decades, building his wealth over time, while the boys on Wall Street destroyed theirs—and ours, too!—in just several short months. Buffet’s compounded annual book value gain has been more than double the return of the S&P 500 for more than forty years, while they dashed our 401(k)s and sent the economy into a spiral.

There can be no question as to which is the more sustainable path, which is the smartest way to create wealth over the long term, which is the best way for us—for all of us—to invest for a bright future. It’s time for a change. It’s time to embrace the feminine.

It’s time, quite simply, for all of us to invest like girls, right alongside the greatest investor of all time, Warren Buffett.

With the markets as jittery as they are right now, the best thing we can do as individuals to counter the panic is to remain calm—act as investors rather than speculators. Lofton lays out eight essential principles that research shows are tendencies of women investors that can help help us all accomplish that.

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April 2, 2008

Go Green, Live Rich

Filed under: Big Ideas,Book Reviews,Personal Finance and Investing,Social Responsibilty — dylan @ 9:35 am

David Bach–author of the popular Finish Rich series of personal finance books and the man who coined the term Latte Factor–has penned a new book entitled Go Green, Live Rich: 50 Simple Ways to Save the Earth and Get Rich Trying. It is a quick and interesting read, filled with a sense of purpose as well as easy steps that one can take to become a smarter consumer and live a greener lifestyle.
There is a widely held view out there that greening your lifestyle is an expensive and painful process. Bach deftly explodes this myth in 192 (recycled) pages. Early on in the book he revisits the Latte Factor concept, but tweaks it a bit and suggests we find our “Litter Factor.”

I have long encouraged my readers to identify their Latte Factor and eliminate it to start saving money. But small changes such as not buying coffee in a disposable cup or water in a plastic bottle not only are good for your wallet, but they actually better the planet. In the same way that “little things” add up to drain your wealth, “small changes” add up to make a big difference for the Earth.
Consider this: Every year, Americans drink more than 100 billion cups of coffee. Of those, 14.4 billion are served in disposable paper cups, enough to wrap the Earth 55 times if placed end to end! Plus, those paper cups contain a plastic lining made from a petro-chemical that would produce enough energy to heat 8,300 homes a year.

He goes on to briefly discuss bottled water, referencing what I think was the best article published last year–Charles Fishman’s Message in a Bottle. This is just a snippet of the first chapter, but it contains advice that, if taken, can lead to serious change… and save you money to boot. The rest of the book has equally clear and concise thinking and advice that ranges from how to save money by becoming energy smart, to shopping green, to going green at work. The steps to going green and energy-efficiency aren’t necessarily going to be completely new to people, but Bach revealing how taking them is ultimately cost-efficient probably will be.
You’ll be hearing much more from Bach on this issue. His first stop will be on the Today Show next Monday discussing seven green steps that can save you 3,000 dollars a year. The book itself will be hitting the shelves on Tuesday of next week, and I think you could consider it’s $14.95 list price as an investment in the future of your finances, and maybe, even the future of planet as well.

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January 23, 2008

Excerpt from Fast Profits in Hard Times

Filed under: Personal Finance and Investing — 800-CEO-READ @ 1:35 pm

The following is an excerpt from the book Fast Profits in Hard Times by Jordan E. Goodman
Published by Business Plus; January 2008; 9780446581561
Copyright (c) 2008 Jordan E. Goodman

10 Strategies: An Overview

Fast Profits in Hard Times will teach you everything you need to know and give you specific resources (websites, toll-free numbers, etc) to implement the following 10 strategies:

Invest in Tax Liens
Buy liens placed on properties by municipalities because owners have fallen behind in paying their property taxes. Then, when the property owners pay what they owe to the municipalities, receive not only a return of your principal but also a penalty interest rate set by the municipality, typically in the range of 8% to 25%. If the property owner defaults altogether, take possession of the property for a fraction of its real value: the sum of the back taxes you’ve already advanced. You can then sell the property, even a bit below its market value, for a huge profit.
Buy Real Estate Below Market Value
Identify real estate sellers who are willing to accept less than their property’s full market value for a variety of reasons. Then resell the property immediately at a profit, rehab it, rent it out, or even live in it yourself, all with the built-in financial cushion of having purchased the property for far less than it is truly worth.
Invest in Income Trusts and Master Limited Partnerships
Earn high yields of 8% to 13% by investing in trusts that extract or transport natural resources such as oil, gas, coal, or timber. Such trusts pass a large amount of their earnings directly to investors through monthly dividends. Depending on the trust or MLP, some of the distributions may be considered a tax-free return of capital, boosting your after-tax return even more.
Invest in High-Yield Stocks
Invest in stocks with stable businesses that pay dividend yields of 5% to 15% or more. Some industries offering such high yields include electric utilities, oil tankers, and real estate investment trusts, and several broad-based closed-end mutual funds. This is a way to make your capital compound with very little risk when you reinvest the dividends or to boost the income you live on if you take the dividends in cash.
Enroll in Dividend Reinvestment Plans
Invest in companies that offer Dividend Reinvestment Plans, known as DRIPS, which allow you to use dividends to purchase shares directly and thus bypass brokerage fees. Automatically reinvest dividends back into further stock purchases, thereby compounding your portfolio’s assets over time. Several companies offer discount DRIPS, meaning that you get an additional 2% to 5% bonus every time you reinvest dividends, compounding your return even more at no additional cost to you. So if you get $100 in dividends, you receive $105 worth of stock when you enroll in a 5% discount DRIP.
Buy High-Yielding Bonds
Buy bonds of companies, municipalities, or foreign governments, either individually or through open and closed-end funds, which pay yields of 5% to 12%. In addition to the high rate of interest, you will receive the return of your principal when the bond matures. There are many types of hybrid bonds available in today’s market with catchy names like STRIDES, ELKS, MITTS and HITS which offer guaranteed return of principal, high yields and potential bonuses based on how the underlying instruments perform.
Use Put and Call Options
Rather than buying and selling actual stocks or stock indexes, you can, for a fraction of the cost, trade rights to buy and sell those stocks or stock indexes at specific prices within a specified period of time up to two years into the future. This form of leveraged trading allows for far greater gains but also runs the risk of far greater losses than normal stock investing. It is therefore imperative to follow careful strategies that limit risk while optimizing profits.
Profit from Foreign Exchange Trading
Trade one currency against another currency, on the expectation that the currency you’ve bought will gain in value relative to the one you sold. This provides a convenient way to profit from the decline of the US dollar against most major foreign currencies.
Invest in and Broker Cash Flow Opportunities
Identify people and/or businesses willing to sell future receivables at a significant discount in exchange for ready cash. Then either buy the payments yourself or serve as a broker for a third party, typically a large financial company, which provides the funds. For example, you can broker or buy cash flows from lottery winners, lawsuit winners, mortgage notes or reimbursements due to a doctor’s office from insurance companies or Medicare.
Set Up Passive Income Strategies
Set up some kind of system that needs minimal ongoing management but continues to produce significant cash flow far into the future. A few examples include:
- placing vending machines in high-traffic locations to collect passive income whenever customers make purchases
- placing ATMs or point-of-sale (credit/debit/card swipe) machines in high sales volume locations to earn small fees paid by merchants whenever customers use the machines
- Buy high-quality timeshares in desirable locations and seasons and rent them out over the internet to earn substantial rental income

Author
Jordan E. Goodman is a former Money magazine journalist and the author of several bestselling books, including Everyone’s Money Book, The Dictionary of Finance and Investment Terms, and Master Your Money Type. He provides financial advice to millions of people each month through regular appearances on radio call-in and TV shows and through his seminars to corporate, association, and university audiences. He has been a regular contributor to NBC News at Sunrise, The Marketplace Morning Report on Public Radio, and many other shows. He hosts a popular financial resources Web site, www.moneyanswers.com, and is the host of The Money Answers Show on the VoiceAmerica Radio Network at www.voiceamerica.com. You can find out more about this book at www.fastprofitsinhardtimes.com.

Fast Profits in Hard Times

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March 20, 2007

John C. Bogle is the Man

Filed under: Personal Finance and Investing — Tom Ehrenfeld @ 11:24 am

While this blog rarely covers personal finance books, I think that any time Jack Bogle puts pen to paper folks should take notice. His new book, The Little Book of Common Sense Investing, is another dose of refreshing common sense from the guy who created index funds as we know them today. Not to spoil anything, but there’s simply no great secrets revealed in this book. For years Bogle has been preaching a very simple and very powerful point. In today’s market the individual investor faces insurmountable odds over the long haul, after you factor in the transaction costs and the powerful incentives driving fund managers. Therefore buy low-cost index funds. End of story.
The charm of the book rests in Bogle’s sharp wit and spicy writing. Here’s a passage I particularly enjoyed:

As investors, all of us as a group earn the stock market’s return. As a group—I hope you’re sitting down for this astonishing revelation—we are average. Each extra return that one of us earns means that another of our fellow investors suffers a return shortfall of precisely the same dimension. Before the deduction of the costs of investing, beating the stock market is a zero-sum game.
But the costs of playing the investment game both reduce the gains of the winners and increases the losses of the losers. So who wins? You know who wins. The man in the middle (actually, the men and women in the middle, the brokers, the investment bankers, the money managers, the marketers, the lawyers, the accountants, the operations departments of our financial system) is the only sure winner in the game of investing. Our financial croupiers always win. In the casino, the house always wins. In horse racing, the track always wins. Investing is no different. After the deduction of the costs of investing, beating the stock market is a loser’s game.

Jonathan Clements, a Wall Street Journal personal finance writer with tremendous common sense, just touted Bogle’s new book in a piece, saying, “It’s an easy read that will, I suspect, quickly join Burton Malkiel’s ‘A Random Walk Down Wall Street’ and Charles Ellis’s ‘Winning the Loser’s Game’ as one of the indexing crowd’s favorite books.”

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June 27, 2006

Personal Finance Advice: It's All The Same

Filed under: Personal Finance and Investing — Todd Sattersten @ 12:48 pm

You don’t see us do much with personal finance books here on the blog. The advice is always the same.

The Wall Street Journal attempted to talk about the category on their Weekend Edition. This is the most important part of the article:

[J.D. Roth's Getting Rich Slowly], rated highly by Technorati, a search engine for blogs, includes advice about choosing books like this: “Many books — especially the good ones — give similar advice: pay yourself first, establish an emergency fund, don’t spend more than you earn, diversify, etc. Sound personal finance is basic stuff.”

It is an opinion seconded by academics even more grounded in the field. “Any book that suggests it has a new way to riches should probably be a little suspect,” says Prof. Kenneth Froewiss, a finance professor at New York University Stern School of Business. A good book about personal finance, he says, always elaborates on three simple themes: Save early, know your risk tolerance and diversify.

I think I proved my point.

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June 14, 2006

More Love for More Than You Know

Filed under: Big Ideas,Personal Finance and Investing — Todd Sattersten @ 3:20 pm

The Wall Street Journal shows their love for More Than You Know today. Here is a piece:

Delightful examples follow from a variety of disciplines. The short period over which the average company can sustain a competitive advantage is likened to the lifespan of a fruit fly. The fatal risks of imitation by money managers are illustrated by ants who tend to follow one another in an endless circle, marching on and on until death. Mr. Mauboussin explains how Tupperware parties, where people buy lots more stuff than they need, provide important lessons for stock-market investors; how Tiger Woods’s decision to change his golf swing even when he was winning reflects the “fitness landscapes” concept in evolutionary biology; and why gambling legend Puggy Pearson can help you be a better investor (“Ain’t only three things to gambling: Knowin’ the 60-40 end of a proposition, money management, and knowin’ yourself”).

What is also great about the review is the author–Burton Malkiel. He is the author of a different book you should be familiar with–A Random Walk Down Wall Street.

Jack and I both highly recommend this book.

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May 10, 2006

The Books of William Bernstein

Filed under: Personal Finance and Investing — Todd Sattersten @ 7:38 am

In the area of personal finance, there are two types of books

How do I get out of debt
What do I do with all my extra money now that I am out of debt.

The books of William Bernstein are for those who have extra money and are trying to figure out a way of investing it for the long-term. He believe in index funds and asset-based investing as the best path to success.

[a short pause while short-seller, derivative traders, and commodity brokers file out of the room]

For all of you still reading, I throughly recommend both of his books. Bernstein recommends The Four Pillars of Investing to “the liberal arts audience” and The Intelligent Asset Allocator “for the sophisticated investor”.

In the first book, Bernstein explains the Four Pillars as history, theory, psychology, and business. He takes time to explain how “The Market Is Smarter Than You”, how “Your Broker Is Not Your Friend”, and “Neither Is Your Mutual Fund”. He ends the book explain how to create a portfolio of the right asset types to minimize risk while maximizing returns.

In The Intelligent Asset Allocator, you need to already be on the bandwagon. He spends a little time talking about historical returns and the wide variation of the last 80 years. Shortly thereafter, the reader will find themselves in the world of standard deviation, correlation, and mean-variance optimizers. This is for the investors who has already drunk the Kool-aid and now wants to mix some for themselves.

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