Common Sense Investing- A Review
Remember when you were a second year medical student studying for the USMLE? There was a company out there that made a series of books entitled “High Yield _____________”. There was High-yield Embryology, High-yield Histology, High-yield Biochemistry etc. The point of these “review books” was that no medical student actually had time to read the main textbook for all of the subjects he needed to cover. Imagine having to read a Robbin's Pathologic Basis of Disease every two weeks, then reading them all again over 2-4 weeks while studying for the USMLE. It just isn't going to happen. (For those too old to remember the review books, think of Cliffs Notes versions of your medical textbooks.)
Now, I am pleased to announce that there is a “High-Yield” Guide to Investing, at least to the Bogleheads version of investing. The book is called Common Sense Investing, and is written by Rick Van Ness, a retired engineer who also happens to have an MBA in finance. It is a mere 62 pages long if you don't count the appendices, and there's plenty of white space, charts, and graphs. I read it in less than an hour. I never thought I'd see a good investing book that took even less time to get through than Bill Schultheis's CoffeeHouse Investor, but here it is.
Rick embarked on a second career educating investors essentially for free. He has written a series of videos I've linked to before that explain investing in 10 easy steps. His book is basically a written version of those videos.
I have seen no better summary of “Boglehead Investing,” which is essentially low-cost, widely-diversified, buy and hold fixed asset allocation investing. If you can't come up with a single hour to read this book, you're probably hopeless as far as a do-it-yourself investor (and truthfully, you're probably not reading this blog either.)
The book, although brief, does pack a lot of information into a short space. There are few entertaining anecdotes. There are many references to and even figures from “Standard Boglehead Authors” like Rick Ferri, Larry Swedroe, John Bogle, and Bill Schultheis. Reading this book AND all the internet and book sources it refers to would be a near-complete investing education. Like the “High-Yield” series books, most readers will read this book and only look up the referenced sources for points they didn't quite understand.
My favorite chapter was the first one, where he discusses making a workable plan (in 6 pages or less). He says this:
Some of our dreams need a little money. This list is where we begin [figure listing retirement, house, car, vacations, college etc]. We need to have some idea of how much we need to save and how we will save it. There may be part of you rebelling already. Relax. Of course you don't know the future! But it will serve you to imagine one scenario. The enemy of a good plan is the search for a perfect plan….Make assumptions, and then change them when you get better ideas or better information. Our goal is to enable these possibilities.
A lot of the meat of the book is in the appendices. There are appendices on rebalancing, sample portfolios, and dollar cost averaging. My favorite was on becoming a savvy buyer in which he displays some of the tricks financial advisors and the mutual fund industry uses to get you to buy high-cost investments.
I can't say I really learned anything new from reading his book, but then again I write a blog on the subject and have read not just some of the books he refers to in the book, but all of them. This book is probably best for someone just starting to get a handle on their own investments or as a gift for someone who you think should! It's listed for $8.95 on Amazon, which makes it one of the cheapest good investment books out there. As usual, I have no financial relationship with Rick, but I do get 4% if you buy the book (or anything else from Amazon) from a link on the blog. If you're too cheap to buy it, you can always check out his videos, which cover the same material.
Click here to buy.