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Simple Wealth, Inevitable Wealth
The wealth-building process described in this book is simple, but it isn't easy. But if you can muster the required amounts of faith, patience and discipline - and if you can draw those qualities from your advisor when your own are running low - history suggests that wealth follows over time.
183 pages, Hardcover
First published November 8, 1999
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November 21, 2017
Joint review of:
The 5 Mistakes Every Investor Makes And How To Avoid Them - Peter Mallouk
Simple Wealth, Inevitable Wealth - Nick Murray
If TLDR, investment advice for dummies: Dollar-cost average (buy $x every month) into index funds (e.g. VTSAX). "Forget the needle, buy the haystack." - Jack Bogle
Two KISS books about investing recommended to me by a Certified Financial Planner. I read them in an effort to figure out what exactly CFPs do for one percent a year. I still don't know (and I suspect that's by design)! If I ever learn, I will share it with the world!
First, "The 5 Mistakes Every Investor Makes and How to Avoid Them" by Peter Mallouk. I enjoyed this book, it's both breezy and thoroughly footnoted.
The mistakes are:
1) Market Timing - It cannot be consistently done to an investor's advantage. Mallouk cites Jane Bryant Quinn who wrote, "The market timing Hall of Fame is an empty room." He also cites an interesting Schwab article ( http://www.schwab.com/public/schwab/n... ) that compares five different investment styles and how they fare over 20 years. The slight gap between "Perfect Timing" and "Invest Immediately" is remarkable, and the odds on "Perfect Timing" are very long.
2) Active Trading - Mallouk writes that transaction costs, management costs, taxes, sitting on cash, and behavioral mistakes make passive investing beat active investing.
However, in the same chapter, he writes how diversification overcame ho-hum large-cap U.S. returns for January 2001-December 2010. If you're making asset allocation decisions (e.g. Emerging Markets vs. Real Estate vs. Large-Cap U.S.), then that's not exactly passive. VTSAX now, VTSAX tomorrow, VTSAX forever is passive!
3) Misunderstand Performance and Financial Information - Investors must filter out the noise of the financial media. I remember reading when Carl Icahn got out of APPL (Apr 28, 2016, around $129). $90.52 May 13, 2016. Closed 3/24/2017 at $140.64. And $2.28 in dividends in the meantime!
The disconnect between the market and the news is incredible. The S&P 500 is up 15.13% over the year. Has the world improved 15.13% in that time? It's debatable! ;-)
4) Letting Yourself Get in the Way - Mallouk reviews a number of cognitive biases and how they can hurt investors, e.g. fear and loss aversion.
5) Working with the Wrong Advisor - Coincidentally, Mallouk is a CFP! I wonder if he and his firm are the right advisor? ;-) Mallouk writes on how to avoid the Madoffs and find an advisor with your interests at heart.
6) Getting It Right - Mallouk cites a number of asset allocations that he proposes for different types of investors. This is the "devil in the details" chapter. Portfolio creation is an art not a science, Mallouk's suggestions are debatable.
All told, I thought it was a good book about investing pitfalls. I appreciated Mallouk's humor and citations.
"Simple Wealth, Inevitable Wealth" is a different animal. It's self-published, it's folksier, it lacks footnotes. Nick Murray writes books for CFPs, this is the one book he's written for clients. I love the "Speaking Dates" section of his Web site.
"$10,000 for one keynote presentation of up to 75 minutes."
"First class airfare on a U.S. carrier."
"Nick never speaks after dinner."
"Nick never speaks to people who are drinking, or were just drinking, alcohol."
Nick Murray doesn't put up with your BS. I call $10K an hour nice work if you can get it. Go on with your bad self, Nick Murray!
"Simple Wealth" argues for equities over bonds, is skeptical of retail investors beating the market, and thinks people need CFPs. The main take away from the book, though, is behavior. Murray writes of two fundamental things:
1) The process of achieving wealth is simple. Not easy! Simple.
2) If you can adhere to Murray's principles, wealth is inevitable.
Murray's principles simply stated:
Have a plan. Stick to the plan. Behavior is more important than fund selection.
One of Murray's most compelling charts is "Percentage of Rolling Periods with Positive Returns for the S&P 500, 1926-2011"
1 year - 73.65%
3 years - 82.35%
5 years - 86.74%
10 years - 94.19%
15 years - 99.77%
20 years - 100%
(The 15-year window of "Meh" appears to be around 1929-1958).
This provides evidence for Murray's assertion that the advance is permanent, the declines are temporary. Because of it Murray redefines risk as underperforming inflation.
One of Murray's assertions is it's better to be an owner than a loaner, i.e. equities are superior to bonds. Loaners merely get paid back, but the sky is the limit for owners. Here he shares a bit of generational/survival bias when he cites a home he bought in 1983 for $80,000 and sold in 2003 for $627,500. He put $20,000 down and had a $60,000 mortgage. Yes, he did better than the bank. But I doubt his home was in Youngstown, OH!
He lists four positive behaviors:
Behavior #1: Set specific dollar/time goals.
Behavior #2: Make a specific plan for closing the gap.
Behavior #3: Invest the same amounts monthy, in the same funds, so as to harness the power of dollar-cost averaging
Behavior #4: Systematically withdraw no more than 5% of your equity account balance at retirement.
Mallouk had little to say about asset allocation. Murray says even less. He sees value in a very basic portfolio with five mutual funds:
Large-Cap Growth
Large-Cap Value
Small-Cap Growth
Small-Cap Value
International/Emerging Markets
This is what I find a bit perplexing about the CFP profession. Surely, if I gave Murray my age, financial biography, and goals, he could come up with an asset allocation for me. You could put it in a big table in an expensive book and sell it for $100.
But no, for that, CFPs want 1% *a year*! SMH.
Here are the Eight Great Mistakes according to Murray:
1) Overdiversification (I'm skeptical that this is a mistake).
2) Underdiversification
3) Euphoria - Being underwhelmed by modest returns and trying to trade into grand slam returns, e.g. chasing hot funds. Murray regards this as a recipe for loss/disappointment.
4) Panic
5) Speculating when you think you're still investing, and not realizing that you've crossed that line.
6) Investing for yield instead of for total return - e.g. Investing in bonds instead of stocks.
7) Letting your cost basis dictate your investment decisions
8) Leverage - e.g. Borrowing against your house to buy equities. "Do I feel lucky?" Well, do ya, punk?
I enjoyed Murray's book and his "Tell me about stocks, grandpa!" style, but I also appreciated Mallouk's footnotes and citations. I'd recommend both books.
The 5 Mistakes Every Investor Makes And How To Avoid Them - Peter Mallouk
Simple Wealth, Inevitable Wealth - Nick Murray
If TLDR, investment advice for dummies: Dollar-cost average (buy $x every month) into index funds (e.g. VTSAX). "Forget the needle, buy the haystack." - Jack Bogle
Two KISS books about investing recommended to me by a Certified Financial Planner. I read them in an effort to figure out what exactly CFPs do for one percent a year. I still don't know (and I suspect that's by design)! If I ever learn, I will share it with the world!
First, "The 5 Mistakes Every Investor Makes and How to Avoid Them" by Peter Mallouk. I enjoyed this book, it's both breezy and thoroughly footnoted.
The mistakes are:
1) Market Timing - It cannot be consistently done to an investor's advantage. Mallouk cites Jane Bryant Quinn who wrote, "The market timing Hall of Fame is an empty room." He also cites an interesting Schwab article ( http://www.schwab.com/public/schwab/n... ) that compares five different investment styles and how they fare over 20 years. The slight gap between "Perfect Timing" and "Invest Immediately" is remarkable, and the odds on "Perfect Timing" are very long.
2) Active Trading - Mallouk writes that transaction costs, management costs, taxes, sitting on cash, and behavioral mistakes make passive investing beat active investing.
However, in the same chapter, he writes how diversification overcame ho-hum large-cap U.S. returns for January 2001-December 2010. If you're making asset allocation decisions (e.g. Emerging Markets vs. Real Estate vs. Large-Cap U.S.), then that's not exactly passive. VTSAX now, VTSAX tomorrow, VTSAX forever is passive!
3) Misunderstand Performance and Financial Information - Investors must filter out the noise of the financial media. I remember reading when Carl Icahn got out of APPL (Apr 28, 2016, around $129). $90.52 May 13, 2016. Closed 3/24/2017 at $140.64. And $2.28 in dividends in the meantime!
The disconnect between the market and the news is incredible. The S&P 500 is up 15.13% over the year. Has the world improved 15.13% in that time? It's debatable! ;-)
4) Letting Yourself Get in the Way - Mallouk reviews a number of cognitive biases and how they can hurt investors, e.g. fear and loss aversion.
5) Working with the Wrong Advisor - Coincidentally, Mallouk is a CFP! I wonder if he and his firm are the right advisor? ;-) Mallouk writes on how to avoid the Madoffs and find an advisor with your interests at heart.
6) Getting It Right - Mallouk cites a number of asset allocations that he proposes for different types of investors. This is the "devil in the details" chapter. Portfolio creation is an art not a science, Mallouk's suggestions are debatable.
All told, I thought it was a good book about investing pitfalls. I appreciated Mallouk's humor and citations.
"Simple Wealth, Inevitable Wealth" is a different animal. It's self-published, it's folksier, it lacks footnotes. Nick Murray writes books for CFPs, this is the one book he's written for clients. I love the "Speaking Dates" section of his Web site.
"$10,000 for one keynote presentation of up to 75 minutes."
"First class airfare on a U.S. carrier."
"Nick never speaks after dinner."
"Nick never speaks to people who are drinking, or were just drinking, alcohol."
Nick Murray doesn't put up with your BS. I call $10K an hour nice work if you can get it. Go on with your bad self, Nick Murray!
"Simple Wealth" argues for equities over bonds, is skeptical of retail investors beating the market, and thinks people need CFPs. The main take away from the book, though, is behavior. Murray writes of two fundamental things:
1) The process of achieving wealth is simple. Not easy! Simple.
2) If you can adhere to Murray's principles, wealth is inevitable.
Murray's principles simply stated:
Have a plan. Stick to the plan. Behavior is more important than fund selection.
One of Murray's most compelling charts is "Percentage of Rolling Periods with Positive Returns for the S&P 500, 1926-2011"
1 year - 73.65%
3 years - 82.35%
5 years - 86.74%
10 years - 94.19%
15 years - 99.77%
20 years - 100%
(The 15-year window of "Meh" appears to be around 1929-1958).
This provides evidence for Murray's assertion that the advance is permanent, the declines are temporary. Because of it Murray redefines risk as underperforming inflation.
One of Murray's assertions is it's better to be an owner than a loaner, i.e. equities are superior to bonds. Loaners merely get paid back, but the sky is the limit for owners. Here he shares a bit of generational/survival bias when he cites a home he bought in 1983 for $80,000 and sold in 2003 for $627,500. He put $20,000 down and had a $60,000 mortgage. Yes, he did better than the bank. But I doubt his home was in Youngstown, OH!
He lists four positive behaviors:
Behavior #1: Set specific dollar/time goals.
Behavior #2: Make a specific plan for closing the gap.
Behavior #3: Invest the same amounts monthy, in the same funds, so as to harness the power of dollar-cost averaging
Behavior #4: Systematically withdraw no more than 5% of your equity account balance at retirement.
Mallouk had little to say about asset allocation. Murray says even less. He sees value in a very basic portfolio with five mutual funds:
Large-Cap Growth
Large-Cap Value
Small-Cap Growth
Small-Cap Value
International/Emerging Markets
This is what I find a bit perplexing about the CFP profession. Surely, if I gave Murray my age, financial biography, and goals, he could come up with an asset allocation for me. You could put it in a big table in an expensive book and sell it for $100.
But no, for that, CFPs want 1% *a year*! SMH.
Here are the Eight Great Mistakes according to Murray:
1) Overdiversification (I'm skeptical that this is a mistake).
2) Underdiversification
3) Euphoria - Being underwhelmed by modest returns and trying to trade into grand slam returns, e.g. chasing hot funds. Murray regards this as a recipe for loss/disappointment.
4) Panic
5) Speculating when you think you're still investing, and not realizing that you've crossed that line.
6) Investing for yield instead of for total return - e.g. Investing in bonds instead of stocks.
7) Letting your cost basis dictate your investment decisions
8) Leverage - e.g. Borrowing against your house to buy equities. "Do I feel lucky?" Well, do ya, punk?
I enjoyed Murray's book and his "Tell me about stocks, grandpa!" style, but I also appreciated Mallouk's footnotes and citations. I'd recommend both books.
July 19, 2009
A homework assignment from our financial planner. The message is: build wealth by being an owner (i.e. owning stock via regular investing in a diversified suite of mutual funds) not a loaner (investing in bonds). Get a good financial planner who will keep you on the program and help you avoid short term panic. And avoid "tweaking" your portfolio, where tweaking is ([I love this definition:]: "a very precise technical investment term which translates 'Tear off one of its legs and try to beat the portfolio to death with it."
April 18, 2020
Awesome book if you are new to investing. It boils down the most important theories into an easy and entertaining read.
This is a book you want to read 2-3 times in your life.
This is a book you want to read 2-3 times in your life.
November 4, 2021
3.5 stars. Repetitive at times, but overall helpful in understanding investing and preparing for retirement. Even if your personal goal isn’t to become a millionaire and leave a financial legacy, you will still benefit from this book. I enjoyed his humor and would recommend to most people who would like to become financially secure and independent. This is a book to keep on your shelf and revisit when you need to be reminded to not panic and keep it simple.
January 13, 2021
This book should have been 1 paragraph, not a book.
Actually, a paragraph would be too long. A (long) sentence would be better: stocks are likely to have a higher total return than bonds over the long-run because they have done historically and people should get a financial adviser because they don't know enough and are not psychologically capable of managing their investments.
This statement I largely agree with (despite the customary over-reliance on historicism that plagues nearly all financial texts).
The rest of the book is noise. But it's worse than that, it's noise that is, in large parts, at best exaggerated and at worst just plain wrong. I found myself muttering "Well, that's not true", "Not really", "That's too simplistic" often (looking semi-insane whilst doing it). It was nice, in some ways, to read something that had this effect but, unfortunately, I can't, in good conscience, give it more than 2 stars.
Actually, a paragraph would be too long. A (long) sentence would be better: stocks are likely to have a higher total return than bonds over the long-run because they have done historically and people should get a financial adviser because they don't know enough and are not psychologically capable of managing their investments.
This statement I largely agree with (despite the customary over-reliance on historicism that plagues nearly all financial texts).
The rest of the book is noise. But it's worse than that, it's noise that is, in large parts, at best exaggerated and at worst just plain wrong. I found myself muttering "Well, that's not true", "Not really", "That's too simplistic" often (looking semi-insane whilst doing it). It was nice, in some ways, to read something that had this effect but, unfortunately, I can't, in good conscience, give it more than 2 stars.
September 30, 2022
Nick Murray’s Simple Wealth, Inevitable Wealth is written exactly how a personal finance book oughta be - nice and simple. Plan instead of predict, don’t panic, don’t time the market, and don’t go it alone are the key take-aways from this book. “Fear has a greater grasp on human action than does the impressive weight of historical evidence.” Have faith in the future instead of fearing it. Murray teaches the reader to focus on a diversified portfolio of four or five funds and invest for the long-run. Use dollar-cost averaging to reap the benefits of buying cheap in a bear market, but limit the high price tag of premiums in a bull market. Using history as a guide - the advance is permanent, the declines are temporary. Stay the course and keep it simple.
At the end of the day, investing is a long-term game that is better suited with an ally. Murray recommends using an advisor to guide you through lifelong financial decisions and I agree with him. While people may be capable of picking their own investments, having a trusted advisor assist with research, options, decisions, and most importantly - keeping you calm when things go awry, is valuable for the long haul.
The book is also short, less than 200 pages. It could probably be whittled down a bit more, but it’s a quick read nonetheless. Throw some money into a few index funds and get back to work!
At the end of the day, investing is a long-term game that is better suited with an ally. Murray recommends using an advisor to guide you through lifelong financial decisions and I agree with him. While people may be capable of picking their own investments, having a trusted advisor assist with research, options, decisions, and most importantly - keeping you calm when things go awry, is valuable for the long haul.
The book is also short, less than 200 pages. It could probably be whittled down a bit more, but it’s a quick read nonetheless. Throw some money into a few index funds and get back to work!
December 30, 2020
Investing for dummies. Nick Murray offers a solid lesson in the fundamentals of wealth creation that is helpful for those of us that never really thought about investing until we thought about retirement. tl;dr : Being an owner is better than being a lender (aka buy equity not bonds), Hire a financial adviser that prevents you from making emotional selling decisions (aka do nothing when markets turn), Dollar average your way through mutual equity funds (invest savings regularly and periodically into a bunch of stocks that are not self selected). Sound basics.
I love how he reframes common vocabulary while rightfully taking an irritated tone towards popcorn finance journalism. It was an easy read - Nick Murray sounds like a smart uncle or a clever grandpa dispensing unequivocal opinion and grand advice to a bunch of whippersnappers.
I love how he reframes common vocabulary while rightfully taking an irritated tone towards popcorn finance journalism. It was an easy read - Nick Murray sounds like a smart uncle or a clever grandpa dispensing unequivocal opinion and grand advice to a bunch of whippersnappers.
November 17, 2021
Very educational! This book provides peaceful instruction that can lead to confidence in your retirement plan if followed. Are you worried if you’re doing the right thing in how you are saving for retirement? This book will help you overcome that fear. “Simple” truly is the best word to start the title of this read, as long as you can get the person in the mirror to behave.
January 31, 2018
When your financial planner mails you a book with a page-long inscription on the inside cover that amounts to "read this every year" you read it.
February 1, 2023
My dear friend, David suggested this read (and specifically, the author). I'd love something updated, but I certainly found it helpful! Worth the read.
March 6, 2021
Recommended by D. Murphy. Solid advice for the person looking to get into investing by finding a financial advisor and working with them. Major takeaways: owning (stocks) is by nature more lucrative than lending (bonds) since returns aren’t capped, you aren’t losing money if you choose not to sell, the difference between currency and money, four behavioral tactics for investing, the young might not have more money but they have time (and compounding makes that more valuable), the value of dollar cost averaging in acquiring more shares for cheap in bear markets, doing nothing makes a successful investor.
Highlights:
- Page 16: “1. it is simple to accumulate wealth through patient, disciplined investment and equity mutual funds – those funds which invest primarily if not exclusively in common stocks. 2. if history is any guide (and it’s the only guy that we have), and if you give your investment program both enough time and enough money, wealth is ultimately inevitable.”
- Page 21: “wealth isn’t primarily determined by investment performance, but by investor behavior.”
- Page 22: “simply stated, most families will be more successful at achieving and preserving wealth with the help of a caring and competent financial advisor and by trying to do it themselves.”
- Page 22: “taking the time to understand you and your family emotionally as well as financially, building that overall plan and helping you find it with appropriate investments, and guiding you passed all the facts and fears of an investing lifetime — serving in effect as your own in-house ‘appropriate behavior’ coach – that’s what great advisers do. And their value is many times their cost, which is — or ought to be — your main concern.”
- Page 24 “risk is not knowing what you’re doing” (warren Buffett)
- Page 27: these days, a professional investment advisor probably cost around 1% per year. The only worthwhile question, then, is: will working with an advisor add more than 1% (or whatever) to your total lifetime return?
- Page 32: do not care what they know until you know that they care.
- Page 38: there is nothing new in the world except the history you do not know. (Harry S Truman)
- Page 50: “all our common sense, and all our life experience, tell us that the owners of good businesses make more money than do their lenders, if only because owners take more risk. When you invest in stocks, you’re an owner of businesses. When you invest in bonds, your lender to businesses. Everything else is commentary.”
- Page 51: “the right question is: what is risk?“
- Page 54: chapters 3 and four complete this book central investment thesis, began in the last chapter.
- One. The real long-term total return of equities is so much greater than that of bonds that holding bonds is irrational for the true wealth seeker. (An owner, not a loaner).
- Two. While stocks are much more volatile than bonds, sometimes horrifically so, the passage of time leeches the risk out of stocks. Moreover, volatility isn’t risk, and volatility passes away, while the premium returns of stocks remain. (What the real risk isn’t).
- Three. The great long-term financial risk isn’t loss of principle, but erosion of purchasing power. Stocks increase in value, and raise their dividends, at a much greater rate than inflation saps our purchasing power. The great long-term risk of stocks is, therefore, not owning them. (What the real risk is).
- Page 58: the fewer stocks you own, the greater are your opportunities to outperform — and under perform — the market as a whole.
- Page 65: Warren Buffett’s personal shareholdings in his Berkshire Hathaway declined in $6.2 billion between July 17 and August 31 of 1998. How much did he lose? The answer is, of course, he didn’t lose anything. Why? That simple: he didn’t sell.
- Page 65: the best book that’s ever been written about stocks as an asset class is stocks for the long run by Professor Jeremy J Siegel of the Wharton school of University of Pennsylvania.
- Page 66: the repeated sentence in the book above: “fear has a greater grasp on human action then does the impressive weight of historical evidence.”
- Page 67: “the only thing we have to fear is fear itself.”
- Page 68: “then the highest and best function of an advisor may simply be in convincing you not to lose faith – not to sell.“ They stay rational.
- Page 72: because even if your timing were perfect — and it won’t be — you historically don’t gain much by it. Interesting graph about the differences between investing annually at the high and investing annually at the low between 1979 and 1998. Both investors reinvested their dividends. In the end, the returns are separated by just 1.7% per year.
- Page 75: the world does not end. People just fear that it’s ending. And part this is because people fear lost much more than they hoped for gain. Therefore they react much more emotionally to declining markets then to rising ones. Loss aversion.
- Page 88: “the thing you’re holding in your hand is currency. In no long-term sense is it money, if by money we made a constant reliable store of value.”
- Page 100: “be careful of words. Be very careful of who is using them to mean what. And be downright scared when everyone is using them to mean the same thing – because that’s your cue that they mean something else, and may actually mean the opposite of the conventional interpretation.”
- Page 101: “all investing, and especially equity investing, is first and last a battle with your own anxiety.”
- Page 108: “behavioral tactics are:
- setting goals and dollar specific, date specific terms,
- establishing a plan for achieving these goals, assuming a specific rate (or rates) of return,
- investing the same dollar amount at regular intervals, so as to harness the power of dollar cost averaging, and
- meeting your retirement income needs via systematic withdrawal from your equity mutual funds portfolio.”
- Page 113: “And, make no mistake about this, your plan has to be carried out in the monthly investments, for psychological even more than for financial reasons. Don’t tell yourself you’re going to do it in one big chunk out of your annual bonus, because we both know you won’t. One year the whole kitchen will have to be remodeled, and one year somebody will offer you the deal of a lifetime on the both of your dreams, the days will dwindle down to a precious few… Fahgeddaboudit. It has to be treated like your most important monthly bill. Because, of course, that’s exactly what it is.”
- Page 113: “Young people tend to look at the wealth building glass is half empty — they have so little money to invest — and they should be seeing that it’s at least half full: they’ve got so much time.���
- Page 121: when you’re dollar-cost averaging (DCA), you want the stock market to decline early and often. (So that you buy greater amounts of shares at a discount)
- Page 122: one caveat. We dollar cost average because we have to, not because we want to. Should you receive a lump sum which you need to invest, don’t dollar cost average with it. Go ahead and invest it.
- Page 123: “remember, it’s OK to feel the feeling, it’s just not OK to act on the feeling.”
- Page 130: “the right time to buy equities is always when you have the money. The only time to sell them is when you need the money. Otherwise… Just let them grow.“
- Page 131: “DCA empowers you to view bear markets as an opportunist rather than a victim.”
- Page 141: since the following mutual funds all tend to run in different cycles, the author recommends investing in the five mutual fund groups: large-cap growth, large-cap value, small-cap growth, small-cap value, and international.
- Page 142: an index — any index, be it the S&P 500, NASDAQ composite, or the Russell 2000 — tells you the average return of all the money that’s invested in all the stocks and that index. But you and I can’t buy an index; the closest we can come is to buy an index fund, which should give us the index return less the expenses of running the fund. Happily, index fund expenses should be pretty low.
- Page 151: but now, you mostly have to do just about the hardest thing you’re asked to do in investing: nothing
- Page 153: the more often you change your portfolio, the lower your lifetime return will be. There is a perfect inverse correlation between turnover and return. If you don’t intuitively believe this, make the time to read a paper called “trading is hazardous to your wealth: the common stock investment performance of individual investors”.
- Page 162: “at the end of the day, the issue is an indexing versus active management. It’s cost.“
- Page 163: “optimism is the only realism. It’s the only worldview that squares with the facts, and with the historical record. And we ain’t seen nothing yet.”
- Page 173: recommended reading for understanding the analysis of managing a portfolio of mutual funds: “the complete guide to managing a portfolio of mutual funds“ by Ronald K Rutherford
- Read David McCollough’s biography of Harry Truman (good for your soul)
Highlights:
- Page 16: “1. it is simple to accumulate wealth through patient, disciplined investment and equity mutual funds – those funds which invest primarily if not exclusively in common stocks. 2. if history is any guide (and it’s the only guy that we have), and if you give your investment program both enough time and enough money, wealth is ultimately inevitable.”
- Page 21: “wealth isn’t primarily determined by investment performance, but by investor behavior.”
- Page 22: “simply stated, most families will be more successful at achieving and preserving wealth with the help of a caring and competent financial advisor and by trying to do it themselves.”
- Page 22: “taking the time to understand you and your family emotionally as well as financially, building that overall plan and helping you find it with appropriate investments, and guiding you passed all the facts and fears of an investing lifetime — serving in effect as your own in-house ‘appropriate behavior’ coach – that’s what great advisers do. And their value is many times their cost, which is — or ought to be — your main concern.”
- Page 24 “risk is not knowing what you’re doing” (warren Buffett)
- Page 27: these days, a professional investment advisor probably cost around 1% per year. The only worthwhile question, then, is: will working with an advisor add more than 1% (or whatever) to your total lifetime return?
- Page 32: do not care what they know until you know that they care.
- Page 38: there is nothing new in the world except the history you do not know. (Harry S Truman)
- Page 50: “all our common sense, and all our life experience, tell us that the owners of good businesses make more money than do their lenders, if only because owners take more risk. When you invest in stocks, you’re an owner of businesses. When you invest in bonds, your lender to businesses. Everything else is commentary.”
- Page 51: “the right question is: what is risk?“
- Page 54: chapters 3 and four complete this book central investment thesis, began in the last chapter.
- One. The real long-term total return of equities is so much greater than that of bonds that holding bonds is irrational for the true wealth seeker. (An owner, not a loaner).
- Two. While stocks are much more volatile than bonds, sometimes horrifically so, the passage of time leeches the risk out of stocks. Moreover, volatility isn’t risk, and volatility passes away, while the premium returns of stocks remain. (What the real risk isn’t).
- Three. The great long-term financial risk isn’t loss of principle, but erosion of purchasing power. Stocks increase in value, and raise their dividends, at a much greater rate than inflation saps our purchasing power. The great long-term risk of stocks is, therefore, not owning them. (What the real risk is).
- Page 58: the fewer stocks you own, the greater are your opportunities to outperform — and under perform — the market as a whole.
- Page 65: Warren Buffett’s personal shareholdings in his Berkshire Hathaway declined in $6.2 billion between July 17 and August 31 of 1998. How much did he lose? The answer is, of course, he didn’t lose anything. Why? That simple: he didn’t sell.
- Page 65: the best book that’s ever been written about stocks as an asset class is stocks for the long run by Professor Jeremy J Siegel of the Wharton school of University of Pennsylvania.
- Page 66: the repeated sentence in the book above: “fear has a greater grasp on human action then does the impressive weight of historical evidence.”
- Page 67: “the only thing we have to fear is fear itself.”
- Page 68: “then the highest and best function of an advisor may simply be in convincing you not to lose faith – not to sell.“ They stay rational.
- Page 72: because even if your timing were perfect — and it won’t be — you historically don’t gain much by it. Interesting graph about the differences between investing annually at the high and investing annually at the low between 1979 and 1998. Both investors reinvested their dividends. In the end, the returns are separated by just 1.7% per year.
- Page 75: the world does not end. People just fear that it’s ending. And part this is because people fear lost much more than they hoped for gain. Therefore they react much more emotionally to declining markets then to rising ones. Loss aversion.
- Page 88: “the thing you’re holding in your hand is currency. In no long-term sense is it money, if by money we made a constant reliable store of value.”
- Page 100: “be careful of words. Be very careful of who is using them to mean what. And be downright scared when everyone is using them to mean the same thing – because that’s your cue that they mean something else, and may actually mean the opposite of the conventional interpretation.”
- Page 101: “all investing, and especially equity investing, is first and last a battle with your own anxiety.”
- Page 108: “behavioral tactics are:
- setting goals and dollar specific, date specific terms,
- establishing a plan for achieving these goals, assuming a specific rate (or rates) of return,
- investing the same dollar amount at regular intervals, so as to harness the power of dollar cost averaging, and
- meeting your retirement income needs via systematic withdrawal from your equity mutual funds portfolio.”
- Page 113: “And, make no mistake about this, your plan has to be carried out in the monthly investments, for psychological even more than for financial reasons. Don’t tell yourself you’re going to do it in one big chunk out of your annual bonus, because we both know you won’t. One year the whole kitchen will have to be remodeled, and one year somebody will offer you the deal of a lifetime on the both of your dreams, the days will dwindle down to a precious few… Fahgeddaboudit. It has to be treated like your most important monthly bill. Because, of course, that’s exactly what it is.”
- Page 113: “Young people tend to look at the wealth building glass is half empty — they have so little money to invest — and they should be seeing that it’s at least half full: they’ve got so much time.���
- Page 121: when you’re dollar-cost averaging (DCA), you want the stock market to decline early and often. (So that you buy greater amounts of shares at a discount)
- Page 122: one caveat. We dollar cost average because we have to, not because we want to. Should you receive a lump sum which you need to invest, don’t dollar cost average with it. Go ahead and invest it.
- Page 123: “remember, it’s OK to feel the feeling, it’s just not OK to act on the feeling.”
- Page 130: “the right time to buy equities is always when you have the money. The only time to sell them is when you need the money. Otherwise… Just let them grow.“
- Page 131: “DCA empowers you to view bear markets as an opportunist rather than a victim.”
- Page 141: since the following mutual funds all tend to run in different cycles, the author recommends investing in the five mutual fund groups: large-cap growth, large-cap value, small-cap growth, small-cap value, and international.
- Page 142: an index — any index, be it the S&P 500, NASDAQ composite, or the Russell 2000 — tells you the average return of all the money that’s invested in all the stocks and that index. But you and I can’t buy an index; the closest we can come is to buy an index fund, which should give us the index return less the expenses of running the fund. Happily, index fund expenses should be pretty low.
- Page 151: but now, you mostly have to do just about the hardest thing you’re asked to do in investing: nothing
- Page 153: the more often you change your portfolio, the lower your lifetime return will be. There is a perfect inverse correlation between turnover and return. If you don’t intuitively believe this, make the time to read a paper called “trading is hazardous to your wealth: the common stock investment performance of individual investors”.
- Page 162: “at the end of the day, the issue is an indexing versus active management. It’s cost.“
- Page 163: “optimism is the only realism. It’s the only worldview that squares with the facts, and with the historical record. And we ain’t seen nothing yet.”
- Page 173: recommended reading for understanding the analysis of managing a portfolio of mutual funds: “the complete guide to managing a portfolio of mutual funds“ by Ronald K Rutherford
- Read David McCollough’s biography of Harry Truman (good for your soul)
May 30, 2018
Simple wealth inevitable wealth is a good book. It has a general idea or philosophy on investing based on Jeremy Siegels "Stocks for the Long run" mixed with his own life experience as a financial advisor Nicky Murray really simplifies stock investing to raw easy to understand habits. Accepting that you will take losses and convincing you not everyone cant beat the market through buying and selling, but through long term investing with a diversified portfolio and of course with a financial advisor. It certainly made me think twice about how I don't have a financial advisor and has set me into contemplation about whether I should. Its a worth while book with an optimistic outlook and solid research. I gave it four stars because the writing was good and his ideas easy to understand. Certainly recommend it.
March 27, 2009
Everyone should read if they are at all concerned about their retirement. Nick Murray is known as the financial advisor to financial advisors, so he's been around the block a time or two. He lays out with boldness and wit and humor the only way to have enough money to one day retire with money to live off of and leave to our kids and their kids. We all know that social security (or CPP in Canada) won't be around when were old and tired of working (hopefully that will be on our time table and not ages) so really our retirement nest-egg is up to us to acquire. This book is the perfect tool to get you started on your way! Read it, ponder it and then do it and if you have any questions, please just ask, I mean, can you really afford to not ask?
December 24, 2012
It's a simple plan, just not easy to execute. Why? Because we're human with emotions that often get the best of us. So find a coach/advisor to help you set up and execute your plan and to keep you on track when emotion starts to creep in to your decision making process.
August 19, 2013
Quick and easy read to help jump start your financial success via investments. Simple and to the point. Hire a financial advisor. Invest in stocks. Don't freak out. Enjoy future wealth. There's a bit more to it, but that's the overall premise.
June 25, 2008
I'm big into being financially responsible, secure, you name it. This book is a must read if you want to retire with lots of money:)
December 29, 2009
My CFP advised me to read this book. I am glad I did. Two key points about working with a CFP: They must be someone you both like and trust.
September 25, 2012
Incredibly dry and just kept repeating the same thing over and over!
January 26, 2017
I stole this from my mom over break, after meeting her financial advisors and promptly panicking that probably going to grad school wasn't a "lucrative" life-choice.
Anyway I come from a super privileged (checking that privilege!) family and have never much wanted for things (well, except a pool) but I've never felt a really great understanding of money. Now that I'm an adult or something, it's probably good to at least have some vague understanding of financial responsibility.
The point is, this book is super simple to understand and a good starting point. I'm interested in reading up on some stuff a little more in depth (I like math!) but overall it did its job in reassuring me that investing isn't the most terrifying thing in the world and is a good idea. So, neat. It was also a super easy read, I finished it there-and-back on the train in a single day. The writer really hates journalists though, which is weird because I've definitely read pieces that echo his sentiments, so they can't ALL be bad.
Also the writing isn't necessarily groundbreaking and feels repetitive, but that's kind of the point. Just buck up and listen to grandpa's lecture, he has a good point. It's not meant to be a nobel prize in literature, it's meant to teach you how to get your shit together and invest wisely.
Anyway I come from a super privileged (checking that privilege!) family and have never much wanted for things (well, except a pool) but I've never felt a really great understanding of money. Now that I'm an adult or something, it's probably good to at least have some vague understanding of financial responsibility.
The point is, this book is super simple to understand and a good starting point. I'm interested in reading up on some stuff a little more in depth (I like math!) but overall it did its job in reassuring me that investing isn't the most terrifying thing in the world and is a good idea. So, neat. It was also a super easy read, I finished it there-and-back on the train in a single day. The writer really hates journalists though, which is weird because I've definitely read pieces that echo his sentiments, so they can't ALL be bad.
Also the writing isn't necessarily groundbreaking and feels repetitive, but that's kind of the point. Just buck up and listen to grandpa's lecture, he has a good point. It's not meant to be a nobel prize in literature, it's meant to teach you how to get your shit together and invest wisely.
December 28, 2022
Key highlight was the idea that how you behave as an investor is more important to your long term returns than what you own. Believes that the importance of individual fund selection is relatively small, when compared to the issue of how the investor behaves. IF you are constantly diving into funds with spectacular performance over the previous three years, then switching funds oten as new hot performers grab the headlines, and finally selling out in revulsion and fear when your funds decline 30% in a perfectly normal "bear market" you not only won't become wealthy, you'll lose much of the capital you have. Think of it: one can buy nothing but the highest-rated funds, and yet lose significant amounts of money, if one's own behaviour is sufficiently inappropriate. It's done all teh time. Thus, a huge percentage of your lifetime return is attributable to the simple decision to be an owner and not a loaner. And most of the rest of your return depends not on how your stock funds perform vs their peers, but on how you behave. Wealth isn't primarily determined by investment performance, but by investor behaviour. Own, don't loan; patience and discipline; slow and steady wins the race; end of story.
An advisor is worth their 1% per year if they keep you from selling at the wrong time and diving into and out of investments.
Be wary of concentrating in "what's working" now.
An advisor is worth their 1% per year if they keep you from selling at the wrong time and diving into and out of investments.
Be wary of concentrating in "what's working" now.
September 3, 2020
This book is, by its own admission, a thesis for the advantages of hiring a financial advisor. I am not a financial advisor, nor do I employ one, but I am so glad that I read this book. If nothing else, the reader comes away with a well founded optimism in our economy and in the world in general. Optimism is the only realism, as the subtitle of his final chapter reads.
This is a great introductory read to the world of investing. It covers the very basics of establishing strategy, the common mistakes investors make, and oh so many priceless quotes that make you wish you had a bumper sticker maker and an Etsy account.
Although there’s nothing in this book that is groundbreaking for an experienced investor, he does shine fresh perspective on stayed topics like diversification and risk. And it never hurts to have one more perspective on things that are so important.
Although the book has been around forever, it has been well updated to include everything but the markets swoons of 2019 and 2020.
This is a great introductory read to the world of investing. It covers the very basics of establishing strategy, the common mistakes investors make, and oh so many priceless quotes that make you wish you had a bumper sticker maker and an Etsy account.
Although there’s nothing in this book that is groundbreaking for an experienced investor, he does shine fresh perspective on stayed topics like diversification and risk. And it never hurts to have one more perspective on things that are so important.
Although the book has been around forever, it has been well updated to include everything but the markets swoons of 2019 and 2020.
December 27, 2023
Feels a little outdated but I still liked the perspectives. If I were to summarize it:
1. Hire and advisor (basically to keep you from not panicking)
2. Invest in stocks (by the time you have inflation and taxes bonds won’t keep you a float)
3. Diversify through mutual funds
- he had a process to look for actively managed funds from long term owners that are the king/queen in the asset class (large term cap/value, short term cap/value, emerging markets/international)
4. My favorite part was on the behaviors. I do agree that aside from going to the moon- 90% of wealth is going to come from our behaviors- not so much which investments we’re in. Important to be in the market and to Dollar Cost Average, when the market is going down, things are on sale!
5. Don’t panic or make other mistakes like over/under diversification, let cost basis guide your holding pattern etc.
So I think these were some good viewpoints that I want to mix in with Money Master the Game and things with My Rich Life.
Good stuff.
1. Hire and advisor (basically to keep you from not panicking)
2. Invest in stocks (by the time you have inflation and taxes bonds won’t keep you a float)
3. Diversify through mutual funds
- he had a process to look for actively managed funds from long term owners that are the king/queen in the asset class (large term cap/value, short term cap/value, emerging markets/international)
4. My favorite part was on the behaviors. I do agree that aside from going to the moon- 90% of wealth is going to come from our behaviors- not so much which investments we’re in. Important to be in the market and to Dollar Cost Average, when the market is going down, things are on sale!
5. Don’t panic or make other mistakes like over/under diversification, let cost basis guide your holding pattern etc.
So I think these were some good viewpoints that I want to mix in with Money Master the Game and things with My Rich Life.
Good stuff.
March 16, 2017
Poorly written, repetitive, and didactic. That said, Murray's not wrong about the simple advice he offers which can be summed up as: investing is about behavior, to save for retirement you should simply own ~5 different sectors (large cap growth, lc value, small cap growth, sc value, and international) of mutual funds, invest the same amount each month to take advantage of investing more in down markets (dollar cost averaging), and then do nothing since you're usually your own worst enemy. Murray also recommends working with an advisor to keep yourself on plan.
Very short and quick read. An ok primer for someone wanting to start investing and needs insight to the behavioral issues over the recommendation of six hot mutual funds.
Very short and quick read. An ok primer for someone wanting to start investing and needs insight to the behavioral issues over the recommendation of six hot mutual funds.
August 29, 2019
It is that time for me to revisit some fundamentals. This is the 20th Anniversary Edition of this book that was just released.
Oh, how could I have convinced so many of my participants that their 401(k) is not a convenient way to save for that large screen TV. Many treated it like a Christmas Club and thus paying taxes and penalties joyfully.
Speaking with the caretaker of the largest database of 401(k) investments, tells us that we are riding into the future with little thought. Someone else will take care of me. We have a predictable crises soon to come.
It is amazing how many employees deny themselves a raise by ignoring their employer's matching contributions.
Oh, I could go on and on.
Oh, how could I have convinced so many of my participants that their 401(k) is not a convenient way to save for that large screen TV. Many treated it like a Christmas Club and thus paying taxes and penalties joyfully.
Speaking with the caretaker of the largest database of 401(k) investments, tells us that we are riding into the future with little thought. Someone else will take care of me. We have a predictable crises soon to come.
It is amazing how many employees deny themselves a raise by ignoring their employer's matching contributions.
Oh, I could go on and on.
January 29, 2019
A very tongue-in-cheek yet direct plan to achieving financial stability. I heard about this book from the fantastic Farnam Street blog in the post "29 of the Most Gifted and Highly Recommended Books"
https://fs.blog/2017/11/most-gifted-b...
Nick Murray pulls no punches in this fast and fun read. He slices through the BS of the financial news industry. The book distilled down concepts that are simple to understand but difficult to execute. One of favorite points in the book is when Murray asks us as the readers to describe what the bills of paper in our wallets are. A great exercise in re-thinking about the concept of "money"
I highly recommend it and look forward to reading it again.
https://fs.blog/2017/11/most-gifted-b...
Nick Murray pulls no punches in this fast and fun read. He slices through the BS of the financial news industry. The book distilled down concepts that are simple to understand but difficult to execute. One of favorite points in the book is when Murray asks us as the readers to describe what the bills of paper in our wallets are. A great exercise in re-thinking about the concept of "money"
I highly recommend it and look forward to reading it again.
This entire review has been hidden because of spoilers.
January 5, 2021
Overall, I thought this was a solid book. It was recommended to me by Matthew Jarvis from The Perfect RIA podcast. Matthew is a Nick Murray acolyte and this book lays out Mr. Murray's investing philosophy for prospective clients of a financial planning firm. Ultimately, Mr. Murray is a strong advocate for 100% equity portfolio and he would say that the real risk is not owning equities - especially for investments that are five years or longer. It's not so much the equities that you pick, but just being able to feel the fear of the volatility and stick to the plan. I don't think it makes sense to give this to current clients, but possibly prospects.
This entire review has been hidden because of spoilers.
August 14, 2023
I enjoyed the book, but got bored after a while! Has good lessons for individuals that are very novice to investing and need to learn the basic investing philosophies! Also, I’d say this book is good for clients that are conservative and pessimistic about the future as it relates to the economy and so fourth. Then lastly, this book is good to give to, do it your selfers. Helps give a simplistic method of accumulating wealth without out necessarily needing an advisor until retirement.
May 6, 2024
Fine. Pretty repetitive but it does help to get his main points across. You can definitely tell that it is written by an advisor to persuade the general public that financial advisors are a necessity no matter your tax bracket. With that being said, the book still made some good points and I liked the writing style. It was pretty easy to read even though I do not have an excessive amount of knowledge when it comes to finance topics being basic financial literacy.
October 13, 2017
Great read on how to build and keep wealth for generations to come. While reading through I can definitely see how many of the eight mistakes I have fallen to. The book is very informative and definitely hits the point and drills down the teachings very well. Recommend this book to everyone who has ever held a mutual stock or individual stock.
July 13, 2019
Simply invest in stocks when you’re young and stay with the plan. You will have millions when you’re older. This book drives the point home in convincing fashion. No bonds just stocks. It was written a while ago so he suggest mutual funds- an update for today would be low-cost index funds or ETFs. If you want buy it, go directly to the author’s website for the best price.
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