One of the best things about being a journalist - apart from the luxurious cubicles and complimentary Internet access - are the free books. I get so many free books, I couldn't possibly read them all. But I've become an accomplished skimmer. And my skimming is your gain, for today - in my final Investor Clinic column of 2009 - I'm sharing with you some of the nuggets of financial wisdom I've gleaned from flipping through the stack of personal finance volumes that piled up on my desk this year. If some of this information strikes you as simplistic, remember what Warren Buffett said: 'Investing is simple, but not easy.' My hope is that you'll find some useful advice here, whether you're an experienced investor or just starting out.
William Bernstein, The Investor's Manifesto: Preparing for Prosperity, Armageddon and Everything in Between: "Nothing is more likely to make you poor than your own emotions; nothing is more likely to save your finances than learning how to use cool, dispassionate reason to hold these emotions in check. … If done properly, successful investing entertains as much as watching clothes tumble in the dryer window." "Whether investors know it or not, they are engaged in an ongoing zero-sum, life-and-death struggle with piranhas, and if rigorous precautions are not taken, the financial services industry will strip investors of their wealth faster than they can say 'Bernie Madoff.'" - Ibid.
Jonathan Clements, The Little Book of Main Street Money: 21 Simple Truths that Help Real People Make Real Money: "We should focus on the things we can control. We may not be able to influence the inflation rate, the direction of bond yields, or what happens to stock prices. But there's much we can control, including how much we save and spend, how much we pay in investment costs and taxes, how much investment risk we take, and how we react to the markets' ups and downs."
David Trahair, Enough Bull: How to Retire Well Without the Stock Market, Mutual Funds or Even an Investment Advisor: "Never touch anything that cannot be explained simply to you in plain English."
John Talbott, The 86 Biggest Lies on Wall Street: "The first rule of efficient markets says that no one can beat the market. … If no one can beat the market, then it makes no sense to pay 1, 2 or 3 per cent fees per year to get worthless advice. Rather, most people should just invest their money in a general index fund … that has very low fees and just replicates the overall stock market return." "There is no guarantee that in the long run stocks will outperform bonds." - Ibid. Michael Graham, Bryan Snelson and Cindy David, Financial First Aid for Canadian Investors: Stop the Bleeding, Start the Healing and Get Your Portfolio on the Road to Recovery: "Even in an era of ultra-low interest rates like now … running a portfolio without fixed-income securities is a little like the Flying Wallendas - performing without a net."
"It's … human nature to want to knock the proverbial ball out of the investment ballpark. Experience has taught us, however, that swinging for the fences every time results in little more than a whole lot of strikeouts. The more sensible strategy, to carry on the baseball metaphor a little longer, is to strive to get runners on base every time and to advance runners through consistency." - Ibid .
Garth Rustand, Investors-Aid Guide to Protecting Investment Returns: "Advisors are paid more to sell risky and costly products, so that is what most investors end up with - to the great detriment of their returns. The lesson to be gleaned from all of this bad news is that investors need to be smart consumers. You can get the services you want from an advisor, along with fair returns, but you have to know the right questions to ask and the practices to avoid."
"The good news is that productive investment behaviours are really very simple. Be a passive investor. Buy and hold assets for the long term. Do not engage in frequent trading activities, do not attempt to select individual stocks, and do not attempt to time the market. Generally be more conservative than aggressive. Understand your comfortable risk tolerance and stay within that zone. Understand and manage your investment costs. Do not use leverage." - Ibid .
Eric Tyson and Tony Martin, Investing for Canadians for Dummies: "We know plenty of high-income earners, including more than a few who earn six figures annually, who have little to invest. Some of these people have high-interest debt outstanding on credit cards and auto loans, yet they spend endless hours researching and tracking investments. We also know many people who built significant personal wealth despite having modest-paying jobs. The difference: the ability to live within their means."
John Bogle, The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns: "Our system of financial intermediation has created enormous fortunes for those in the field of managing other people's money. Their self-interest will not soon change. But as an investor, you must look after your self-interest."