Today's book review is The Gone Fishin' Portfolio by Alexander Green. Mr. Green is the investment Director of The Oxford Club, as well as Chairman of Investment U.
The book is broken down into three parts: 1) Get Wise; 2) Get Wealthy; and 3) Get On With Your Life.
It starts with why you should handle your own investments. It takes a simple look at items like compound interest and the power of investing over time. When looking for investment advice, he recommends Peter Lynch, John Templeton, and Warren Buffett. This outlines the idea that you can handle your own investments, and that you should.
Green, like many others, is a believer in the long-term value of common stocks. Throughout history, they have been the strongest investment for not only outpacing inflation, but providing real capital gains to investors. To help show the long-term value of stocks, he quotes Jeremy Siegel's Stocks for the Long Run, and says: "What he [Siegel] discovered is dramatic: $1 invested in gold in 1802 was worth $32.84 at the end of 2006. The same dollar invested in T-bills would have grown to $5,061. $1 invested in bonds would be worth $18,235. And $1 invested in common stocks with dividends reinvested--drum roll, please--is worth $12.7 million."
After showing of the long-term value of stocks, he puts forth ways to invest in them. Mutual funds are the most common way, and can have great success. But many funds are taking away from performance by charging too much in fees. This is why he recommends index funds, and specifically Vanguard, which is the industry standard for low-cost funds. He introduces the history of Vanguard, and the basis for its lowest-in-the-industry fee structure.
The plan itself is a fairly basic mix of diversified holdings. You buy a combination of the funds mentioned, and that will vary based on your age and risk tolerance. Once a year, you should re-balance your portfolio to meet your percentages in each fund.
Sounds simple? It should. This is about taking control of your own finances, but not letting it take control of your life. This theme should connect with a lot of middle class investors that have become disillusioned by what has happened on Wall Street in the past year.
His advice is straightforward. Trust this proven plan, and give it time to work. There are times when market hysteria tempts investors to chase speculative stocks, and there are times when fear tempts investors to sell out. Both of these emotions should be avoided. Having a plan will allow you to avoid these temptations.
In my opinion, this book accomplishes a lot. Almost anyone can read and understand it, and use it. It doesn't outline risky formulas or plans that need to be monitored daily. It allows investors to avoid unnecessary risks like trying to time the market or the risk of holding individual stocks. It is a simple program for people who don't want to hand their money over to an expensive broker, but still want an effective investment process. Although "buy and hold" and indexing has taken a lot of heat with the market underperforming over the past decade, I think Green still makes a legit case for this investment plan.