Thursday, October 10, 2013

Why I No Longer Buy Personal Finance Books

At one time I was buying personal finance books at quite a brisk pace looking for the best advice to secure my future and look out for my family. It became clear after a close reading of these books that most of them were saying the same things over and over again, just with a slightly different spin. The common principals from these books could be easily distilled and written on a single sheet of paper, and why spend money helping to make the authors and publishers rich when I could be investing it for myself instead. So here are my principals:
  1. Save 20% of your income.
  2. Max out your 401K plan and take full advantage of your employer match.
  3. Only borrow money for houses and cars.
  4. Pay off your credit card bills in full each month and limit the number of credit cards that you carry.
  5. Unless you are Warren Buffett, Peter Lynch or Michael Price, don’t buy individual securities and stick with well diversified mutual funds or ETFs.
  6. Investment costs are the single most reliable indicator of future investment performance. What you don’t pay to the broker or fund manager is what you get to keep. Investment costs compound negatively. Index funds are a low-cost choice that guarantee diversify and market-performance minus their low fees without the need for star managers.
  7. Use your asset mix between bonds and stocks to manage your overall portfolio risk. There is always risk in every choice and black swan events will occur periodically.
  8. Rebalance your portfolio periodically between stocks and bonds. This is a mechanical way to ensure you are selling high and buying low.
  9. The greatest investment opportunities arise when the markets are in full panic mode (think 2008, 2009). If you can control your emotions, do the opposite of what the herd is doing, though it may be very painful for a while because no one know where the bottom is in the market.
  10. Maximize investments in tax-saving vehicles like Roth-IRAs.
  11. Insurance is necessary and is meant to protect you from catastrophes. It is not an investment vehicle.
  12. If you need a financial adviser (you can do this yourself), pick only fee-based advisers. For many, setting up an account online can take less than an hour.
  13. For most investors who will earn their lifetime income from a stream of payroll checks over the next 30 - 40 years, dollar cost averaging into index funds or well-diversified mutual funds is the most effective strategy for wealth accumulation.

That’s about it. If you can think of anything I left out, please feel free to add a comment.


  1. Great list. I would add that most people could be up and running in less than an hour once shown how to buy funds online.