Review: The Little Book of Bulletproof Investing
Every Sunday, The Simple Dollar reviews a personal finance book or other book of interest.
The Little Book of Bulletproof Investing by Ben Stein and Phil DeMuth is the most recent entry in the Wiley Little Books series and probably the most entertaining one, too. The first thing you’ll pick up from the book is a good deal of humor: while they treat the subject seriously, they don’t treat it as Serious Business. This actually makes the book a rather enjoyable read.
The Little Book of Bulletproof Investing focuses, unsurprisingly, on a conservative investment philosophy that doesn’t focus on earning a mint, but does focus on earning a steady return and not facing giant losses when the market dips. They focus heavily on diversification and steady investing with a very long-term focus without any real concern for short term dips and bubbles.
In other words, it’s a philosophy I like.
One | The Nut Behind the Wheel: Behavioral Finance in One Lesson
We trust our emotions so often in day to day life that it seems completely natural that we trust them when it comes to our finances. Yet, when we do rely on our emotions to help us decide what to do with our money, we usually wind up in trouble. We buy when we’re confident (usually a bad time). We sell when we’re afraid (almost always a bad time). The one lesson worth learning is that we need to remove our emotions from our financial decisions and take them entirely based on the numbers.
Two | Wall Street Therapy: For Good and for Evil
The best course of action is to have a plan. Know the reasons why you’re investing. What are you investing for? If you can’t answer that with anything beyond, “To, uh, get rich,” you don’t have a plan. Start with your goals first. If your goals are long term, invest for the long term. If your goals are short term, invest for the short term. Don’t let all of the investment talk out there confuse you, either – much of that talk is directed towards day traders, institutional investors, and all sorts of people who are investing for different reasons and with different levels of acceptable risk than you.
Three | How Not to Invest: Kids, Don’t Try This at Home
Slow, steady, and boring wins the race. You can’t beat the stock market by stock picking. You can’t beat the stock market with timing, either. Instead, your focus should be in diversification, so that you do reasonably well when others are doing well but don’t completely fall apart when a bubble pops (like the tech bubble or the housing bubble).
Four | How to Invest: It’s Not as Fun as It Used to Be
Simplify. Diversify. Minimize expenses. Buy and hold. That’s really what the whole solution to investing for most people boils down to – and it’s not all that glamorous. People often imagine investing as being something like day trading or the movie Wall Street when it’s actually more akin to putting money in a savings account. It’s all about patience.
Five | The Holy Grail of Investing: Having Your Cake and Eating It, Too
The best way to invest over a very long period is to ...
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