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Weekend Reading – The Elements of Investing (Part 3 of 3) and other great reads

Over the last week or so, I’ve shared what I believe are the best takeaways from The Elements of Investing. This book is a gem and is one of my investing favourites because it is so matter of fact; straightforward, here-it-is-right-in-front-of-you kinda stuff.

As someone who uses a two-pronged strategy to work towards my retirement dreams (dividend-investing and indexing), this book gave me all the reinforcement I need to prove to me that indexing in my RRSP is one the best investing strategies for wealth creation.

I had so many great takeaways from this book I needed to break it down into three blogposts for you!

Part 1 was posted last week.

Part 2 was posted earlier this week.

Here is Part 3, I saved the best for last with the KISS principle!

Read on to see what I mean.

“As an investor, what should you do about forecasts – forecasts of the stock market, forecasts of interest rates, forecasts of the economy?  Answer:  Nothing.  You can save time, anxiety, and money by ignoring all market forecasts.”

“Mr. Market tries to trick us into changing our investments at the wrong time – and he’s really good at it.   The more you do, the merrier he will be.”

“The stock market as a whole has delivered an average rate of return of about 9.5 percent over long periods of time.  But that return only measures what a buy-and-hold investor would earn by putting money in at the start of the period and keeping her money invested through thick and thin.”

“The changes in stock prices are very close to a “random walk”:  There is no dependable way to predict the future movements of a stock’s price from its past wanderings.”

“There is one investment truism that, if followed, can dependably increase your investment returns:  Minimize your investment costs.”

“The stockbroker’s real job is not to make money for you but to make money from you.”

In the book, the authors lay out what they call a KISS portfolio (Keep It Simple, Sweetheart). 

They claim the KISS portfolio “gets it right” for almost every investor:

  • Save early and regularly, for as long as possible.
  • Use any help you can get from your employer and/or government-sponsored retirement plan.
  • Set aside a cash reserve for when “stuff happens”, at least 6 months is suggested by the authors.
  • Make sure you are covered by insurance, especially life insurance.
  • Diversification will reduce your anxiety; include stocks from fast-growing markets like China, Brazil and India.
  • Avoid all credit card debt – period.
  • Ignore the short-term sound and fury of Mr. Market; the biggest mistakes investors make are letting emotions dominate.
  • Use low-cost index funds.
  • Focus on major investment categories; avoid “exotics” like venture capital, private equity and hedge funds.  The authors suggest most investors should focus on three simple categories:
    • Common Stocks
    • Bonds
    • Real Estate (via ownership of your home).

What do you think about the excerpts I provided you from The Elements of Investing?

Anything you try and live by?   Anything you need to change based on what you read?

Your turn readers, let me know! :)

 

This week has been busy, workwise and on the social calendar.  Regarding the former, I’m involved many projects at work so when it comes quitting time, I can’t wait to get home and relax.  Heck, it’s so busy at work that some nights it’s cause for celebration when it’s over.  Last night, I did just that, attending a free scotch tasting soiree in downtown Ottawa hosted by the fine people at The MacallanEver heard of them?  I didn’t know much about this scotch distillery either until I attended their free tasting session as part of their fall 2011 promotional tour.  How did it go?  Well, we had fun needless to say and those scotch products “went down” very smooth, including the silky 12-year-old single malt that finished with dried fruits, sweet toffee and a slight lingering mix of smoke and wood.  Yummy!  I’m sure the 100+ guests put a smile on “Whiskey Ambassador’s” face last night after his presentation when many of them asked where they could find The Macallan products to fill their Christmas wish list.  Good times indeed.  I love free stuff and free scotch :)

Do I have any free scotch for you?  Well, no, sorry.  I drank it all last night but I do have a host of great blogposts and articles from the world of personal finance and investing to share.  Look at it this way, these articles aren’t 12-years-old!  Check ‘em out!

Have a safe, happy and healthy weekend readers and thanks for taking time to stop by!

My friend in Sinapore is giving away copies of his book, The Millionaire TeacherHurry soon over to Andrew Hallam’s site for a chance to get your free copy!

Dan from Canadian Couch Potato put some ETF risks in perspective, when he wrote about leveraged ETFs this week.   For me, I try to avoid any investment product with the word “leverage” in it.

Mike from Money Smarts Blog wondered if you could buy a gold-plated government pension, would you?

Michael James on Money discussed some forces whereby leveraged ETFs add to market volatility.  (Yet another reason why my favourite ETF flavour is vanilla.)

Kevin from Invest It Wisely had a guest post about investing in life insurance.

Million Dollar Journey provided his October 2011 net worth update.   Great stuff FrugalTrader!

The witty Big Cajun Man from Canadian Personal Finance Blog offered his perspective on Costco gas.

Dividend Growth Investor listed 12 dividend machines for you to consider.

Mich from Beating The Index (BTI) provided an update on his BTI portfolio.

Dividend Mantra shared his freedom fund update for November 2011.

Balance Junkie informed us on the evils of market timing, and better still, how market timing is like whiskey.  I love whiskey.  Does that mean I love market timing?  The answer is “no” to the latter.

TFB wondered if the best discussions happen in public.

101 Centavos offered readers 10 tips to save energy, money and the enivornment.  I love it when these things come together.  Check it out!

Canadian Capitalist wondered if the BMO dividend ETF (ZDV) will change any part of the dividend ETF space.

Hank Coleman wrote a guest post for Dividend Ninja, informing Ninja Nation why Hank loves investing with Dividend Reinvestment Plans (DRIPs).   You’ve got company Hank, I love DRIPs too!

My buddy The Wealthy Canadian sold his shares in Pacific Northern Gas after they rose 20% on the announcement of a company buyout by AltaGas Ltd. (ALA-N) for $230 million.  Once again, TWC did the smart thing, sold high.  I bet he’s looking for another blue-chip stock soon and looking to buy low.  Just a hunch :)

Preet Banerjee informed us about some crazy yield, as in over 190%, for Greek bonds.

Jim Yih from Retire Happy Blog gave us some financial ABC’s in the spirit of Financial Literacy Week in Canada.  I didn’t even know we had such a week?!  Does that make me illiterate and simply unaware? J

Dividend Monk provided readers with another stellar stock review:  Chevron Corporation (CVX:US).

Boomer & Echo demystified Registered Retirement Income Funds (RRIFs).

Dividend Guy Blog provided another great update on the TSX 60 and their ex-dividend dates.  I blogpost/resource I look forward to reading upon issue.  Nice stuff!

Young & Thrifty wondered what could help the young from being so reckless on the roads.  “Young people take risks without thinking about the consequences, either due to being over confident or just plain arrogance.”  Sometimes older folks do the same Y&T.

Take care, I’ll be back next week!

Filed in: Authors & Books, Index Investing

23 Responses to "Weekend Reading – The Elements of Investing (Part 3 of 3) and other great reads"

  1. Preet says:

    Thanks for the mention – have a great weekend!

  2. Thanks for the inclusion, and nice KISS reference, makes me want to Rock’n Roll all afternoon and party until early evening (I ain’t quite as good as I once was)….

  3. Echo says:

    Thanks for the mention, Mark! I like the part about ignoring market forecasts. We seem to get inundated daily that it’s a good time to buy or sell. It’s best not to get caught up in all of that noise and just stick to your plan.

  4. MOA, thanx for the mention! On behalf of the Ninja Nation and Hank :)

  5. Mike Holman says:

    Thanks for the mention – have a great weekend!

    Oddly enough, I was never a big KISS fan.

  6. Mark,

    Thanks for the inclusion. It’s much appreciated.

    Enjoy your weekend!

  7. Is that what you dressed up as for Halloween? Kiss?

    Thanks for the mention!

    Do you do the same? Drive recklessly? ;)

  8. Peter says:

    @My Own Advisor

    Ha, I tend to drive too fast now as well. Gotta slow down!

    A bit anxious over SLF now, and I never want to sell, but man I wanna sell this one. =)

    Have a great weekend.

  9. Thanks for the mention MOA, I read this book before and believe it or not this is how I function with my RRSPs :)

  10. Elemag says:

    Another great post by you, Mark! I must admit it made me a bit envious. Why? Well, Macallan is my favourite scotch : ) Just kidding, I am glad you had good time at the scotch tasting seminar!
    Regarding all the investment advice you’ve nicely picked up for us I can’t add much more. The more I read and learn about investing, the more I realize that simplicity, persistence and keeping emotions in check are the best recipe for success. Let’s not forget minimizing risk, of course. However, there is one more thing that comes to mind (at least to mine)- it’s very easy to get overexcited when those bank accounts begin to swell in a bull market and it’s human nature to want some more and then some more and…and before we know it, greed takes over.

    Let’s take a look at Europe and see what greed and overspending have caused there.

    • @Elemag,

      Yeah, that Macallan stuff is pretty darn nice. I wish I could afford the 18-year-old bottle we had a sample of. Wow, amazing. Like silk.

      Thanks for your comments. I’m with you, the more I read and learn, the better investor (theorectially) I’m becoming. I just need to ensure my emotions never get in the way of my logic, and I’ll be OK for the long-run I hope! Yes, look no further than Europe for some signs of greed, although that is everywhere I think.

      Hope you had a good weekend!?

  11. I am also down with index investing for the long term; thanks for the mention, Mark! I appreciate all of the support.

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