Jeff's Reviews > The Investment Answer

The Investment Answer by Daniel C. Goldie
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's review
Dec 03, 2010

really liked it
Read in November, 2010

This book is so small that I bought the cheap Kindle version and read it on my computer screen in about an hour. It's definitely a good way to get a decent overview of the basics.

It has a lot of simple advice that makes sense. A few takeaways:

* If you get help, go for an independent fee-only advisor and not a broker.
* Quote:"The right time to invest is when you have the money and the right time to sell is when you need the money."
* Your most important decision is balancing risk by determining how you should allocate your money between cash [money market funds], bonds [fixed income], and stocks [equities].
* The most important long-term factors for returns are size (e.g. Large/Mid/Small cap) and valuation (Value/Growth). The more Small/Value you are, the higher the expected long-term returns.
* Bonds should reduce volatility, so if you get them, go for short-term high quality ones.
* Quote: "Efficient Markets Hypothesis - no investor will consistently beat the market over long periods except by chance."
* Opt for passive investing instead of active investing. The funds are usually cheaper (e.g. less than 0.5% avg fee vs 1.3% for active ones). The fees really make a huge difference for returns. As such, actively managed funds always (on the whole) underperform passive ones.
* Interesting quote: "Wall street brokers and press would have you believe (1) timing and (2) picking [specific] stocks/bonds (3) finding manager or mutual fund [matter], but this is wrong! Research shows that these factors make a negative contribution to the total return level of a diversified portfolio."

The book has an appendix that includes a chart for hypothetical allocations based on your risk tolerance. I think this chart alone probably made the book worth what I paid for it.


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