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Do the Worksheets and Invest Like a Pro
on October 19, 2008
This review is about the updated and expanded 2008 edition of Investing 101 by Kathy Kristof, nationally syndicated Personal Finance Columnist for the Los Angeles Times.
I approached this book from two perspectives, first, as a teacher (retired) of technical subject matter and, second, as a self-reliant investor (active) who is living out of his retirement funds.
As a teacher, I had three objectives for students who took my courses. I expected students who completed my courses to come away with: (1) an appreciation for the discipline, (2) an understanding of the subject matter, and (3) a proficiency for putting the discipline into practice. If I were teaching Investing 101, could I realistically expect my students to achieve these same objectives with Kristof's composition as their textbook? The answer is Yes, Yes, and Yes. (And, yes, I know that Investing 101 was not written as a textbook, but please bear with me for the sake of this review.)
First, I believe my Investing 101 students will come away with a positive attitude toward the discipline of do-it-yourself investing. The FUD factor (fear, uncertainty, and doubt about private investing) is more than adequately addressed by Kristof in the first chapter of her book. I am convinced that an attitude check at the beginning of my make-believe course compared with the same attitude check at the end of the course would show that anxieties toward individual investing will be allayed because of Kristof's practical advice.
Second, I believe my students will come away with a clear comprehension of what investing is about, not only the buying and selling of stocks, bonds, mutual funds, and real estate investment trusts, but understanding these matters in relation to retirement planning and tax strategies. I believe that students who study Kristof's book and complete the paper-and-pencil assignments (worksheets spaced throughout the book) will finish this introductory investing course with enough fiscal savvy to be able to explain their financial goals, buy and sell strategies, and preferred portfolio allocations to their spouse, friends, financial adviser, and tax man.
Third, I believe my students will come away with a proficiency for setting up and maintaining investment portfolios on their own. I believe these portfolios will be wisely allocated between cash, stocks, and bonds so that principal will be protected and grow, income will be provided, and inflation will be hedged. I believe these portfolios, different for each student, will thrive in good markets and survive bad markets.
Overall, I believe my pretend students will benefit by the way Kristof's book is laid out. Each chapter is prefaced with a pedagogically sound "Quick Take" page. Kristof briefly tells the reader "What You'll Learn," "What You'll Do," and "How You'll Use This." If this were a theology book instead of a secular book, I would rename these headings as "Facts to be Believed," "Commands to be Obeyed," and "Promises to be Enjoyed."
As a self-reliant, active investor who is living out of his retirement funds, I looked for but could not find any ill-advised, slipshod action plans in this book. Kristof writes unambiguously about real financial problems and genuine investment solutions. Her explanations and illustrations are clear and to the point.
On the one hand, I found no investment topics so simple or elementary that they had no place in this book. On the other hand, I found no esoteric discussions of financial topics that were beyond a novice investor's level of appreciation, understanding, and ability.
My Favorite Chapter: I especially liked Chapter 14, "The Lazy Investor's Portfolio Planner." ("Lazy Portfolio" is a hot topic on the Internet. I got 366,000 hits with a Google search.) In this chapter, Kristof tells the reader how to take everything they've learned in Chapters 1-13 and apply it to a "hands-off" portfolio. [...]
My Favorite Kristof Quote: "Do the math."
Bottom Line: I recommend Investing 101, the 2008 updated and expanded edition, both as a tutorial for the newbie investor and as a review guide and reference manual for the intermediate investor.