125 of 134 people found the following review helpful
on November 7, 2006
Daniel Solin, a securities arbitration lawyer, has penned a short and sweet book on investing for all types of investors. The author's four-step investment strategy is one that is well known and has been espoused by many market veterans (especially John Bogle, the inventor of the first index fund at Vanguard) and the financial media (selected magazine articles and selected investing books) for years.
Solin recommends that investors follow four steps with their investments to beat the vast majority of professionals:
1. Determine your asset allocation based upon your personal parameters (Note: author provides a multi-page asset allocation questionnaire to determine a specific score for each individual's circumstances and risk tolerance).
2. Open an account with Fidelity Investments, Vanguard or T. Rowe Price.
3. Set up your portfolio among three specific no-load, low internal expense index funds in any of the three fund families representing the total U.S. stock market, international market, and U.S. bond market, or purchase three specific similar in composition ETFs.
4. Rebalance the portfolio twice a year.
The author provides readers with a specific percentage of dollars to be invested in each fund or ETF depending upon the investor's risk tolerance. In an appendix, he provides the historical returns of these portfolios for the four risk combinations (e.g., 20% equities/80% bonds, 40%/60%. 60%/40%and 80%/20%).
He appropriately warns investors about hedge funds, house funds, margin, B and C mutual fund shares, and other concerns that result in higher costs and lower returns. With the advent of the Internet, investment scams have proliferated and investors need to be exceedingly careful with their money.
While most of the author's points are on solid ground, I take issue with his chapter titled "Nobody Can Time the Market." The author mentions that market timing is nothing but a shell game, and that no one can consistently predict the market's direction. I find that assertion not credible. The main goal of market timing is to reduce risk, not beat the market. The key to investment success is to look at risk-adjusted returns, since bear markets can devastate portfolios and take many years to recover. The Hulbert Financial Digest, an independent and authoritative rating service, tracks stock and mutual fund newsletter writers, as well as market timers. The digest provides data on specific market timers that have beat the market on a risk-adjusted basis for the last 10 years or more. So yes, there are successful market timers contrary to the author's assertion.
Solin's basic premise is that most investors with less than $1 million in investible assets do not need the help of investment advisors and brokers, since their assistance does not translate into improved returns over the long term. Therefore, why pay them commissions and fees when they offer no value-added. Wealthy investors may benefit from the more complicated investment strategies offered by advisers.
Overall, the author does a credible job of providing investors with the basics of a solid investment plan and how to put together a viable low-cost portfolio that will appreciate over time. This is a quick read and will take about an hour or two to get through. After that, it is up to the reader to take action, and that may be the biggest stumbling block to his/her future investment success.
18 of 18 people found the following review helpful
The book I read this week was The Smartest Investment Book You'll Ever Read by Daniel R. Solin. I loved it. Fantastic ideas that follow my personal investing philosophies.
Solin's book has four sections although I feel like there were really two main ideas. One, that index funds are a more solid investment strategy than stocks or mutual funds because you cannot, nor any "professionals," beat the market. And Two, how to invest in the index funds (the fun part.) Solin provides solid research that shows results of many studys. All evidence points towards using index funds. "Financial Experts" and Wall Street have spent lots and lots of money on marketing themselves. They pitch themselves as having a financial expertise that helps them predict the market. This is false. Marketing dollars have also gone into telling the public that mutual funds will provide a great return because of the diversity and that they are being maintained by a "financial expert" that can beat the market with their expertise. This is also false.
The Truth: You can make just as much or more money than any "financial expert" and you can do this by avoiding mutual funds and investing in index funds.
There are just a couple differences between index funds and mutual funds, but the differences make a huge difference. A mutual fund is managed by a person, this person is supposed to be able to predict what stocks and bonds will rise and fall, so they buy and sell to appropriately position the fund to make high returns... you pay a premium expense to have this "luxury." An index fund is managed by a computer and the computer buys and sells stocks to position the fund in line with the right ratio of the market. This means the index fund will always earn the market average. Now for the great news and another difference.... Mutual funds earn less than the market average 95% of the time. So you have a 5% chance to have a mutual fund that does better than a index fund. Additionally, many mutual funds have an expense ratio of about 1.4% whereas an index fund has an average expense ratio of .3%. So if that mutual fund does beat the market by a whole percent, which is very unlikely to begin with (5%), you would make more money if you had invested in the index fund. Why would you pay a premium to lose money? Great question... You shouldn't.
The book also analyzes the differences between the Smart Investor and the Hyperactive Investor. The Hyperactive investor is the "financial expert"- They spend all day every day trying to beat the market. This is very unlikely, very few individuals have been able to beat the market for an extended period of time. One of these people is Warren Buffet and it is unlikely that he is your financial adviser. The Smart Investor understands that you can not beat the market and also understands that in the long-term, the market makes great returns (9-12%). So this Smart Investor puts his money into index fund which pay the market average. Being a Hyperactive Investor is a great way to spend a lot of time getting no where... I am not a fan.
Can you do it yourself? Yes!
I am confident saying that anyone investing less than one million dollars can do so themselves, with very little oversight (checking in every 6 months or so). Now onto the what, how, and where... I am going to spell it out for you so read carefully. There is a rule of thumb for the ratio someone should use when they are going to be investing. Take your age and subtract it from 100 and that is what you invest in stocks vs. bonds. So if you are 30 years old you will invest 70% in stocks and 30% in bonds. I will use a 30 year old for the example below and we will use what Solin considers the Medium to High risk investor.
Here is your how-to... Write it down if you have to...
First go to either Fidelity or Vanguard and create an account ([...] or [...]) Both companies handle taxable or tax-favored accounts (IRAs and Roths) and both offer funds that have as low as a $3,000 minimum investment. Once you have your account use your ratio and purchase accordingly into these funds
30 year old =
52% FSTMX <---(This is the fund that you will purchase)- This is a domestic stock fund
18% FSIIX- This is a international stock fund
30% FBIDX- This is a bond fund
52% VTSMX- This is a domestic stock fund
18% VGTSX- This is a international stock fund
30% VBMFX- This is a bond fund
The book also goes into investing in ETFs (Exchange Trade Funds) but I don't like ETFs. People invest in these if they want to own a portion in a commodity. If you are going to buy into a commodity, buy into gold and silver, hedging inflation, and don't buy the ETF. Buy the real thing off [...].
Well I just gave you a very powerful road map to great fortunes... I highly recommend this book. It's a very easy read and has great advice.
16 of 16 people found the following review helpful
on April 12, 2009
Repetitive & not very useful. This entire book could have been condensed to a single powerpoint slide:
Title: Investing For Retirement
+ Financial advisors are bad
+ Fees are bad
+ Risk is bad
+ Indexes are good
I suggest "Little Book of Common Sense Investing" or "Random Walk Guide to Investing" instead.
26 of 29 people found the following review helpful
on December 1, 2006
My husband and I followed the plan in this book and I can say that it is everything it says it is. It is simple. It took us less than an hour to decide on our asset allocation (I went to the author's website [...] and took the questionnaire on line.) We are opening accounts directly with Fidelity after contacting their customer service people who were excellent in responding to the few questions we had.
We don't worry about the news. We don't worry about the collapse of another major company or industry. We feel really good about having a "global" portfolio and about understanding (finally) and managing our risk.
45 of 53 people found the following review helpful
on March 20, 2007
The message here is that investors should take charge of their investment portfolio by determining an asset allocation model based on their tolerance for risk and invest their assets in index mutual funds (or ETF exchange traded funds) that track the U.S. equity, U.S. bond, and international markets. Trying to "beat" the market with actively managed mutual funds is a fool's game. Stock-picking and market-timing don't work. The popular financial media is a distraction. Your broker may not be acting in your best interest. Avoid hedge funds, margin, brokerage wrap accounts, proprietary brokerage ("house") mutual funds, B and C mutual fund shares, etc.
Even the author concedes that we've heard this before. His contention, however, is that many of those scholarly works are difficult to understand and have not achieved commercial success thus conveying the impression that you can't do this yourself. That's the rationale for this book. The ideas are concise and accessible. Many will be put-off by the book's aggressive tone (e.g. most advisers are "hyperactive" and self-serving). Many will find this tabloid-equivalency refreshing.
The basic ideas - the importance of asset allocation and low investment costs - and many of the specifics - the recommended portfolios - of this book make sense for many investors, I'm not sure all. Solin talks about including bonds as "ballast" in a portfolio, but what about the specific value of tax free municipal bonds? Among the best performing investment classes in recent years (and at other times) have been real estate and commodities. These diversifying asset classes are overlooked, even though ETFs track indexes for those different markets. Another reality is that many retirees are looking for investments that produce strong (monthly) cash flow, yet these are also ignored.
One of the risks faced by an investor is that the rush of certainty imparted by this book can persuade them that they have learned all they need to know. A little bit of humility (uncertainty?) is a good thing for an open mind in an unpredictable market.
35 of 41 people found the following review helpful
on January 27, 2007
(in my opinion) Daniel Solin provides NO practical advice about investing. (the following statement is an analogy and not meant to be taken literally) His book reads like a pamphlet printed by Vanguard Funds. (the following is not a known fact but simply my understanding) Daniel Solin is not an economist or any type of "financial expert", but merely a lawyer who used to make a living by suing licensed financial advisors whom he alleged had wronged others. I think it is strange that he pursued "taking down" people whom he believed had no business dispensing financial advice - then this LAWYER felt himself capable (you know based upon his legal background) to dispense financial advice. But, no matter how much (some might say) this "sue-happy" attorney tries to parade as a financial expert, he can never leave his (some might say) sue-happy demeanor behind.
All of my parentheses and caveats to each and every comment are because this (some might say) "litigious attorney masquerading as an investment advice author" actually (now this is a fact) has patrolled these very review boards threatening legal action against individuals posting negative reviews via CERTIFIED MAIL (again I will attest to this as a fact). Mr. Solin (in my opinion) is quite fuzzy on sound financial advice, but he is unequivocal on his desire to take legal action against those whom he determines are not on sound legal footing as to the facts of their reviews. Some (not me) might call this suppressing freedom to speak in open forums. I was told growing up that "sticks and stones might break your bones, but words will never hurt me". Apparently (or I should say it is in my own personal opinion and is not a supported fact that) Mr. Solin believes that words do hurt and should be followed by threats of legal actions when these words are disparaging reviews of works by the author and said author believes that he can prove in a court of law that aforementioned words posted on Amazon review boards were damaging to said author.
If you believe that an author should not (1)investigate to discover the identity of a reviewer (2)once their identity has been discovered do a background investigation on them and their family to discover their place of work, then (3)have their attorney threaten legal action, THEN PLEASE CHECK THAT THIS REVIEW WAS HELPFUL.
If you like the type of behavior described, then what the heck - BUY THIS BOOK and ENJOY.
22 of 25 people found the following review helpful
on December 2, 2006
I enjoyed this book so much I am giving it to two of my clients. I am an estate planning attorney. In that capacity, I, unfortunately, witness far too many victims of the hyperactive brokers and "financial advisors" described by Mr. Solin.
Mr. Solin's book is not an academic treatise, but is academically sound and well researched. He is able to explain complicated concepts and theories in a manner understandable and, importantly, enjoyable no matter the level of sophistication of the reader.
This is a well written book with solid advice. I recommend it highly.
Kendall W. Maddox, JD, LL.M(Taxation), CFP
40 of 49 people found the following review helpful
on January 15, 2007
Simple it is, Stress-Free Reading it ain't. The first 96 pages blather on about the Hyperactive Broker, the Hyperactive Advisor & the Hyperactive Investor ad nauseum. The magic pill to all this Hyperactivity is, voila, Indexing. Duh. This would have made a great two page article in one of the financial monthlies, but as Mr. Solin points out it wouldn't be published anyway because indexing is so boring and does not sell magazines. But cutesy titles sell books.
If you've never ever bought a book on investing this might be helpful. Keep in mind that if you have less than $25,000 to invest, Mr. Solin notes that you may not be able to use the book's suggested allocations because of the minimum investment requirements of the suggested funds. Maybe next year. In the meantime if you are into NOT so simple reading check out the real pros: William Bernstein, Larry E. Swedroe, Steven A. Schoenfield, Roger Gibson, Marvin Appel among others. And then go over and Google "Paul Merriman" for a great website on asset allocation and indexing.
16 of 18 people found the following review helpful
on January 4, 2007
Solin presents what is, as far as I know, the agreed upon "best" method for most investors when dealing with their retirement accounts - invest in low cost, index funds (or the equivalent in ETFs, though beware trading fees). Note, he does not scope this advice to retirement accounts.
He presents asset allocation (% of portfolio in US stocks, foreign equities, bonds, cash) as the major decision for an investor, based on their investment objectives and risk tolerance. He takes a very simplistic attitude (no discussion of emerging markets, etc.) and recommends funds from Vanguard and Fidelity to do the job.
I found it a very quick read, but interesting nonetheless as Solin argued over and over, in different ways and with different stories, about why this is the way to go for most people.
For a better book on actual investing and markets - for those that are interested in these sorts of things, I would recommend Andrew Tobias's "The Only Investment Guide You'll Ever Need" - a title which I suspect Solin's "Smartest Investment Book You'll Ever Read" is based.
That being said, I would wholeheartedly recommend this book to someone using the services of any of the chain financial advisor companies who are typically sold terrible investments.
17 of 21 people found the following review helpful
on November 12, 2006
Financial crime crusader, Dan Solin, carefully calibrates his cannon loaded with facts and logic and then lights the fuse. Kaboom!
Like a meteor rushing through the cavernous corridors of Wall Street, this book decimates the traditional Wall Street "beat the market" investment strategies. Solin demonstrates that most of those brokerage houses were were built by the ill-gotten gains of hyperactive investment managers and brokers.
Investors will learn to stop the madness of trying to beat the market and capture the superior returns of a simple buy, hold and rebalanced portfolio of index funds that is risk-appropriate for them.
As ground breaking authors before him, like Adam Smith, Ludwig von Mises, Frederick von Hayek, Milton Friedman, Burton Malkiel, Charles Ellis, and John Bogle, Dan Solin illustrates that markets work best for society when they are allowed to be free (not managed) and index funds empowers investors to capture those profitable market forces of capitalism, not fight them or try to outsmart them like active investors have eternally tried to do. The failure of their costly and futile hyperactive trading strategies are finally getting wide spread exposure due to the simplicity of Solin's book and his passion for justice to all investors. Solin shows that stock picking, market timing, and manager selection are all a complete waste of money and time, detracting from market returns, not enhancing them. You will see that traditional Wall Street is more skilled at wealth extraction than they are at wealth enhancement.
Yes, your hyperactive broker and advisor owe you money and an apology for not capturing market rates of returns that will be needed to enhance your retirement. In the best 90 minutes you will ever spend on an investment book, you will become smarter than all professional investment managers who are still stuck in rut of active investing.
Break the destructive cycle of trying to beat the market and position your portfolio to capture the superior returns of the market. That giant sucking sound will be newly minted "smartest investors" who just finished Solin's book and have the confidence and intelligence to move their money into portfolios of index funds.
Mark T. Hebner, author of Index Funds: The 12-Step Program for Active Investors