I was pretty impressed with this book. I give it an A+.
As hard and complicated as Wall Street tries to make investing..... to make you think you need a broker or active mutual fund manager, the steps for successful investing are very basic. This book does hit most of the basic steps correctly.
#1 is to live below your means so you can save at least 10% of your gross each year and invest it. This sounds easy, but it apparently is not since the average U.S. household credit card debt is now around $8,000 saving rates are below 1%, and average household net worth is below $100K. The book should have mentioned the classic book The Richest Man in Babylon with regards to the merits of living below your means so you have money to invest.
#2 is to use automatic investment so you pay yourself first. If you set up an automatic way of investing, then you can't spend money you don't see. After all, the U.S. government adopted automatic payroll deduction to pay income taxes right after WWII because it was concerned people would not save to pay their tax bill. The government using automatic payroll deduction to assure they always get their share of your money, so why not use this method to keep some of your money for yourself? If you use automatic investment, you get the advantages of dollar cost averaging as well. Automatic savings would have been a good addition to this book.
#3 is to invest your savings in stocks and use low cost index funds for your investments. The book got it right in saying that stock brokers are not your friends. Often their objective is to move your money into their hands per the classic book Where are the Customer's Yachts?
#4 is to focus on asset allocation, not which stocks or mutual funds to pick. This book does an excellent job of explaining asset allocation.
As a yardstick measurement of how well one saves and invests, the book should have referenced The Millionaire Next Door's expected net worth formula of 1/10 of your age times your income. This gives you a frame of reference to how well you have saved and invested.
A visit to this book's web site reveals how successful a good asset allocation has been the last 5 years. A good asset allocation helps weather the storms we occasionally see in the U.S. stock market......like 3 down years in a row in 2000-2002. The example portfolio in this web site includes a 10% allocation to the real estate area using a
All-in-all, a great primer on successful investing strategies. I would suggest companion books to supplement this book including The Richest Man in Babylon, Bogle on Mutual Funds, The Millionaire Next Door, The 4 Pillars of Investing, A Random Walk Down Wall Street, Wealth of Experience: Real Investors on what Works and What Doesn't.
on December 14, 1999
I found this book to be on point. The majority of people do not have the time to thoroughly research stocks in order to build a portfolio that will earn the 12%+ per year needed to retire. Also, the book makes the correct point that it is very hard to beat the market in the long run, and by investing in indexes, a person can do just as well at a lower cost as an investment professional. If you are looking to become the next Buffett, Soros, Lynch, etc..., buy another book. If you are looking for a simple, inexpensive, less time consuming way to build a portfolio, this is a good book to buy. To comment on the one negative review, yes the author could have explained everything in 20-30 pages, but the writing is easy to read and when you get down to it, most books can be condensed to fewer pages. Enjoy!
on August 5, 1999
This review will be short... Simple, and to the point. This should be a must read for anybody even remotely looking at investing. Period. End of Review. You can stop reading now. I read it, and checked it against my portfolio and was horified to see that he was not only right, he was right on. Our Indexed funds consistantly aproximated the market average, while all my other funds were way up one year, way down the next one or more, while year for year, I did better with the indexed than with any other investment vehicle.
It is common sense for all of us. Of course wall street doesn't want you to know this, if you did you would stop pissing money away buying into this fund or that one.
More importantly the time I will save not putzing around with my investments, (usually to their detriment) I plan on investing in writing a book. In short, getting on with my life.
Great advice, Heed it!
on February 11, 2003
THE COFFEEHOUSE INVESTOR is written for those of us who recognize the importance of the investment process to achieve our financial goals but don't want to take a lot of time from family, careers, and recreational passions to obsess on the matter. This is a book that can be easily read in a couple of sittings. In fact, the book's brevity is a function of its message. Commit to a few basic investment strategies and "get on with your life". For the author those life passions include cooking and mountain climbing, so you will want to indulge him a bit (bite?) to digest the book's message. Contrived, perhaps, but I for one will take my tips where I can find them. Schultheis' advice is to diversify our investments, approximate the stock market's long-term results by using index funds, and save. These are themes that other investment writers have worked in detail, but a 'coffeehouse investor' is not about overwhelming us with detail. Schultheis chooses his statistical references and charts sparingly, but they are persuasive. Charts showing the average annual returns of large company stocks over a one-year, rolling five-year, and rolling ten-year period in Chapter 2 clearly show how risk in the stock market diminishes over time. On the subject of savings, I recommend his 'retirement worksheet' in Chapter 7 as a good working model. Why index funds? The majority of actively managed funds under-perform the benchmark indexes, and that's before annual expenses, management fees, and taxes resulting from portfolio turnover. Investing as equity owners in the stock market is ultimately an investment in the "collective" creativity of our fellow human beings. The best way to participate is to 'buy the market', which is the collective sum of all our entrepreneurial efforts, mirrored in an index fund, and avoid single stock ownership except with the "fun" share (say, 5 to 15%) of our assets. No reason why investing shouldn't have a fun component too. Schultheis wants us to ignore Wall Street's muddled, self-interested message that tells us to be long-term investors, and then stimulates an environment of short-term "stuff", "hot stocks and cool mutual funds", and a "switch-to-get-rich mentality". Books by William Bernstein, Larry E. Swedroe, Charles D. Ellis, Richard A. Ferri, and others detail in greater depth the reasoning behind asset allocation, index investing, and saving for retirement, but THE COFFEEHOUSE INVESTOR will reach a large segment of the investing public who might otherwise be occupied with family, career, and recreational priorities and miss the opportunity to embrace these important investment ideas.
on February 23, 2006
You will enjoy this easy / quick read. Bill has a great message. He believes that the average investor will become rich by following 4 simple rules: saving early and often; build a diversified portfolio and maintain your allocation over time; keep expenses low by investing in low cost Index Funds and ignore the finance industry's marketing and hype. More experienced investors will be disappointed that Bill does not provide more evidence or historical performance as proof of his investment approach. In addition, I was expecting more specific portfolio allocation advice including fund or EFT recommendations. Worth the read.
on January 25, 1999
Having recently read a number of personal finance books, I found Schutheis'work refreshing, easy to follow, and FUN to read. How often have you laughed out loud reading an INVESTMENT book?? But don't get me wrong; the real message and beauty of this book is that it's as practical as it is enjoyable.
With well-documented research, the author succinctly and cleverly explains what he considers the three principles of successful investing: saving, allocating and indexing. Interspersed among these principles is a somewhat divergent but still very relevant "sub-story" describing the author's mountain climbing, golfing and cooking adventures. This lighter side works well to contrast with the serious investment aspects, and helps the book remain true to one of its main messages: that it's possible -- if not vital -- to have a vibrant personal life AND a lucrative financial life.
Schultheis' writing style is similar to that of Andrew Tobias' (author of the classic best-seller "The Only Investment Guide You'll Ever Need"), in that it's written for the "common person." Schultheis pokes some legitimate holes in arguments of a few relatively myopic investment experts. He gives readers information to help them feel more in control of their money and in control of how much they can earn by investing wisely, primarily through lower-cost, higher returning index funds. Most importantly, he helps lower our anxiety about our money and retirement with an achievable, easy-to-follow investment strategy.
If you care about your money and would like to find a practical way to invest and REST, if you'd like to keep your money and personal lives both separate AND successful, you must read this book. (end)
on November 2, 1999
Hands down, this is the best investment book on the market! The author has the guts to go where Wall Street dare not tread, and in the process provides his readers with a tool in which to confidently build a common stock portfolio. Read it for yourself and decide. Then get one for your spouse and children. They will enjoy the book's disarming humor today, and ten years from now they will appreciate the investment wisdom shared inside the coffeehouse. I read it in one sitting and am astounded at the simple principles shared by the author, a quiet message that is lost in the din of Wall Street.
on May 23, 2008
This book could work if the goal is to introduce an investor to the concept of efficient markets and index investing. However it is a little too laid back and short on content. It is easily skimmed, and summarizes the major points of how you can't beat the market, how indexing and low expenses work. However I doubt that someone serious about revamping their portfolio or changing their investing style would be convinced from this short book to do the overhaul. I would say that at the minimum, this book would whet your appetite to explore further. Three books I would recommend are Bernstein's Four Pillars of Investing, Rick Ferri's All About Asset Allocation, and John Bogle's The Little Book of Common Sense Investing. These books furnish the investor with the education, the rationale, the evidence, studies and statistics, as well as the practical how-to's of assembling a personal portfolio and sticking to it. Otherwise, someone reading the Coffeehouse Investor would just treat Indexing as another investment fad, and abandon it when the next bear market hits, not understanding risk/reward, diversification, correlation, asset allocation and rebalancing.
on January 26, 1999
I remember reading a book titled "Whack on the side of the head." It was about being creative and ignoring the usual ways of doing things. This little red book, basically is whacking readers to invest wisely and correctly. Why are you paying "experts" to underperform? Whack. Why are you paying high expense fees and taxes? Whack. Why are you spending time and money figuring out PEs, EPS, 12 month trailing revenues, stock valuation formulas, etc.? Whack. Here, indexing works. Whack, whack, whack. Sadly, people will still play the game "Beat the Market", ignore indexing and waste time and energy on the Market. This book is a fast read, you can finish it at one sitting and start investing wisely. If the only thing you get out from this book is how much you need to save every month for your retirement, then it is worth it. You will have taken the first step to investing wisely.
on November 5, 2009
This financial planning book attempts to simplify retirement investing. It focuses on three principles: 1) Asset allocation; 2) Approximate the stock market average; and 3) Saving.
I loved this book for a couple different reason. First, it simplifies investing. Retirement planning has always been an overwhelming prospect for me given the multitude of products and services available to consumers. It left me feeling too overwhelmed to take action. This book offers a simplistic AND sensible approach to retirement planning/investing that really resonated with my wife and I. It has given us the confidence and motivation needed to move forward with the development of short and long-term financial goals and has given us the tools to implement a plan of action.
Secondly, I found the author's personal anecdotes about extracurricular activities gave this book a certain charm AND Mr. Schultheis usually did a good job of connecting those stories (including the pumpkin pie recipe) to this oftentimes bland topic. These anecdotes likely took up a grand total of 5 pages of the entire book and gave it a much needed human touch. By the end, you actually feel like you know and trust the author. This style of writing was either a clever marketing scheme or merely a reflection of a genuine person hoping to enlighten the do-it-yourself investor so that they/we can get on with our lives and cease living in fear of the happenings on Wall Street of which we have no control and make little or no sense. It that regard, it's a very liberating book!