Customer Review

4 of 4 people found the following review helpful
1.0 out of 5 stars Dangerous advice, March 20, 2013
This review is from: The 7% Solution: You Can Afford a Comfortable Retirement (Paperback)
A couple of thoughts on the advice offered in this book:

1) The investment approach advocated in this book comes down to chasing yield. When an investor chases yield, the result is an un-diversified, unnecessarily risky investment portfolio. Chasing yield can be very dangerous. A more prudent approach is to include a broad array of asset classes that don't always act the same way.

2) A hold-to-maturity portfolio of bonds yielding 7% doesn't mean that the investor can expect to achieve a 7% return, because those investments have default risk. 7% is simply the maximum the investor can get, assuming everything goes perfectly, which it won't.

3) The author advocates using individual corporate bonds. Most investors can't cost effectively buy enough corporate bonds to be properly diversified. If 1 bond in a portfolio of 10 corporate bonds defaults, that might wipe out a year or two of earnings.

4) He advocates using a stop loss on investments. Even if this was a good strategy, it is impractical for many of the illiquid investments he suggests using.
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