Book Review: Money for Something – A Free Investing Primer

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There is always a demand for starter books on investing and personal finance, especially as graduation season is coming up again. Although they often cover similar topics, the execution varies widely. For example, I found Tony Robbin’s “7 Simple Steps to Financial Freedom” to be dense, unfocused, and it somehow ended up suggesting a complicated insurance product. Blech.

This is why I found it refreshing to read Money for Something – A Handy Field Guide for Turning Small Investments into Financial Freedom by Matt Henderson. This starter book was short, focused, and practical:

  • Short – The book consists of 17 brief chapters. In roughly the time it takes to read 17 of my blog posts, you can finish this book.
  • Focused – The world of investing is wide and deep, which makes it very tempting to explore every nuance. This book keeps the supporting material very tight.
  • Practical – The same holds true for the actual implementation of his plan. For examples, he gives you two options for model portfolios, he tells you where you can buy them, and that’s just enough to get you started.

Henderson has an engineering background and says the book is based on his own experiences. Here’s an excerpt from the introduction:

Hoping not to rely on luck, I began reading books about personal investment. What I discovered was very exciting—that practically anyone can achieve financial freedom.

I put the principles I learned into practice, and over the next 15 years confirmed that they work. It seems profoundly important that the path to financial freedom is so accessible—just by following a set of basic principles with discipline. At the same time, it seems profoundly sad that so many never find it, simply because they are unaware.

In terms of criticisms, it would be the same as with any starter investment book. Readers should take it as a rough roadmap, something motivational that shows a way to get from here (starting out) to there (financial freedom). But actually following the map will take many years, and there will be many distractions and moments that question your faith along the way. In my experience, you will need to keep learning in order to build up the required confidence in your (probably somewhat different) plan. It’s not that the original plan wasn’t good, more that you need something that you truly believe in. Don’t let that scare you off though, because the payoff is worth it!

This may also help… Money for Something is now available for free to read online, $5 in PDF format, and also available for purchase in Kindle format.

Recap. Concise and practical starter investing book. If you need a short roadmap, I recommend reading this book and doing additional research as needed. It’s free to read online, so that’s one less excuse!

Related: Another recommended starter book on personal finance is If You Can by William Bernstein, which is also free in PDF format and about $6 in paperpack. You can use the included recommended reading list for additional research.

Comments

  1. Free to read online doesn’t seem to work. After inputing email and clicking continue, it went 404.

  2. Matt Henderson says:

    Steve, could you please let me know where you saw that? There’s actually nowhere that you should have to enter your email to read the content.

  3. Matt,
    I checked again. Alas, the guy behind the keyboard made a mistake. The link is fine

  4. Oh man… I hate the two asset allocations he chose. The rest is fabulous, but the actual implementation falls way short.

    Hell, a target date fund would be far superior! I mean, one of his portfolio is 50% bonds (After showing us for the last bunch of pages that stocks offer a much better long term return.) Is a 50% bond portfolio really suitable for a young person?

    The other asset allocation is the odd one by Browne which is 25% gold and 25% cash! Again, this is counter to all the advice he’s provided earlier in the book about being invested and remaining invested. (Gold is more or less a greater fool’s asset. Your always waiting around for a greater fool to buy it from you.)

    I was going to share this link, but I absolutely can’t in good conscience share those awful asset allocations as the two “best” someone can come up with. Heck, Betterment, Wealthfront or Schwab’s intelligent portfolios would be far better as they auto rebalance and are more diversified.

    The Swensen Lazy Portfolio is just as easy and has trounced the performance of all of these over the years. That is just one example.

    Man, great stuff but the asset allocation is simplified to the point it is just plain wrong for most people.

    • You can look at the past performance of various asset allocations at PortfolioCharts.com. Permanent portfolio has done pretty well historically, better than Swensen in some respects. I personally agree that Permanent Portfolio is only in the current conversation because long-term bonds and gold did very well post-2008. Nobody was talking about it in the decade before that, even though the concept had been around for a while. But then that is how a lot of these models work, Swensen was popular because his recent past performance was good as well. It all boils down to faith, as I said. I believe in REITs backed by commercial properties more than gold. But if someone really does keep the Permanent Portfolio for 50 years and doesn’t mess with it besides rebalancing as indicated, I personally believe you’ll still end up just fine.

    • Maury and I have also been discussing his comments by email, which I appreciated very much. Here’s my response to some of the points he raised:

      Man, great stuff but the asset allocation is simplified to the point it is just plain wrong for most people.

      It’s important to understand my objective in writing the book.

      So many of my friends never finished the investment books I recommended in the past, because the core message that “you should be investing”, got diluted in secondary complexities, such as choosing an optimal allocation, tax loss harvesting, etc.

      As a result, those people never started investing, and that’s a shame.

      So the objectives in writing the book were to teach the very basics in as concise a manner as possible, so that reader has a good chance of actually finishing it, and, second, to convince the reader that he should be investing.

      It’s debatable that a gliding allocation over time is a good idea, but for the sake of argument, let’s assume you’re right. Even still, a person would be far, far better offer in a fixed conservative portfolio (and sticking with it), than to have never began investing in the first place.

      And it’s _those_ people I’m trying to reach in this book. Asset allocation and lifecycle investing are topics I extend on in the blog (see below), but my goal for the book is to be the best possible _first_ exposure to investing.

      Hell, a target date fund would be far superior! I mean, one of his portfolio is 50% bonds (After showing us for the last bunch of pages that stocks offer a much better long term return.) Is a 50% bond portfolio really suitable for a young person?

      I go much deeper into lifecycle investing in the blog, and in particular in this article that I think you’ll enjoy:

      https://www.moneyforsomething.org/how-to-invest-over-a-lifetime/

      Here, I reviewed two professional’s views of lifecycle investing: Bill Bernstein, one of the most respected investment authorities around today, and Phil DeMuth, advisor to the many HNWIs.

      There are strong arguments that young people should be 100% invested in stocks, and even leveraged if possible. But as Bill Bernstein points out, it’s of no benefit if the young individual gives up on investing and cashes out when the first 50% market crash happens.

      And in his (long) experience and extensive studies of history, he believes that people far overestimate their tolerance to risk and, consequently, his recommendation for young people, is a much more conservative allocation.

      The other asset allocation is the odd one by Browne which is 25% gold and 25% cash

      It is a critical error to focus on any individual component of an allocation in isolation. It’s like saying vinegar shouldn’t be an ingredient in dishes.

      In the case of the Browne portfolio, it’s the extreme volatility of gold, and it’s strong dis-correlation with the other classes in the portfolio, that allows it to add value through rebalancing.

      Dating as far back as data exists, the Browne portfolio has returned an annualized real return of 5.0% and with a very low volatility of 7.1%. (See the portfolio discussion below.) For anyone like myself, whose investing objectives are (a) preservation of capital and (b) capturing a market return when there is one, it’s proven to be a great portfolio over the long term.

      I hate the two asset allocations he chose.

      You can find a number of other allocations here (including Swensen’s):

      https://www.moneyforsomething.org/resources/asset-allocations/

      My own portfolio is a slight modification to the Brown portfolio, called “The Golden Butterfly”. As you can see in the above page, the historical inflation-adjusted return of that portfolio is 6.1% vs 6.7% for the Swensen portfolio (the one retail consumers can invest in), but the volatility is _dramatically_ lower at 7.6% vs 12.0%.

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