Global Asset Allocation Book Review: Comparing 12+ Expert Model Portfolios

gaafaberI am a regular reader of Meb Faber’s online writings, and volunteered to received a free review copy of his new book Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies. It is a rather short book and would probably be around 100 pages if printed, but it condensed a lot of information into that small package.

First off, you are shown how any individual asset class contains its own risks, from cash to stocks. The only “free lunch” out there is diversification, meaning that you should hold a portfolio of different, non-correlated asset classes. For the purposes of this book, the major asset classes are broken down into:

  • US Large Cap Stocks
  • US Small Cap Stocks
  • Foreign Developed Markets Stocks
  • Foreign Emerging Markets Stocks
  • US Corporate Bonds
  • US T-Bills
  • US 10-Year Treasury Bonds
  • US 30-Year Treasury Bonds
  • 10-Year Foreign Gov’t Bonds
  • TIPS (US Inflation-linked Treasuries)
  • Commodities (GSCI)
  • Gold (GFD)
  • REITs (NAREIT)

So, what mix of these “ingredients” is best? Faber discusses and compares model asset allocations from various experts and sources. I will only include the name and brief description below, but the book expands on the portfolios a little more. Don’t expect a comprehensive review of each model and its underpinnings, however.

  • Classic 60/40 – the benchmark portfolio, 60% stocks (S&P 500) and 40% bonds (10-year US Treasuries).
  • Global 60/40 – stocks split 50/50 US/foreign, bonds also split 50/50 US/foreign.
  • Ray Dalio All Seasons – proposed by well-known hedge fund manager in Master The Money Game book.
  • Harry Browne Permanent Portfolio – 25% stocks/25% cash/25% Long-term Treasuries/25% Gold.
  • Global Market Portfolio – Based on the estimated market-weighted composition of asset classes worldwide.
  • Rob Arnott Portfolio – Well-known proponent of fundamental indexing and “smart beta”.
  • Marc Faber Portfolio – Author of the “Gloom, Boom, and Doom” newsletter.
  • David Swensen Portfolio – Yale Endowment manager, from his book Unconventional Success.
  • Mohamad El-Erian Portfolio – Former Harvard Endowment manager, from his book When Markets Collide.
  • Warren Buffett Portfolio – As directed to Buffett’s trust for his wife’s benefit upon his passing.
  • Andrew Tobias Portfolio – 1/3rd each of: US Large, Foreign Developed, US 10-Year Treasuries.
  • Talmud Portfolio – “Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve.”
  • 7Twelve Portfolio – From the book 7Twelve by Craig Israelsen.
  • William Bernstein Portfolio – From his book The Intelligent Asset Allocator.
  • Larry Swedroe Portfolio – Specifically, his “Eliminate Fat Tails” portfolio.

Faber collected and calculated the average annualized returns, volatility, Sharpe ratio, and Max Drawdown percentage (peak-to-trough drop in value) of all these model asset allocations from 1973-2013. So what were his conclusions? Here some excerpts from the book:

If you exclude the Permanent Portfolio, all of the allocations are within one percentage point.

What if someone was able to predict the best-performing strategy in 1973 and then decided to implement it via the average mutual fund? We also looked at the effect if someone decided to use a financial advisor who then invested client assets in the average mutual fund. Predicting the best asset allocation, but implementing it via the average mutual fund would push returns down to roughly even with the Permanent Portfolio. If you added advisory fees on top of that, it had the effect of transforming the BEST performing asset allocation into lower than the WORST.

Think about that for a second. Fees are far more important than your asset allocation decision! Now what do you spend most of your time thinking about? Probably the asset allocation decision and not fees! This is the main point we are trying to drive home in this book – if you are going to allocate to a buy and hold portfolio you want to be paying as little as possible in total fees and costs.

So after collecting the best strategies from the smartest gurus out there, all with very different allocations, the difference in past performance between the 12+ portfolios was less than 1% a year (besides the permanent portfolio, which had performance roughly another 1% lower but also the smallest max drawdown). Now, there were some differences in Sharpe ratio, volatility, and max drawdown which was addressed a little but wasn’t explored in much detail. There was no “winner” that was crowned, but for the curious the Arnott portfolio had the highest Sharpe ratio by a little bit and the Permanent portfolio had the smallest max drawdown by a little bit.

Instead of trying to predict future performance, it would appear much more reliable to focus on fees and taxes. I would also add that all of these portfolio backtests looked pretty good, but they were all theoretical returns based on strict application of the model asset allocation. If you are going to use a buy-and-hold portfolio and get these sort of returns, you have to keep buying and keep holding through both the good times and bad.

Although I don’t believe it is explicitly mentioned in this book, Faber’s company has a new ETF that just happens to help you do these things. The Cambria Global Asset Allocation ETF (GAA) is an “all-in-one” ETF that includes 29 underlying funds with an approximate allocation of 40% stocks, 40% bonds, and 20% real assets. The total expense ratio is 0.29% which includes the expenses of the underlying funds with no separate management fee. The ETF holdings have a big chunk of various Vanguard index funds, but it also holds about 9% in Cambria ETFs managed by Faber.

Since it is an all-in-one fund, theoretically you can’t fiddle around with the asset allocation. That’s pretty much how automated advisors like Wealthfront and Betterment work as well. If you have more money to invest, you just hand it over and it will be invested for you, including regular rebalancing. The same idea has also been around for a while through the under-rated Vanguard Target Retirement Funds, which are also all-in-one but stick with simplicity rather than trying to capture possible higher returns though value, momentum, and real asset strategies. The Vanguard Target funds are cheaper though, at around 0.18% expense ratio.

Well, my portfolio already very low in costs. So my own takeaway is that I should… do nothing! :)

Alpha Architect also has a review of this book.

The Affluent Investor by Phil DeMuth – Book for $100,000+ Club

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This week I’ve been trying to catch up on my book reviews (you should see my “to read” shelf!), and after a good beginner book I thought I’d write about a good intermediate-to-advanced book. You’ve probably noticed there are a lot of starter books out there for novice investors but not as many with more advanced advice ($$$… the potential audience is a fraction of the size). Addressing this deficiency is the goal of The Affluent Investor by Phil DeMuth.

In terms of the title, the industry classifies you as “mass affluent” if you have investable assets between $100,000 and $999,999. From $1 million to $10 million you are “high net worth”. This definition excludes some possibly important stuff – your income, the value of your personal residence, pensions, etc. But in real world terms, I would say this book is for anyone who isn’t living from paycheck-to-paycheck. If you have a $10,000 portfolio and have a surplus each month, sooner or later you will reach $100,000. If instead you have a credit card balance and it just keeps inching up, then you need something closer to a Dave Ramsey book.

The overall tone of the book is that of a close friend who is smart and into finances. DeMuth is already a financial advisor to rich folks so the last part is expected. What I mean is that he will be blunt and isn’t afraid to make stereotypical assumptions in order to rattle off all his tips. At only 200 pages, most things are only touched upon in a concise manner. Here’s a rough outline of the topics covered:

  • Big picture rules. Get and stay married. Make sure you can afford your children. Avoid debt. Save early and invest it. Diversify. Plan ahead.
  • Financial advice based on life stage. He puts you in the basic “affluent” mold of 20-35s have a kid buy a house, 35-55 working hard at professional career making most of your money, 55-65 protect assets and prepare for retirement, and 65+ retire and spend down money.
  • Financial advice based on job. Has special advice for doctors, lawyers, small business owners, and corporate executives.
  • General investing advice and “Can you do better?” investing advice. General investing advice is keep costs low and buy index funds that closely approximate the global market portfolio. “Can you do better?” advice touches on things like value stocks, small-cap stocks, dividend stocks, momentum, low-beta, etc.
  • Asset protection. Being affluent means you have money, and other people will want it. Insurance, buying real estate with LLCs, homestead exemptions, and similar topics are are very complex but his take is condensed into less than a page each.
  • Tax minimization. IRAs, 401ks, Solo Pensions, 529 plans, Health Savings Accounts, etc.

Here are things you might expect from a “book for rich folks” but won’t find inside:

  • You won’t get in-depth, hand-holding walkthroughs of anything. Consider the book as a push in the right direction for researching ideas.
  • You won’t find his secret list of the best hedge fund managers.
  • You won’t find tips on how to get rich with real estate.
  • You won’t find advice on how to pick individual stocks like Warren Buffett.
  • You won’t find him selling his own personal advisory services.

A general problem with all books of this type is that the advice is pretty short and to the point, but it doesn’t provide very much supporting evidence. You’ll either have to do your own due diligence, or blindly decide to trust the author. I’ve read books where the author might sound convincing but their advice is horrible. In my opinion, I think for the most part the advice in this book is good. But I’m just another person on the internet, so again do your own research.

In conclusion, I think this book covers a lot of questions that are commonly asked by the intermediate individual investor. It’s not too long and not too short. Some of the advice won’t fit your own situation, but at this level if you just find one solid actionable idea that makes the entire $18 book worth it. I’m personally going to look into the solo defined-beneift plan idea again, although I may still be too young to take full advantage.

Book Review: The New New Thing: A Silicon Valley Story by Michael Lewis

newnewthing

Somehow I picked up a copy of The New New Thing: A Silicon Valley Story, which is a Michael Lewis bestseller published back in 1999 about the internet boom. The central character is Jim Clark, founder of Silicon Graphics (SGI), Netscape, and Healtheon/WebMD. That means Clark started three separate companies in three different industries that were all worth at least hundred of millions of dollars to over a billion dollars. Although Silicon Graphics has since filed for bankruptcy and younger folks probably don’t even know the same, for a while it was one of the most prestigious places for computer engineers to work.

It’s been over 15 years since the dot-com boom, and reading it actually felt nostalgic to this 36-year-old, but as with any Michael Lewis book it was at least a good story. It was light on practical finance-related material, but as always I like to record my notes.

  • The 1990s were a turning point where a young person with strong technology skills could get stupid rich. Before that, it seemed that you needed to work somewhere on Wall Street after showing off your Ivy League credentials. Even today, the smartest people want to be tech entrepreneurs. Geeks are cool and nerds can be treated like rock stars.
  • Clark grew up poor and had a chip on his shoulder. He grew up poor in a small town in Texas with an abusive father. Now on one of his rare returns “home”, he buzzes the town in his private jet, has lunch with his mom, and then jets off again the same day.
  • Jim Clark’s personality was perfect for this era. He had the smarts and street cred of a techie, but also the visionary skills and lack of self-doubt that made him a leader of other techies. Netscape was a web browser without a plan to make money (this was pre-Google!), yet it made Clark a billionaire. I liked this quote:

    Most people don’t enjoy making huge gambles on the future. They would just as soon have someone else tell them what to do. And that is what Jim Clark did. From the moment Netscape made him a billionaire [...] half the engineers in the Valley wanted to work for whatever company he started

  • Rich men have a thing for big boats. Since Michael Lewis spent a lot of time following Jim Clark around and Clark was obsessed with his big-ass sailboat (which would barely fit under the Golden Gate Bridge), a lot of the book is somewhat boring stuff about trying to make a computerized sailboat called Hyperion. Then he commissioned an even bigger boat, Athena. Now go check out Steve Jobs’ super-yacht that cost over $100 million: Venus. Shrug.
  • “If money is how your measure yourself, you’ll never have enough” is a recent quote that I came across, source unknown. But that’s pretty much Clark (and probably a lot of other billionaires to be fair). Before founding his first big company SGI, he said he just wanted $10 million. After becoming a multimillionaire, he wanted $100 million. After his Netscape shares hit $600 million, he wanted a billion. After the Healtheon IPO made him an after-tax billionaire, he wanted more than Larry Ellison ($13B at the time).
  • The book ends with Jim Clark starting another business called myCFO, which was supposed to cater to all those new internet millionaires and help them manage their money without having to go with one of those stuffy, established institutions like Merrill Lynch or Goldman Sachs. myCFO ended up being sold off for “only” $30 million, but I think it was a precursor to modern non-traditional advisors like Wealthfront which also specifically targets Silicon Valley engineers.
  • Jim Clark’s more recent ventures since the publishing of this book have much been less exciting. The only one I hard heard of is Shutterfly, and he was really only involved with the funding. It appears that now he’s just enjoying life with his big boats and family.

The Elements of Investing – Book Review (Updated Edition)

elements180

There are two major types of investing books for beginner investors: “Instructional to-do list” books basically tell you what you should do. “Inspirational big-picture” focus more on the philosophical reasons why you should do those things. Both can be equally important and useful.

The Elements of Investing: Easy Lessons for Every Investor by Burton G. Malkiel and Charles D. Ellis falls more into the former “list” category. Malkiel is a noted academic and wrote the classic bestseller A Random Walk Down Wall Street. Ellis is a former director of Vanguard Group and wrote the classic bestseller Winning the Loser’s Game.

Basically, two pillars of the investment world got together and tried to whittle down their 80 years of experience into 200 pages and roughly 2-3 hours of reading time. The pages aren’t even big, as the hardcover version is only 7 inches tall. You could read the entire thing in an afternoon or in snippets before going to bed within a week.

In opinion, they did a pretty good job. Topics are covered in a brief, straighforward manner. If you’ve read your share of personal finance material, none of it will be new to you, but they remain critically important. The key takeaways are clearly laid out and repeated over and over to drill them into your head. Things like:

  • Save regularly and never take on credit card debt (most important).
  • Utilize any available tax-advantaged plans like IRAs, 401ks, 403bs.
  • Keep a safe, liquid emergency fund.
  • Diversification, rebalancing, dollar-cost averaging, and low-cost indexing are the keys to investing success.

There are also a lot of little nuggets of wisdom in the book. My two favorite quotes:

The real purpose of saving is to empower you to keep your priorities—not to make you sacrifice. Your goal in saving is not to “squeeze orange juice from a turnip” or to make you feel deprived. Not at all! Your goal is to enable you to feel better and better about your life and the way you are living it by making your own best-for-you choices. Savings can give you an opportunity to take advantage of attractive future opportunities that are important to you.

As in so many human endeavors, the secrets to success are patience, persistence, and minimizing mistakes.

The updated 2013 edition of the book (original edition was 2009) includes some interesting (controversial?) suggestions for dealing with the current low-interest environment for bonds. Since the current yield for US Treasury bonds is so low, and thus the future expected return just as low, they offer up tax-exempt municipal bonds, emerging markets bonds, and even blue-chip dividend stocks.

It was sort of weird to be told “stay the course!” and then in the next chapter be told “here’s how to change course!”. I actually appreciate that they express their honest opinions, even if it appears to contradict passive-investing dogma. Jack Bogle himself does it from time to time. (I personally choose to hold muni bonds instead of US Treasuries as well.)

Bottom line: This investing primer would make a very good gift for a recent college graduate or young worker if they are ready to start getting serious about investing. If they aren’t, the book may be a bit dry. I will be adding it to my recommended books list, once I get around to updating it…

Amazon.com Coupon: 25% Off Any Book

dinnerlove

Updated, good until 12/14. Similar to their Black Friday promo, take an extra 25% off any book at Amazon.com with promo code BOOKDEAL25. Print books only, max $10 off, must by sold and shipped by Amazon.com. Valid until December 14, 2014 at 11:59pm PST.

Here are some recommendations for those looking to give or receive some financial inspiration:

Here are all my book reviews in reverse-chronological order.

I would have to say my favorite book of the year was Dinner A Love Story. It has some inspirational material to help you cook for yourself and your family, along with the best compilation of weeknight dinner recipes I’ve read in a cookbook. They taste special enough (not bland or boring), but they also take 30 minutes. I just used it again last night.

I bought the new Tony Robbins book MONEY Master the Game: 7 Simple Steps to Financial Freedom. I’m skeptical, but I think I have to read it. What other informercial guru could get book blurbs from Jack Bogle, Bill Clinton, Ray Dalio, and T. Boone Pickens?

Dinner: The Playbook Book Review – Preplanning is Critical For Success

dinnerplaybookWe hit consecutive 10 weeks of cooking at home x 5 times a week! (Now we’re going on vacation so the streak must end.) Some days are fun, some days you just want to get it on the table.

Since I liked the first book by Jenny Rosenstrach so much, I also bought her second book Dinner: The Playbook – A 30-Day Plan for Mastering the Art of the Family Meal. While the first book was more autobiographical, this one is more focused on what you need to make home-cooked dinners happen. First, you need the right recipes:

I can’t stress this enough: You will cook more regularly if you choose simple recipes. By choosing simple recipes, you will get dinner on the table more efficiently and you will not end up with a pile of dirty dishes that makes you want to chug a bottle of beta-blockers. By minimizing the prep work and the cleanup (and the beta-blockers), you will be far more likely to do it again the next night. And that is the goal. Sustainable routines. Pleasant tableside experiences. Success. Which for our purposes right now will be defined as “a fifteen-minute period of time during which food is consumed without drama.” In short: The best home cooks choose the easiest recipes.

The book contains over 80 such recipes. But even with a dead-simple recipe, if I am faced with another trip to the grocery store after work, I’m going straight to the frozen lasagna (or worse, my kid’s chicken nugget stash!). You’ll also need to incorporate some structure and pre-planning for success.

The best tip that I learned from Jenny Rosenstrach’s books was to plan every week’s dinner out in advance. I plan for 5 nights cooking, 1 dinner-from-a-box (frozen dumplings, lasagna, premade burritos, etc.), and one dining out each week. Every Saturday night or Sunday morning, I pick out 5 recipes that I want to try. (Usually three come from a Rosenstrach book or blog!) I scan the recipes and (1) make sure that it really is doable with my limited culinary skills and (2) note what ingredients I need. Once you get better, you can pick the ones that share ingredients to save money, but I wouldn’t worry about that in the beginning. Just pick whatever sounds both tasty and easy.

My older kid wakes up at 6 am every single day, so on Sunday morning at 7am we hit the grocery store and Farmer’s market (in the same complex, sweet!). The world is still quiet, the man at the farmer’s market stand with the good salad mix always gives her a free banana, and I never have to go decide if I want to go to the store at 6pm on a Wednesday just for one ingredient.

Why is this important? See my flowchart. If you get arrive home from work and you don’t have all the raw materials in front of you and a plan to make into a meal, you will fail. Remove all roadblocks! Fail to plan, and you plan to fail! Insert other cliche here!

In addition, try to do whatever prep work you can each morning. My thing is just to double-check that I have all the ingredients, like making sure the spice containers aren’t nearly empty or the herbs aren’t yellow or rotten.

Finally, you need a 30-day challenge to get you going. By committing to 30 days and 30 dinners, you will hopefully be able to break out of your current rut and have enough momentum to make homemade dinners a regular habit. I suggest taking her option of backing this off to 20 dinners in a month, making each week 5 days on and 2 days off.

Bottom line: Good book, similar ideas to first book but less about her and more clear on purpose. I bought it mostly for the additional simple recipes. Cooking at home saves us so much money each month, this book easily pays for itself.

Dinner: A Love Story Book Review – An Ode to Family Dinners

dinnerlove

Every since completing the Dinner Boot Camp over 8 weeks ago, we have cooked dinner at home at least 5 times every single week (heating up frozen lasagna doesn’t count). Two months! That has never happened before… The weeklong boot camp (see if still online) was done by Jenny Rosenstrach to promote her new book, but I always like starting at the beginning so I read her first book Dinner: A Love Story: It all begins at the family table. Both books were inspired by her popular blog at DinnerALoveStory.com.

The book itself is probably 50% non-fiction story about her journey and 50% recipes. The author felt strongly about the importance of family dinners and kept a journal of every single dinner she cooked for several years. I think the two excerpts below do a good job of encapsulating her views.

It’s for mothers and fathers—working, staying home, single, divorced, any kind—who crave more quality time with their children and have a sneaking suspicion that the answer may lie in the ritual of family dinner, in the ritual of sitting down together at the end of the day to slow down and listen to each other. [...]

…no matter how different and harried family dinner looked during this new baby phase of our lives, it still served its main purpose: It was our day’s deadline. Even when we were in a house in the suburbs with two kids under two and the evening hours between six o’clock and eight thirty felt like we were trapped in a high-speed game of playground dodge-ball, even when the girls got a little older and we’d try and fail and try and fail to get them to eat the same dinner as us at the same time, even though each of us would have our share of late nights at the office, and even though we’d regress to our frozen veggie burger nights more often than I care to admit, the ritual of sitting down together at the end of the day remained our default mode, our time to be together. And a decade later, dinner has happened regularly enough for me to feel I’ve stayed true to my vow.

It helped that we identified with her situation as we also have two kids under two and often felt like the time between 6 and 8 pm every night was like running the last few miles of a marathon. Most recipes in the book are for a family of four. However, having two tiny ones meant we were really just cooking for two adults. So the book works equally well for couples without kids (if you don’t mind eating leftovers for lunch).

Throughout the book, you can definitely tell that she has professional experience as a magazine writer and editor. The writing is approachable and she uses a friendly, self-deprecating tone that doesn’t scare you off.

The best part about her recipes also comes from her editing skill. These are recipes explicitly honed for the tired, busy, working home cook. The recipes avoid being one-dimensional with simple ingredients like vinegar to make it salty and acidic, or honey to make things sweet and salty. There will usually be a texture component (crunchy, crusty, chewy) and at least one fresh herb. There are no added ingredients just for showing off, but if you leave something out you’ll miss it. As Albert Einstein is credited with saying:

Everything should be made as simple as possible, but not simpler.

There are many recipes in the book that are not on the blog. These are recipes from this book that I actually made and I could find links for. Of course some recipes we liked better than others, but that is mostly due to personal taste and none of them were bombs.

Bottom line: If you can’t spend all day in the kitchen but the idea of making minimally-processed meals appeals to you, this book includes both a nice personal story and many practical recipes for quick after-work meals. Recipe books are often about style, and I really connected with her style and taste. I would say at least half my cooking for the last 8 weeks has come from this book or the blog. If this speaks to you, I encourage you to try out the Dinner Boot Camp or the sample recipes above.

The Big Flavor Grill Cookbook: No Marinade, No Hassle Recipes (Book Review)

bigflavorbookAnother thing I’ve been getting into this summer is grilling over 100% natural hardwood charcoal. My gateway drug was Alton Brown’s Steak on Coals recipe. The smell and flavor brings me back to my childhood, even though technically that was a pile of Kingsford with tons of lighter fluid…

So I agreed to a free review copy of a new cookbook called The Big-Flavor Grill: No-Marinade, No-Hassle Recipes, written by chef Chris Schlesinger and Cook’s Illustrated executive editor John Willoughby.

The basic premise of this book is to save you time and energy by avoiding marinades, brines, or complicated sauces. Instead, while your grill is heating up you smear on a pre-rub, and after the food is cooked you add on a flavorful sauce. You do all the prep in the 30 minutes or so that it takes your charcoal to heat up (preferably with a cheap chimney starter to avoid lighter fluid). Here are some sample recipe names, unfortunately I couldn’t find a sample full recipe online:

  • Five-Spice Steak Tips with Grilled Pineapple and Sweet-Sour Sauce
  • Coriander-Crusted Pork Skewers with Maple-Mustard Barbecue Sauce
  • Chicken Breasts with Maple-Soy Glaze and Peanut-Ginger Relish
  • Spicy Curry-Rubbed Lamb Kebabs with Grilled Peaches
  • Cumin Seed–Crusted Shrimp with Charred Corn Vinaigrette
  • Fish Steaks with Sriracha-Basil Butter

Did the pre-rub + sauce work? Well, yes and no. I didn’t have to marinate or brine. The food tasted good. Can some citrus and herbs brighten things up easily in a pinch? Yes. But I still had to make a special trip to the store to get all the ingredients for my exotic sauces, so that took time. Marinating is basically just doing the same amount of work ahead of time and letting it sit there overnight. Yes, planning ahead is harder but so is shopping for all those ingredients. Is that extra convenience worth the decrease in taste, tenderness, or juiciness from no marinating or brining? I’m not sure.

I found the true benefit of this book is that it reminded me that simple grilled food is great all by itself. For every section, they have something called “Super-Basic” XXX, where XXX is everything from steak to shrimp to corn to cherry tomatoes. And you know what? I liked the grilled shrimp straight-up off the grill more than the shrimp plus ginger/lime/sesame sauce because the sauce made everything a bit soggy. Grilled blistered tomatoes, grilled mushrooms, grilled asparagus… all great with just some olive oil and salt. Grilled peaches, grilled avocados, smokey and awesome right off the grill. I guess I’m a simple guy.

The cookbook itself looks great in hardcover, with good photography inside and the pages are thick and feel high quality. It would make a good gift for the busy grilling enthusiast. I don’t think it’ll be a timeless classic, but I will definitely keep this book around for the Super Basic XXX recipes to provide inspiration on Friday nights when I am short on time and want to cook outdoors.

In the end, just grill baby! It feels special but costs very little extra. I use a simple $30 Weber Smokey Joe grill and real charcoal can be surprisingly cheap too. After reading Omnivore’s Dilemmna by Pollan I think cooking from scratch at home is overall better for both my wallet and health.

I received a review copy of this book for free from Blogging for Books. If you are a blogger, check them out for some free review books in your niche.

Book Review: Wide-Eyed Wanderers by Richard and Amanda Ligato

wideeyedbookA couple of weeks ago I wrote about the non-traditional retirement story of Richard and Amanda Ligato, which was highlighted in a Nationwide Insurance commercial. Usually TV commercials are too busy convincing you to buy buy buy, so the idea that people who saved half their incomes were shown was amusing.

I ended up buying a copy of their book Wide-Eyed Wanderers: A Befuddling Journey from the Rat Race to the Roads of Latin America & Africa* which covers their journey through Mexico, South America, and Africa. For simplicity and frugality, they bought a 1978 Volkswagen camper-van and basically lived in it the entire trip, driving to all of their destinations (besides being shipped from Panama to Ecuador, and then Chile to South Africa). They cooked their own meals and slept nearly every night in the van.

The Ligato’s are one feisty couple. There are multiple stories about them being shaken down by police officers, customs officials, and other government workers for bribes and how they refused to pay any of them. (I think it helped that Amanda is a native speaker of Spanish.) In another incident, they actually tackled a woman who was trying to pickpocket them and ended up arrested in an Argentinian police station (they were eventually released). They weren’t as lucky when they reached the bottom of South American and tried to talk their way into a cheap ticket to Antarctica, as they ultimately had to give up as the price was too high.

Me being me, I wanted to learn more about the economics of how they saved, planned, and budgeted for their journey. Unfortunately, they really don’t cover this in the book. The topic is only mentioned briefly when they have to hang out with what you might call the “average American traveler”. For example, on the Inca Trail in Peru, they wrote about how a fellow hiker realized that the Ligatos had spent as much on their last 15 weeks coming through Mexico and into South America as she alone had spent on her 2-week packaged tour.

For the most part, the book consists of journal entries, each from a different town or city. The stories were nice, although as a whole I wouldn’t say the book was exceptionally funny (although there are light moments) or enthralling (although there are some exciting moments). What I’m trying to say is that they aren’t professional writers and you shouldn’t expect the humor of Bill Bryson or the romanticism of Peter Mayle. This is just a true journal of real people who had a life-changing journey that most people can only dream about.

I highlighted this quote from Rich Ligato, expressed while watching a ceremony to remember the dead in Patzcuaro, Mexico:

If I were to die now would I go without regret? Have I really lived? Unlike many of those who created these ancient traditions, I’ve been given the free will to choose my path. Have I?

If are reading this, it is likely that you have more freedom in your life than most. Books like this remind me to ask myself: Are you consciously living or just passively getting by?

* I bought a physical copy, but this title should also be included for free if you are part of the Kindle Owner’s Lending Library or Kindle Unlimited. It is self-published which is probably why I couldn’t find it at my library, but you could still check.

Kindle Unlimited Review: Personal Finance and Investing Books

kindleu2Amazon has just announced Amazon Unlimited, an eBook and audiobook subscription service that costs $9.99 a month (30-day free trial) and not included in Amazon Prime. They claim over 600,000 titles in their library, although that number is padded by a lot of little-known self-published eBooks. “Thousands” of those books come with free audiobook versions. You can read unlimited books (max 10 out at once) and on any Kindle app (Windows, Mac, web browser, iPhone/iPad, Android, etc).

It’s a library card with 24/7 instant availability, but how well-stocked is this virtual library?

My personal reading habits include mainly business, personal improvement, and finance books. I compiled a list of notable books that I have read or want to read first, and then checked if Amazon Unlimited had it. I’m also including the findings from my Oyster review (a competing eBook app) for comparison purposes.

Book Oyster.com Amazon Unlimited
William Bernstein’s Recommended Reading List for Young Investors
The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas Stanley and William Danko. Yes No
Common Sense on Mutual Funds by Jack Bogle. Yes No
Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor. No No
The Great Depression: A Diary by Benjamin Roth. Yes No
Your Money and Your Brain by Jason Zweig. Yes No
How a Second Grader Beats Wall Street by Allan Roth. Yes No
All About Asset Allocation by Rick Ferri. No No
5 Recent Bestsellers
Flash Boys: A Wall Street Revolt by Michael Lewis. No Yes
Pound Foolish: Exposing the Dark Side of the Personal Finance Industry by Helaine Olen. No No
Think Like a Freak: The Authors of Freakonomics Offer to Retrain Your Brain by Steven Levitt and Stephen Dubner. No No
Capital in the Twenty-First Century by Thomas Piketty. No Yes
Thinking, Fast and Slow by Daniel Kahneman. No No
5 Personal Favorite Financial Books
Your Money or Your Life by Vicki Robin and Joe Dominguez. No No
Work Less, Live More: The Way to Semi-Retirement by Robert Clyatt. Yes No
The Richest Man in Babylon by George S. Clason. No No
The Four Pillars of Investing by William Bernstein. No No
A Random Walk Down Wall Street by Burton G. Malkiel. No No

 
* Oyster catalog checked June 2014 and Amazon Unlimited checked July 2014.

Recap

In the “major publisher, popular, well-reviewed” category, Oyster wins hands-down. AmazonUnlimited reportedly does not have any of the major “Big 5″ publishers (they are not BFFs right now). In the “recent business bestseller” category, neither is great but Amazon actually has a slightly better showing. Many of Michael Lewis’s other books are also on AmazonUnlimited (The Big Short, Liar’s Poker, The Blind Side). In the “niche DIY early retirement personal finance nerd” category, again neither does great although Oyster technically wins by a nose.

Bottom line: Amazon Unlimited has a relatively limited catalog for personal finance enthusiasts.

Keep in mind that the Amazon Kindle Owner’s Lending Library still exists (at least for now) and boasts 500,000+ titles (again padded by self-published eBooks). The Kindle Lending Library is free if you already have both a Kindle (any model) and an Amazon Prime subscription. You can only read on a Kindle device though, and you only get one title per month.

There are some promising titles available if you dig around, for example I noticed that William Bernstein’s “Investing for Adults” series of books (The Ages of the Investor, Skating Where the Puck Was, Deep Risk, and Rational Expectations so far) are all available with both Kindle Unlimited and Kindle Lending Library.

Personally, I might sign-up for the free trial and read whatever books I can during that window and maybe it’ll spill over for a month (though you can cancel now and still enjoy you free month without worry of auto-bill), but I can’t see myself paying $120 a year for a limited selection of books (that interest me) that I can’t keep forever.

Book Review: Young Entrepreneur’s Guide to Starting and Running a Business

youngentI believe that entrepreneurialism is, like many things, a combination of talent and learned skill. Some people will take to it naturally, but a great many more can become successful and independent business people with the proper inspiration and guidance. I plan to help and encourage my daughters to set up their own micro-businesses once they are teenagers, whether it is coding apps or starting a booth at the farmer’s market. Some things you can’t learn from a book.

Oh wait, this a book review! Anyhow, since I love the idea of young folks starting businesses I took the opportunity to review a copy of the revised 3rd edition of The Young Entrepreneur’s Guide to Starting and Running a Business by Steve Mariotti. (I received a free review copy of this book from the publisher, as apparently did most of the Amazon reviewers. If you are a blogger, check out Blogging for Books for review books in your area of interest.)

This is a rather thick paperback at nearly 500 pages, and it uses that space to try to be a little of everything:

  • A reference book, covering everything from basic accounting and balance sheets to legal structures (corporation vs. sole proprietorship vs. LLC) to franchising.
  • An easy-to-read guide for beginners, which means that the treatment of all the above topics is concise and simplified (and thus not very thorough or detailed).
  • A collection of inspirational case studies from the non-profit group Network for Teaching Entrepreneurship (NFTE), which the author founded. You’ll read about many young folks who started their own business in various fields and most of them plan to continue working on them through college and beyond. Sample businesses include website design, party DJ, landscaping, sport or fashion apparel, and Honest Tea.

In the end, like many things that try to be all things to all people, it ends up not being great at any one single thing. It is somewhat all over the place. The book spends time telling you to save money by plugging in your computer and printer into a smart power strip to reduce “vampire” draw. A bit later, it wants to help you prepare for franchising and an IPO. Huh?

Personally, I would tell a young reader to just read all the “An Entrepreneur Like You” case studies first, and see if they have the fire to just go ahead and try to get that first customer. Then, after some successes and failures, they can use this book as a resource to answer any specific questions. How many young people want to read about OSHA regulations or double-entry bookkeeping before making their first dollar?!

For me, I did enjoy reading the case studies but for the other stuff I’d probably just look up on the internet as needed. I might read the marketing section again. All in all, this might make a nice gift for a recent graduate or young person that has shown some entrepreneurial spirit.

Book Review: The Four Pillars of Investing

Update: Yanking this one from waaaay back in the archives! Today (6/4) only, the Kindle eBook version of The Four Pillars of Investing is only $1.99. I read this book nearly 10 years ago, and I still have my hardcover copy sitting on my bookshelf. One of my favorites.

My original review published on December 26, 2004:

4pbookWhile A Random Walk Down Wall Street was more of a primer on investing in general, The Four Pillars of Investing by William Bernstein focuses on forming your portfolio. The four pillars are investment theory, history, psychology, and finally investment business.

The book uses statistics and research to support it’s conclusions, which are (briefly and in my opinion) that:

  1. Markets go up and down, but timing it is hard if not impossible, and any success one may have is basically luck.
  2. As risk increases, so does the return. (Ex. Small-cap stocks vs. Large-cap stocks.)
  3. Yes, many actively-managed mutuals fund beat the market every year, but there is no way that you could pick them ahead of time. This year’s winners are just as likely to be next year’s losers. Stick with index funds with the risk-return profile that you desire.
  4. Brokerage firms and stock brokers make their money on commissions and spreads. Most mutual fund companies are similar in that they make their money from fees, without actually being very good at market-beating returns.
  5. Proper diversification in low-expense ratio products can bring you the best chance to keep your money and make it grow.

The book is pretty easy to read, with minimal math. I also briefly browsed Bernstein’s previous book, The Intelligent Asset Allocator, which has a similar focus but is very heavy in the math department. I’d read this book first and see if you thirst for the mathematical underpinnings. I didn’t.