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Review: Investing in Brazil Stocks by Fred Fuld III

Investing in Brazil Stocks by Fred Fuld IIII don’t know Fred Fuld too well, though we’ve swapped a handful of emails, but I suspect he’s a no nonsense, get to the point, don’t waste your time kind of guy. I suspect this because his book, Investing in Brazil Stocks, is a no nonsense, get to the point, don’t waste your time kind of book. If you want to learn about the major companies of the major industries in Brazil and you had only one hour to do it, this is your book.

The book is organized in a very straightforward manner. The book begins with a discussion of the importance of international markets, of BRIC (Brazil, Russia, India, China), and the rapid growth of industries in those countries. The book then makes a bit of an entertaining digression to discuss a fund Fred created called the Gisele Bündchen index (he has created several of these and the Gisele Bündchen index was featured in Money). The Gisele Bündchen index increased 29% last year (Dow increased 6.5%) and is down only 1.9% this year (Dow fell 5.6%). From there, Fred jumps into the major industries of Brazil in this order:

  • Chemical, Energy & Mining
  • Bank & Real Estate
  • Telecom
  • Food
  • Utility & Forestry
  • Airline

In each industry, Fred outlines a handful of companies in pretty solid detail. For each there is a brief profile, history, recent news, sometimes some trivia and discussion of their financials. Some of the trivia is entertaining to read as well such as Petrobras Energia Participaciones, a leading Brazilian oil company commonly called Petrobras, having some product placement in the yet-to-be-successful Speed Racer movie (that’s polite for ‘it bombed’).

If you are looking to get a comprehensive overview of the major Brazilian industries and their major players, you’ll be hard pressed to find a better starting point than this book. I recognize that’s a very specific need, one that I really didn’t have (but the prospect of a book on Brazilian stocks did interest the trivia side of my brain), but investing internationally is where the investment money will be made in the next hundred years so you might as well start learning now or be relegated to the dinosaurs.

The second edition will be coming out in the Fall.


 Reviews 
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Review: High School Money Book by Don Silver

High School Money Book by Don SilverMany folks in the personal finance community, both bloggers and mainstream media writers alike, have complained that our high schools should be teaching personal finance along with home economics and shop class. High school students aren’t being educated on the intricacies of dealing with credit cards and their fifty page T&C’s or preparing their taxes or even the fundamentals of saving. Well, Don Silver probably heard those calls and, through Adams-Hall Publishing, put together a book called High School Money Book.

The book itself is quite basic but comprehensive in its coverage of personal finance topics. While it’s targeting high school students, it really applies to anyone who is clueless about the breadth of personal finance topics. It discusses things on how to be frugal, handling debt and credit, being philanthropic, preparing for college, banking, paying bills, etc. It’s more a breadth type of book than a depth type of book. By this I mean it covers a lot of topics at a shallow level without going deeply into any of them. While it has been many years since I was in high school, I think this book hits the mark by educating the reader to the keywords they need to know and the processes they need to become familiar with once they start handling money on their own.

The only concern I have is whether high school students care, which is outside the scope of the book, and whether they’d sit down and read it in book form. With as much information as there is on the internet and the younger generation’s savviness with it, I would think anyone proactive enough to want to read something like this would go directly to the internet; those who are less proactive will probably skip it.

Either way, at a little over 150 pages, it’s a good brief primer on personal finance for anyone.


 Investing, Reviews 
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Review: Beating the Market by Gerald Appel, Marvin Appel

Beating the Market by Gerald and Marvin AppelWhen I was first approached to review the book titled Beating the Market, 3 Months at a Time, I thought I was looking at one of those “invest in this hot new sector, you’ll be rich in three months.” Then I saw that the publisher was Financial Times Press and that allayed my concerns some more, FT Press isn’t going to put out some day-trading, hawkerish type book and, this is something I learned later, neither of the authors are your BS snake-oil salesmen types.

The book isn’t about day-trading, though Gerald Appel is well known for his technical analysis and marketing timing (Gerald Appel created the Moving Average Convergence / Divergence technical indicator), but about active investing and how it can yield higher returns than “buy and hold” strategies. By active investing, they mean that you can use their strategy to review your portfolio once ever three months (rather than the often advised once a year rebalancing act). So, through active investing and a one hour review every three months, you can beat the market with their proven investing plan. That’s the promise they’re making.

Basic Investing Education

Beating the Market begins by educating the reader on how to put together an investment portfolio, what your goals should be, how you should approach it, and is generally a good primer on investing in general. For example, it’s important to note that you want to get a rate of return greater than the risk-free investments you have available to you. I could put my funds in an E*Trade Online Savings account and get 3.15% risk-free, so my investments have to beat that. (usually the benchmark is money market funds and 90-day T-bills) Another goal is to manage the risk of your investments, something individual investors are notoriously bad at. Emerging markets are always hot and can return big double digit returns, but they can also lose big doubt digits… are you getting enough return for the risk you’re taking?

It Gets Complicated, Quickly

After the eight page primer on putting together a winning investment portfolio, the books slices right into diversification and risk management. I don’t want to recap the entire book but the topics it covers run the gamut from discussing ETFs and emerging markets, to the purpose of bonds in your portfolio, to special bond market investments, and end with discussions of retirement, planning for the political impacts, and an appendix chock full of resources. There is even a chapter called the Definitive Portfolio in which they build out a well diversified example portfolio with a mix of two types of bonds, two types of ETFs, and one overseas component.

The Investing Plan

So what’s this plan I spoke of earlier? The plan is the whole book. By understanding all the pieces of your portfolio (including risks, investment profiles, and all the nitty gritty described in each chapter) and how diversification works to reduce your risk, you can actively participate in the management of your portfolio without having to pay a manager 1-2% of your investments. That’s what active means in their plan, not day trading.

There’s a lot of information in this book and it’s definitely one I will be reading more closely over the next few weeks. There are discussions about high yield “junk” bonds and about the international markets that I glossed over, two things I know very little about, so if you have it at the library or bookstore (I tend to borrow all my books from the library) I wholeheartedly recommend that you pick it up.


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Review: Financial IQ by Robert Kiyosaki

Financial IQ by Robert KiyosakiI think Financial IQ by Robert Kiyosaki is a good “big financial picture” book that can help some re-frame the way they think about money and the impact money has on their lives. He talks about various Financial IQs and how the rules of money has changed, all of which are important ideas to think about. I’m not saying he’s right, but he certainly raises questions that require additional investigation. I don’t think you should take anyone’s opinions, and that’s what a book like this is really about, as pure gospel without reviewing the details for yourself. For an example of this, let’s take a look at one of the rules that have changed, according to Kiyosaki.

Gold Standard

Kiyosaki repeatedly states that the rules of money changed in 1971. 1971 was the year that President Nixon took the United States off the gold standard. Kiyosaki goes on to explain how that turned our dollars from “money” to “currency,” and how all currencies will eventually move towards being worthless. Besides being a little inflammatory and doomsday-ish, the point is somewhat valid as the concept of inflation is just that – our money is worth less and less each year. Is this true?

If every nation’s money is pegged to gold, what you have are pieces of paper worth exchangeable for different amounts of gold. If you have that, then exchange rates are all fixed and there is no inflation. What ends up happening is that instead of inflation handling the differing growth rates in countries, you would have a shifting of gold reserves. If a country’s gold reserves go down, then you end up deflating and have to pay people less and then they can’t pay their debts and all sorts of bad things happen (at least according to this interesting article by Peter Bernstein. So… while inflation seems bad, it’s not as bad as deflation. So, the lesson of the day is to trust but verify. :)

Financial IQ’s

The five basic financial IQs are:

  1. Making more money.
  2. Protecting your money.
  3. Budgeting your money.
  4. Leveraging your money.
  5. Improving your financial information.

The importance of these financial IQs is that these are the five areas you need to educate yourself on about money, having a high IQ in one area does not mean you have a high IQ in any of the others. Just because you’re good at making money doesn’t mean you’re good at protecting it or leveraging it. I think we can all agree with that but we’d also agree that this is hardly groundbreaking information. Let’s take a look at the first Financial IQ: Making more money.

IQ #1. Make more money!

The key to making more money is learning from your mistakes and solving your problems. Kiyosaki begins this chapter with stories of his younger years as he left a lucrative job as a third mate on an oil tanker to enlist in the Marines for Vietnam, then opting to become a Xerox salesman rather than return the oil business so that he could pursue the path of entrepreneurship. He goes on to explain the rest of his successes and failures with the point being that you have to learn from your mistakes in order to find the right path for you. (there’s also a little bit of Seth Godin’s The Dip in there, where you don’t settle for your local maximum)

Many of the other chapters are like this, very high level, and it’s something that JD of Get Rich Slowly complained about in our chat the other day. The problem with being at such a high level is that it requires the reader to bring it down to the street level, where you take those ideas and act on them. If I remember correctly, JD wasn’t a big fan of that because sometimes we need actionable advice and this book just doesn’t deliver on it.

I have a different take, I appreciate the high level look and brain stimulation. I never thought about the impact of coming off the gold standard (I am only 27) and some of the other viewpoints brought on by Kiyosaki and so I welcome the ideas he’s pushing. Some of them aren’t too groundbreaking, but some of them do intrigue me.

If you’re looking for or need a step by step guide or something like that, I don’t think you’ll like this book very much. If you are looking for something high level, I think this one may stir up your brain a little and get those juices flowing.


 Retirement, Reviews 
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Review: Cash-Rich Retirement by Jim Schlagheck

Cash-Rich Retirement by Jim SchlagheckCash-Rich Retirement by Jim Schlagheck, seen on public television’s Retirement Revolution, seeks to turn the retirement advice community on its head by taking “the investing techniques of the mega-wealth” and bringing it to the masses. It’s quite a bold statement to make, since we all know the mega-rich are afforded a much different set of rules than the rest of us, so we’ll see if Mr. Schlagheck can deliver.

The dust jacket says that Schlagheck’s advice “breaks with conventional advice that tells the public to invest mightily in stocks, flip holdings, and seek capital gains.” I’m not sure that the conventional advice says you should be actively trading stocks, but then again personal finance bloggers live in a world where we are exposed to the sage advice of Buffett and Bogle, two accomplished investors who actively advocate index funds for the masses. However, even if you accept the belief that the conventional advice is flipping stocks, Schlagheck advocates investing for “prudent income… Build a ‘life-cycle’ annuity package for lifetime retirement income. Focus on dividend-, interest-, and rent-producing investments and insurance.” If your alarms went off when you red “life-cycle” annuity package, you weren’t alone – mine went crazy. Annuities are actually one of the “six straight-shooting, show-me-the-money steps” in the Cash-Rich Retirement plan. We can see what Schlagheck means when we get to them.

The six steps are:

  • Change your “automatic pilot”
  • Diversify your holdings in radically different ways
  • Build out your investment plan with funds and objective research
  • Get all the professional help you can
  • Build income streams with a ladder of annuities
  • Invest in long-term health care insurance

Setting the stage

The book begins by discussing retirement and how the rules of the game have changed. Schlagheck has a very straight forward and easy to understand writing style and the book is organized in a way that makes it very easy to follow. He makes excellent points about how the retirement is changing, given the changing demographics, solvency of Social Security, and a whole collection of other issues. It really does drive the point home that the old rules of retirement are changing (because they are!).

Let’s see these six steps…

Change your “automatic pilot”

Schlagheck’s term of “automatic pilot” refers to the fact that you concept of “saving for retirement” is investing for speculative gains. It means taking stocks in your Roth and going after high flyers, it means pushing your 401(k) contributions into microcaps or other more risky investments, and he argues that you need to rewire the way you think and act differently. Less like a slot-machine player and more like a saver and cautious investor. Mostly, he’s saying you need to take your retirement seriously right now. What does he recommend you do?

  • Save at least 20% pre-tax income
  • Hold savings in tax-sheltered accounts (401k, 403b, etc.)
  • Automate saving (think, Automatic Millionaire)
  • Don’t chase speculative gains

So far, nothing super incredible or only within the realm of the super-rich. It’s just straight up, smart personal finance advice that’s been repeated before, though it does have some eye-opening statistics not often included in other books.

Radically diversify your holdings

This chapter focuses on how your asset allocation is probably off, though it focuses on many of the simple mistakes people may make such as investing too much in company stock or being too risky in allotments. He advocates investing in things that provide cash flow. That includes dividend stocks, interest bearing accounts or investments, and “rent” producing REITS or rental properties. This is probably where the “Cash-Rich” in the title comes from. Another category he says you should increase in is international exposure, an idea that probably would’ve netted you quite a tidy sum had you implemented several years ago.

From here, this book has some nice ideas but nothing that’s radically new or unheard of. Since the annuity chapter sounded some alarms, let us skip to that chapter.

Build income with annuities

Annuities are like timeshares, they’re not inherently bad, they were just pitched by inherently bad people. The book makes an excellent case for annuities and one that I buy into, though, as they say, the devil is in the details. Annuities provide protection against longevity risk, which is the risk that you’ll outlive your retirement savings, by providing a guaranteed constant income stream and Schlagheck recommends using them after everything else (401k, Roth). I believe that to be prudent advice.

Schlagheck explains annuities, how they are structured, the four main types, the benefits, drawbacks, etc. If you want a primer on annuities, Schlagheck has a good one in his book. He warns about the costs of an annuity, which are 2.3% average, and says that there are many excellent ones at a fraction of the cost.

So what’s this life cycle strategy? The idea is that you want to ladder your annuities so that you get different amounts of income at different points of your retirement. His example has three annuities, each paying out for three different time periods. The first pays out income for 9 years from age 65 to 74, #2 pays out for 9 years from 75 to 84, and #3 pays out from 85 and onward. I’m afraid the details are outside my capability to detail with much clarity so you’ll have to check out the book if you want to know how their structured. He also provides a lot of explanation that I think is crucial for understanding how to ladder annuities, such as tax implications, purchase tactics, etc.

Overall Impressions

Overall, I felt Schlagheck did a good job explaining his cash-rich retirement plan, even though I skipped a few of them in this review, though nothing seemed exclusive to the mega-wealthy. Granted, the ability for most retirees to invest in rental properties is slim (but not unheard of) but investing in dividend stocks, buying annuities, and many of the other suggestions are not anything special. His explanation of annuities, for someone who knows little about them or the fact that laddering them would be a good technique, was comprehensive and easy to understand. If you have the basics of retirement down and are looking to learn more, I think getting this book, either at the bookstore or your local library, would be a great first step.


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The Prosperous Peasant: Five Secrets of Fortune & Fullfillment Review

The Prosperous Peasant by Tim ClarkMy first impressions of The Prosperous Peasant were that it’s written in very much the same manner as The Richest Man in Babylon, just set in Samurai-era Japan and with slightly different lessons. The story follows two friends, Jiro and Gonsuke, as they seek to find enlightenment from the renowned Samurai, Hideyoshi. All in all, I thoroughly enjoyed the book.

JD gives a great review of the details of the book, explaining the five secrets, so I’ll pass in that department and share only my opinion of the book as a whole. I really enjoyed it because it told a colorful story while weaving in important principles everyone would do well to understand. JD complains about the book starting slowly, which I agree that it does, and gets a little confusing with all the Japanese terms, which I also agree that it does, but I feel all of those help establish the environment in which the story will be told.

I have yet to ask my wife to take a look at this book but I suspect those who are a fan of fiction would find this book far more appealing than any book written by a personal finance expert. Those books, while perfect for people who want hard numbers, analysis, and pretty graphs; turn most “regular” people off because they’re boring and dry. I feel that this book, and the Richest Man in Babylon, try to marry the entertaining fiction and the valuable prosperity lessons into a book that will appeal to a different class of reader.

Lastly, I believe this style of writing is the only way to convey some of the softer lessons in life in a way that’s engaging and interesting. You’d be hard-pressed to come up with numbers to back up a lesson like “Gratitude attracts luck,” but you can tell a story that does so. It would be difficult to prove, and it would be completely boring to read, how “Conceivable means achievable,” but a fictional narrative handles it quite well.

So, if you’re a number cruncher type, you’ll want to pass on this book. If you’re more into a fictional narrative where you aren’t assaulted by tons of figures and numbers, you may find this book right up your alley.


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Review: Rich by Thirty: A Young Adult’s Guide to Financial Success

Rich by Thirty A Young Adults Guide to Financial SuccessLesley Scorgie appeared on Oprah Winfrey when she was 17, a show entitled “Ordinary People, Extraordinary Wealth,” and ever since she’s had a string of television and media appearances because she seems to have a knack to grow her own personal finances and well on her way to being rich by thirty. Now, author of a book titled “Rich by Thirty: A Young Adult’s Guide to Financial Success,” I’ve had the opportunity to read it and hopefully be able to set up an interview with her in the near future.

Rich by Thirty is perfect for the early twenty crowd. If you recently graduated college, just got your first paycheck, or are about to sign the lease on a new apartment; you’re the target audience for this book. If you’re a little older but at this stage financially (maybe you went to graduate school? maybe you made some poor financial decisions?), this is a great book for you because it puts down on paper everything people are forced to learn (and pay for) in the real world on their own.

This isn’t a book about a kid who struck it rich by coming up with a series of great internet ideas (that’s Cameron Johnson) or a guy who exemplified frugality until he was able to strike it rich in the real estate boom (that’s Alan Corey), this is a story about fiscal responsibility, investing acumen, and just being smart with your money from someone who came from a middle-class family in Canada.

I enjoyed the book because it was very direct, understandable, and didn’t use these huge long rambling allegories to get her point across. The book is broken up into logical sections like Get Started (it’s about budgeting), Get Out from Under (how to handle credit and debt), Get Saving (umm… it’s about saving), and two sections on investing. In each, she uses a quick example (“Meet Joey, a Pisces from Georgia who likes long walks on the beach…”) and then jumps right into an explanation that is both clear and appropriate.

I think this book makes a great graduation gift if you’re trying to think of a gift for someone this summer and at a mere $12.95 it’s a pretty good deal. I don’t often recommend that someone buy the book (borrowing it from the library is usually good enough) but since I think this is good information for a college graduate, it makes an ideal gift. Now, getting them to read it is another thing (though the sections are in nice bite-sized pieces so the short-attention-span crowd will be able to digest it).


 Frugal Living 
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Understand the Five Love Languages

Valentine’s Day is tomorrow and it’s a day when many men and women will spend hundreds or thousands of dollars on gifts, activities, and other acts of lavishness in the name of love and affection. If you’re one of the many procrastinators out there, you probably will pick your gift today. However, have you ever considered that the object of your affection has no interest in objects whatsoever? Have you considered that he or she may actually prefer quality time over a trinket? What I’m talking about is a concept known as love languages and one that my friend Fred (who writes at a home improvement blog called One Project Closer) mentioned to me today. The concept of Five Love Languages was popularized by one Dr. Chapman and you can discover your love language in a mere thirty seconds (it’s actually far quicker).

So, why am I writing about this? So many people erroneously think that gifts are the way to a person’s heart, by this I really mean mostly men (but some women). A lot of guys think that if they spend a lot of money then they can get away with something last minute that requires very little thought. I know a friend who, when he thought his girlfriend would be upset, just ran off and bought a bathrobe and some perfume for her (I have no idea if it worked but it did cost him $60). For some people, that works. For others, it’s never going to work. Understanding the love languages is crucial to ensuring that you’re spending money and effort in a way that the recipient will fully appreciate and react favorably to.

Now, back to the five love languages. They are:

  • Words of Affirmation – People who speak this language respond most favorably to words of encouragement, compliments, and other acts of verbal kindness.
  • Quality Time – People who speak this language respond most favorably to spending quality time with their loved ones.
  • Receiving Gifts – People who speak this language respond most favorably to gifts and visual symbols of love.
  • Acts of Service – People who speak this language respond most favorably to favors and things that their partner does on their behalf, regardless of size or significance.
  • Physical Touch – Vavavoooom baby. :) Actually, it’s more than that but you get the idea.

How do you apply this? Well, if you know that your partner responds more favorably to acts of service, then you know that buying him or her a lavish gift just isn’t going to get the results you want. If your partner wants quality time, give him or her quality time… not high fives or a congratulations on a job well done. And if your partner wants physical touch, heck it’s Valentine’s Day, touch them. :)


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