The Only Guide You’ll Ever Need for the Right Financial Plan is a new book published in August 2010. In this book, Swedroe and his co-authors try to tie together the previous three “the only guides” on stocks, bonds, and alternative investments and add more on how to apply the strategies. Larry Swedroe wrote in the preface:
What investors need today is a book offering more specific investment advice, one focusing on the “art” of investing and guiding investors to adapt a winning investment strategy to their own situation. That is what this book is all about.
The art of anything is very hard to teach. I don’t expect to become a Van Gogh by reading books. When it comes to investing, the unknowable future also makes everything complicated. I wrote about it in my previous post What Makes Investing Hard?
Before I continue, I should say what this book is not. It’s not about the “right retirement plan,” as in how much to save for retirement, how do you know you have enough, whether you should relocate, etc. It’s about the “right financial plan” which goes beyond retirement.
The first 2/3 of the book covers investing. It does it very well. I only wish the book is longer. That’s not a criticism. The points brought up in the book are very relevant to coming up with the right investment plan. I often found myself reading the paragraphs twice or three times just to make sure I really understand what it says.
Perhaps the author thought some of the subjects were already covered in his previous books and therefore he went for brevity. He did often refer back to specific chapters in the previous books. Although I read the previous books, I don’t have them memorized. I wouldn’t mind some repetition.
Examples in this book are very good. I also wish there are more of them. I find it easier to learn if I can associate abstract concepts with real world examples.
For example, the main drivers for formulating an asset allocation are said to be the ability, willingness, and need to take risks. I understand the ability and the willingness to take risks. I also understand the lack of need to take risks — if I have $100 million dollars I would still live well without a dime invested in stocks. But I don’t understand the positive case for the need for risks. If I’m not able or willing to take risks beyond a certain level, how will I ever need to take more risks? Shouldn’t I adjust my savings level or my goals instead? An example will be really helpful here.
I found one factual error. On series EE savings bonds, the book says the rates are based on 90% of 5-year Treasury yields. That was the rule for EE bonds issued between May 1997 and April 2005. Treasury changed the rule five years ago. The current EE savings bonds have an arbitrarily low fixed rate, with a possible bonus in year 20. I wonder if EE savings bonds under the current rules would still make them to the “recommended” list.
For a book on the “right financial plan,” it includes a chapter each on college savings, insurance, social security, safe withdrawal during retirement, and estate planning. Together, they make up about 1/3 of the book.
These are very important subjects in a financial plan. I wish they are covered more thoroughly. For example the chapter on college savings gives basic facts on 529 plans, Coverdell accounts, custodial accounts, and savings bonds, but it doesn’t offer any recommendations on which account type(s) one should use, how to determine how much one should contribute to the account(s), or how to invest the funds earmarked for college education. The whole chapter is only six pages.
Don’t get me wrong. I like this book a lot. When you have something good, you crave for more of the good stuff. I understand that a book, no matter how good it is, can’t provide all the answers I’m looking for in creating the right financial plan for me. This book comes close though. For a $20 investment, it will go a long way in helping me evaluate and fine-tune my financial plan. Definitely worth it.
Five stars: *****. Placed on the recommended reading list in the Advanced category.
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