Investing Is Simple

I haven’t written much about investing lately, because investing is simple and I think I pretty much covered everything already. You come up with an asset allocation, open some accounts, pick a few index funds, and you are done. Once in a while you see if anything is out of whack and you redirect your new money to wherever is lagging. It’s not complicated at all.

Fellow blogger Mike Piper apparently agrees. He wrote a small book called Investing Made Simple. He’s making the PDF available as a free download until October 1. [Free PDF download is no longer available.]

Table of Contents

Introduction: Investing is Not Complicated

  1. The Building Blocks
  2. Types of Accounts
  3. Risk and Return
  4. How to Know How Much You Need
  5. Don’t Bother Picking Stocks
  6. Index Funds Win
  7. Asset Allocation
  8. Putting the Pieces Together
  9. Think Long-Term
  10. How to Find a Good Financial Advisor
  11. Automate Your Investments
  12. Beware the Hot Fund
  13. Turn Off the Television
  14. Steer Clear of Stock-Picking Newsletters

Conclusion – Keep It Simple

Appendix: Helpful Resource Guide

Simplicity wins. The simple approach is very straight forward. I was able to finish the book in half an hour. I agree with pretty much everything Mike wrote in the book.

I sent the link to several co-workers who asked me about investing in the past. If you have friends or family members who don’t have patience to read a larger book, send them Investing Made Simple.

Mike also wrote several other small books. If you find reading IRS publications unappealing or the 800-page J. K. Lasser tax guide too daunting, get Taxes Made Simple. It looks like a perfect gift book for someone who’s new to filing taxes.

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  1. Mike Piper says

    Wow. Thanks for mentioning the book on your blog and for the kind words about it. 🙂

    I hope your readers find it helpful!

  2. akb says

    TFB, I’m curious if you are doing the equivalent of your “over-rebalancing” on the way down, now that things have gone up dramatically?

  3. Mike Piper says

    Hi Robert. I’m happy to hear you liked the book. 🙂

    If you know anyone else who might benefit from it, please feel free to share it with them.

  4. Mark Wolfinger says

    Simple. Yes indeed it is.

    But is it effective? Does it provide the protection that’s needed when the markets tumble?

  5. Harry Sit says

    akb – New cash has been going to bonds since the market rebound. Stocks/bonds ratio stands at 75/25 right now, still higher than usual. Overbalancing not completely unwound yet.

  6. John says

    Thanks for the link, and thanks to Mr. Piper for allowing us to read his book. I’m retired (my wife is still working and contributing to her 401K). I have been in index funds almost exclusively since I became eligible for our firm’s 401K (in 1983). I can personally vouch for them as the best way to invest.

    However, what is really needed is a “simple”-type book on how to “dis-accumulate” once one hits retirement. I personally plan to use the 4% SWR once my wife retires. I have used various on-line calculators, as well as doing the math “by hand” with a pocket calculator, and it appears that a very modest real rate of return of 1% (average yield minus inflation) will enable a 4% SWR to last between 28 and 29 years. However, the literature is all over the map on SWRs. I read one paper authored by several Stanford-affiliated academics (referenced on the Boglehead Wiki) and my eyes glazed over. There are so many issues we face as retirees: annuities, SWRs, Medicare and related expenses (how much will that “supplemental” insurance cost and should I buy it or risk the 20% Part B co-pay?), bonds versus CDs, I could go on and on. I’d love a link to such a book (if it exists and isn’t peddled by some entity pushing a product).

  7. simplesimon says

    I linked the book as a note on my Facebook profile so hopefully my friends can take charge of their finances too.

    A couple things that are really minor and just nitpicky because that’s how I am:
    Actually, I’ll preface it with the disclaimer that I haven’t read the book in its entirety, just briefly skimmed it and stopped mostly for the nice graphs and charts.

    Ok here we go…both things have to do with the graph on page 23 regarding what $1000 is worth after investing from 1928-2008…
    1) The graph is a little misleading because it’s not a semilog graph.
    2) The $91,893 stated there is in 1928 dollars, correct? I just thought that was interesting.

    The book does look great, very simple, and easy to understand. I hope many of my friends read it and greatly improve their chances of retirement!

  8. Braveheart says

    TFB or Mike Piper,

    If you can e-mail me the text for Chapter 6 and provide some independent evidence on why index funds win, I will be happy to purchase this book. The biggest hole in index fund logic is that it cannot exist without active management. Actively managed investments drive market efficiency and therefore create market capitalization weighted indices. It’s amazing how blindly people accept academic research papers and their conclusions. Of course mutual funds don’t beat cap weighted indices on average, the only way that would be possible is if institutional separate accounts, hedge funds, and retail accounts in aggregate had inferior performance GROSS of the average expense ratio. Index funds are a great tool for investors not willing to put the time and effort into thoroughly researching actively managed investment options.

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