Archive for March, 2007

Book Review: The Smartest Investment Book You’ll Ever Read

March 5, 2007

9 comments
[Front Cover of The Smartest Investment Book]

The publicist for author Daniel Solin sent a copy of the Canadian edition of his book (listed at $26 and available from Amazon.ca), which is subtitled The Simple, Stress-Free Way to Reach Your Investment Goals, for review. The author defines “smart investing” as constructing a passive portfolio of index funds and rebalancing it periodically. The bulk of the book deals with why passive investing is actually smart, easy and stress-free and why active investing is injurious to your financial health. Mr. Solin devotes the last few chapters to show how to implement a smart portfolio.

I was a little bit surprised at the lower than usual allocation to Canadian equities in the model portfolios. For example, the high-risk portfolio (80% stocks, 20% bonds), which is comparable to the Sleepy Portfolio, has an 8% allocation to Canadian stocks. The author explains that the 10% of equities allocated to Canadian stocks is appropriate because foreign stocks have historically provided a higher return at lower risk.

I do have a few quibbles with the book. While the sample portfolios composed of XBB, XIC, XSP and XIN (or their equivalent index mutual funds) are fine for small portfolios, bigger ones should have exposure to asset classes such as real-return bonds, small-cap equities, emerging markets and real estate. Also, while the author mentions cash as an asset class, there is no allocation to cash in the model portfolios.

Despite the quibbles, I found the book’s central thesis compelling and the arguments against active investing sound. As an investor who is already convinced of the merits of indexing, I found myself agreeing whole-heartedly with the book’s main message. Newbie investors and active investors should check out the book and better yet consider following the author’s advice.

This and That

March 2, 2007

4 comments
  1. Rob Carrick reminds investors to rebalance their portfolios in the wake of the sharp market correction this week.
  2. Larry MacDonald points out two potential pitfalls to be aware of when getting exposure to foreign equities inside RRSPs.
  3. Paul Farrell writes in MarketWatch.com about an 8-year old’s lazy portfolio composed of just three broad-market index funds that handily beat the S&P 500 over the past 10 years.
  4. The Growth in Value blog just celebrated its first anniversary.

Thoughts on the Market Correction

March 1, 2007

3 comments

Equity investors discovered the meaning of risk all over again as markets around the world corrected sharply earlier this week. There is much speculation in the media if this is the beginning of a correction or the rumblings of a bear market or a mere one-day blip in a bull market that is almost four years old now.

I don’t put much faith in predictions of any kind and while the losses are not pretty, it is important to keep in mind that markets do not go up forever and corrections such as the one this week are inevitable. Also, market corrections do have a silver lining for the long-term investor: they almost always are a good time to put more money to work.