#10. Dave ditches the “novel” format and goes with the pick-any-chapter-and-you’ll-be-done-in-20-minutes format.

#9. Stories such as the one in which race horses star in an investment plan or how two cookbook authors stalked Dave into making an investment in their venture. Facts are sometimes stranger than fiction.

#8. The Conclusion. A farmer tells Dave his financial plan: live below the means, save a lot, invest it wisely. That’s all there is to it, really.

#7. If it’s so simple, why can’t everyone do it? The answer, Dave explains, is in our minds. And he offers a number of tips on how to “nudge” ourselves into becoming more financially responsible.

#6. Lest you think this is yet another tome that repeatedly hammers the “save more” theme, Dave has some insights into how to spend more meaningfully too.

#5. Quality Control. Dave’s PF hacks are all extensively tested in the field. They may not all work for you but you are certain to find some that will.

#4. It’s hard to change one’s mind even in the face of overwhelming evidence but Dave has no such problem. What about the advice in the earlier book about picking a mutual fund with a good long-term record and successful management team, eh? Nope, doesn’t work, says Dave.

#3. Dave’s endorsement of low-cost, broad-market index funds will help in spreading the message among every-day Canadians. He’s even coined some slogans: “Average is the new fantastic!”, “Be the most average you can be!” and “Average is its own reward.”

#2. Personal finance is often, well, personal. Dave explains the nuances of perennial PF questions such as “pay down debt or RRSP” or “RRSP or TFSA” or “how much should I save?” brilliantly.

#1. Humour. The book has some really funny parts. One example: Dave explains how one a trip to cancun, a hot tub purchase or a finished basement can all be rationalized as “emergencies”. Yeah, I’ve done that too.

Other reviews:
Larry MacDonald praised the book for making “personal finance less intimidating for the average Canadian and may get many of them to save instead of borrow and spend”.

Ellen Roseman liked Dave’s “psychological insights and humour”.

Dave was kind enough to include my quote in the book: “Brilliant! I liked it even better than The Wealthy Barber. If we incorporate even a couple of Dave’s ideas into our financial lives, we’ll be much richer for it and not merely in monetary terms.”

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Book Review: The Wealthy Barber Returns is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

I first read about The Investment Answer by Daniel Goldie, an investment advisor and Gordon Murray, a Wall Street veteran in a New York Times article (see A Dying Banker’s Last Instructions, NY Times, November 26, 2010). The book was billed a sort of investment Last Lecture for Mr. Murray, who was dying from brain tumour. Sadly, just as the book was reprinted for wider release, Mr. Murray passed away.

I ordered the book from Amazon without any expectation of learning something I didn’t know already. After all, when it comes to passive investing, the authors will be preaching to the choir here. But I did want to find out if I can recommend this book to other investors.

The first thing you notice about this book is how thin it is — just 88 pages of generously spaced text. But it is packed with solid advice. The authors recommend that investors make just five decisions:

- Should you DIY or invest with an advisor?
- How should you divide your portfolio between stocks & bonds, small cap & value?
- How should you diversify within portfolio components?
- Active or Passive?
- Rebalancing: how and why?

I was a bit surprised (perhaps it shouldn’t be considering that both authors are associated with Dimensional Fund Advisors) that the authors do not believe a DIY approach is prudent when it comes to investing. They recommend that investors hire independent, fee-only advisors who will act as fiduciaries to their clients.

The book is available on Amazon.ca for $15. Investors of all stripes will find the book interesting and even enriching if they take intelligent action on the five decisions they are faced with. However, I do wish the authors had included a section on further reading for readers interested in an in-depth study of the subject.

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Book Review: The Investment Answer is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

The MoneySense Guide to Retiring Wealthy, edited by Duncan Hood, Dan Bortolotti (a.k.a. Canadian Couch Potato) and David Aston, is an excellent, concise 130-page guide to saving for retirement in every decade of one’s life. Featuring columns that appeared in MoneySense magazine over the years and packed with fact-filled sidebars, the book attempts to answer questions such as “how much should I save for retirement?”, “how to retire early?”, “what to look for in a retirement home?” etc.

Mr. Hood addresses the question of who will find the Guide useful in the Introduction: “If you worry that you don’t have enough saved, or that you could be handling your finances better, read on. The solutions that follow are simple, they’ll save you money, and over the long haul, they’ll make your retirement dreams come true”.

The Guide is available at Wal-Mart, Shoppers Drug Mart, Loblaws and Chapters/Indigo for $9.95. You can also order it at moneysense.ca/nestegg for $9.95 plus $3.00 (S&H). You can read “Are you on track? “, the final chapter in the book, on The Globe and Mail website.

Full Disclosure: A copy of the Guide was provided by Duncan Hood. And in case you haven’t noticed, I write this blog under the MoneySense banner.

Giveaway

With holidays around the corner and retirement planning top-of-mind for most Canadians, I think this book would make an excellent stocking stuffer. And thanks to MoneySense, you can win one of five copies in this giveaway.

Entering in the giveaway is super simple. Just leave a comment in this post (please do not send an entry via email) and don’t forget to include your email address. If you are reading this through your favourite RSS Reader, you have to click through to the website and scroll to the bottom of the page and type in your comment. Some quick rules: (1) Deadline for entries is 11:59 p.m. EST on Friday, November 26, 2010. (2) One entry per person. (3) Canadian residents only. (4) I treat your privacy very seriously. Your email will be used for the sole purpose of contacting you if you happen to win. (5) I’ll pick five entries at random and announce the winners after the deadline.

Update: The website suffered an outage this morning. It is back up and running again. If you tried to enter in the giveaway during the outage, you may want to try again sometime. Thanks.

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Short Review & Giveaway: The MoneySense Guide to Retiring Wealthy is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

Compared to Registered Retirement Savings Plans (RRSPs) or even the relatively new Tax-Free Savings Accounts (TFSAs), Registered Education Savings Plans (RESPs) are a low priority for the mainstream financial institutions. The reason is quite simple: relatively speaking RESPs are small fry for the big financial institutions. While Canadians hold more than $600 billion in their RRSP accounts (2005 figures from The Wealth of Canadians report by Statistics Canada), the total value of RESP accounts is just $26 billion (2009 figures from the Canada Education Savings Program – Annual Statistical Review 2009). This mismatch is also reflected in books: a number of RRSP books are published every year but to my knowledge, there are no books covering RESPs.

Mike Holman who writes the Money Smarts Blog has filled this gap by penning a valuable resource on RESPs. The author starts off by explaining the unique and sometimes complicated rules governing RESPs. He then talks about the main reason RESPs are the best way to save for a child’s education for most people: the various grants available from the Federal Government and additional grants that Alberta and Quebec residents may be eligible for from their provincial governments. The final chapters deal with how to open a RESP account and how to invest the contributions and grants.

To be honest, most of the information available in the book can be found scattered between Government websites, newspaper articles, blog posts and forum discussions. But frazzled new parents will likely appreciate that the author has put everything together in one slim volume. And hopefully most readers will take the author’s advice and open a self-directed or bank RESP. Or at least opt for a Group RESP after carefully considering other options available to them.

The RESP Book: The Complete Guide to Registered Retirement Savings Plans for Canadians is available from Amazon.ca for $15.99. It should be noted here that a review copy was provided by the author. I should also mention that I’ve personally known Mike for many years and consider him a friend. You can find links to more reviews of The RESP Book on the Money Smarts Blog. The Globe and Mail recently published an excerpt from the book.

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Book Review: The RESP Book is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

Canadians who are starting to plan for their retirement or already planning it will find this book to be invaluable. Topics discussed include what to expect in retirement both from a lifestyle and financial point of view, debt reduction, investments, insurance, taxes, generating income in retirement and estate planning.

The book has an interesting structure. One author kicks off the discussion on a topic and the others chime in later in a roundtable format. As each author works in a different field — Rein Selles is a Retirement Planner, Jim Yih is a Financial Expert and Patricia French is a Family Finance Expert — they each bring an unique perspective to the subject under discussion.

Here’s a sampling of some of the straight talk I found in the book:

On the topic of how much to save for retirement — “Live frugally, save what you can, retire when you can afford to, and manage to a budget thereafter.” [Quote from Malcolm Hamiltom] So the key is to stay flexible. Be the tree that bends with the wind and you may live to retire at a ripe and rich old age.

On the topic how spending changes in retirement — “Despite all the stories regarding the cost of healthcare in retirement, seniors in 2005 spent an average of $1,733 per person, an amount $487 less per person than that spent by Albertans under 65″.

On borrowing to invest: “[However], I think leverage as we call it, is over-promoted and oversold. It is time to change the way we think about debt. Instead of going into more debt — even if it is good debt — we should start focusing on paying down our other debts first”.

The book is available for $30 (taxes and shipping included) through Jim Yih’s website. A review copy was furnished by Jim Yih. I should also mention I know Jim through our blogs and on Twitter.

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Book Review: 10 Things I Wish Someone Had Told Me About Retirement is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

Traditional defined-benefit pensions in which an employer promises and guarantees an employee’s retirement income are becoming scarcer these days. As very few Canadians outside of the public sector being covered by DB plans, the vast majority of us now bear the risk of saving enough for retirement and investing those savings wisely. Unfortunately, the challenge doesn’t end there. Canadians in, or nearing retirement then face risks that their hard-earned nest egg will not last their lifetime.

In Pensionize Your Nest Egg, authors Moshe Milvesky and Alexandra Macqueen demonstrate that retirees face three main risks: (1) Longevity risk — the length of time in retirement, (2) Sequence of Returns Risk — the risk of a negative sequence of returns in the years immediately preceding and following retirement and (3) Inflation Risk — the relentless loss of purchasing power of nominal dollars. But how does one protect against these risks? The authors have coined (and trademarked) a term for the solution: pensionize, which simply refers to converting some fraction of a nest egg into a guaranteed income that lasts a lifetime.

The book is divided into three parts. The first deals with the three aforementioned risks that retirees face. The meat of the book is contained in the second part. It shows why retirees should allocate their retirement accounts across three product silos: annuities, traditional stocks and bonds and guaranteed lifetime withdrawal benefit (GLWB) products (such as Manulife’s IncomePlus). This section also important concepts that retirees need to ponder such as their Retirement Sustainability Quotient and Financial Legacy Value and the trade-offs between them. The last part of the book provides a seven step roadmap for pensionizing a nest egg.

The book is extremely well-written and despite some warnings in the Preface, easy to understand. The discussions are rigorous as you would expect of a book that was co-authored by an academic. Retired Canadians and soon-to-be retirees owe it to themselves to read this book. Pensionize Your Nest Egg is published by John Wiley for a cover price of $26.95. In the spirit of full disclosure, I should mention that a review copy was furnished by Ms. Macqueen and that I know Ms. Macqueen through the Canadian Money Forum where she posts as MoneyGal. You can find  more information on the QWeMA Group website.

Here are some other reactions to the book: Larry MacDonald enjoyed the book and thought it was more accessible and focused than materials presented in other books. Jon Chevreau said the book offers a cure for pension envy in his column in the Financial Post.

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Book Review: Pensionize Your Nest Egg is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

Many Canadians have a debt problem. A recent report titled Where is the Money now: The State of Canadian Household Debt as Conditions for Economic Recovery Emerge by the CGA Canada showed how bad the debt situation is in many households. It found that even with the temporary relief afforded by a credit card or line of credit, one quarter of Canadians would not be able to handle an unforeseen expense of $5,000. About 1 in 10 would have difficulty with a sudden expense of $500. The reason for the dismal statistics is pretty clear: Only one third of non-retired Canadians committed resources to any type of regular savings.

In an environment of easy credit, low interest rates and a debt picture that would make Greece proud, Gail Vaz-Oxlade’s rallying cry of “debt free forever” may sound quaint and anachronistic. But Gail couldn’t care less how it sounds. She takes a no-nonsense, tell-it-as-it-is approach to show deeply indebted Canadians how to dig themselves out of debt and stay out of it.

Now, getting out of debt, saving a bit of money and putting some money away for day when the “Caca hits the fan” isn’t exactly rocket science. Even a child knows the secrets to financial success but it is following through that is the problem. That’s where Gail comes in. She is there every step of the way, cajoling and coaxing the reader to stay with the plan, all of it delivered in the inimitable style that will be familiar to viewers of the wildly popular TV showTil’ Debt Do Us Part. Here’s a sample:

Now comes the hard work!

Crap! Really? I have to do the math?

Darn tootin’. You’re going to sweat some before you can clean up the mess you’ve made of your money and your life. This is where you figure out what you’ve been doing wrong so you can stop. If you skip this step, you’re lazy, uncommitted, and looking for an easy way out. There is no easy way out.

We live in one of the richest countries in the world. It is very sad that so many Canadians are skating so close to the financial precipice. Gail is on a mission to help as many Canadian as possible worry a lot less about their financial affairs. This book is one more way of getting her message out. The book is published by Collins and carries a list price of $21.99. I got my copy at Costco for $12.99.

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Book Review: Debt-Free Forever is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

Jonathan Clements’ personal finance column Getting Going for The Wall Street Journal used to be a weekly must-read for many years until he left the Journal to work in financial services. His column ran for 14 years and touched on a wide variety of topics — everything from coping with bear markets to divorcing the right way. So when I ran across this Little Book at our local library, I was curious to find out more about the “21 Simple Truths that Help Real People Make Real Money”.

Mr. Clements did not disappoint. In this short book, running a modest 194 pages, Mr. Clements has distilled the wisdom gathered over decades observing and writing about Wall Street and watching Main Street readers grapple with financial decisions. This book is not just about the mechanics of saving, investing and constructing portfolios but like his columns for the Journal, Mr. Clements talks about subjects such as human capital, money and happiness and longevity risk. For example, Mr. Clements has six suggestions for getting off the hedonic treadmill and squeezing more happiness out of a limited supply of dollars:

1. Buy experiences, rather than things.
2. Count your blessings.
3. Strive for a sense of control.
4. Find a purpose.
5. Give a little.
6. Make time for friends and family.

A minor quibble: Canadian readers might find the US terminology a bit distracting. Fortunately, the offending terms are limited to a couple of chapters. You can find the table of contents listing the 21 simple truths here. A sample chapter is available on the Wiley website. The book is published by John Wiley and has a cover price of $23.95.

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Book Review: The Little Book of Main Street Money is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

The Big Short is Michael Lewis’ engaging tale of a handful of investors who saw the madness in lenders offering toxic mortgages (such as, and I’m not making this up, the interest-only negative amortizing adjustable-rate subprime mortgage) and rating agencies handing out triple-A rating on these mortgages like candy on Halloween Eve. The subprime mortgages were then sold to investors around the globe who, perhaps blinded by the pristine credit rating, were glad to bear the risk in these securities for little more than a few basis points premium over Treasury bonds.

Some savvy investors found a way to make explicit bets against subprime mortgages through credit default swaps that investment banks, often the same ones that had assembled the subprime mortgages into bonds and sold it to other investors, were only too happy to put together. As a rule, these individuals were Wall Street outsiders — one was Michael Burry, a one-eyed doctor with Asperger’s syndrome who had launched a hedge fund with initial capital raised primarily on his postings on Internet message boards. Michael Burry invested mainly in stocks and managed to handily beat the S&P in his initial years but in 2004, he started noticing the decline in lending standards and started hounding investment banks to sell him credit default swaps on the crappiest subprime mortgages eventually building a $1 billion short position, which was costing him just 2 percent annually (i.e. for a premium of $2 per year, Michael Burry could collect $100, if the underlying bonds defaulted). When the bonds eventually defaulted, as Michael Burry was sure they would, he realized profits of about $720 million.

It must have helped that the author has a background in bond trading because he does a good job in explaining the mind-numbingly complex derivatives brewed up by Wall Street’s finest that almost brought down the global financial system. I read this book on the recommendation of a reader (Thanks Gaby) and I’m glad I did. Though this book is not really about what caused the credit crisis, it is best one I’ve read so far on the events that led to the financial meltdown of 2008. The book retails for about $17.50 on Amazon.

Also see: Jon Stewart’s interview with Michael Lewis on The Daily Show. Canadian Business magazine recently interviewed Michael Lewis.

60 Minutes interview with Michael Lewis is embedded below (Part 1 and Part 2). Hat tip to Invest in the Markets.

Vanity Fair magazine ran a lengthy excerpt from the chapter In the Land of the Blind. Hat tip to Guinness 416.

Watch CBS News Videos Online

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Book Review: The Big Short is brought to you by Canadian Capitalist -- Helping you to invest & prosper.

The authors of this slim volume need no introduction. Burton Malkiel’s A Random Walk Down Wall Street is a classic that was first published in 1973 and is still in print. Charles Ellis is a legendary portfolio manager and author of Winning the Loser’s Game (I reviewed it here). They have combined forces to boil down investing to its elements in this short book that you can breeze through in a couple of hours. The authors say the book follows the format of The Elements of Style, a short classic on the art of powerful writing, which I confess isn’t a title I had heard about before.

In the book, the authors lay out a super simple approach to investing that can be profitably employed by anyone. They call it KISS Investing and it includes the following steps:

1. Save regularly and start early.
2. Use company- and government-sponsored retirement plans to supercharge your savings and minimize your taxes.
3. Diversify broadly over different securities with low-cost “total market” index funds and different asset types.
4. Rebalance annually to the asset mix that’s right for you.
5. Stay the course and ignore market fluctuations; they are likely to lead to serious and costly investing mistakes. Focus on the long term.

If you’ve read other popular tomes on investing, you won’t find much that is new here and can safely skip this one (and thank me for saving you $17 or so). But investors of all ages who are new to investing will be delighted to learn that the basic principles for achieving financial success are not exactly rocket science. The book is published by John Wiley and has a cover price of $23.95.

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Book Review: The Elements of Investing is brought to you by Canadian Capitalist -- Helping you to invest & prosper.