2. BUY it! · Book Review Actions · Book Reviews · Money

BR 135: The Millionaire Teacher by Andrew Hallam

Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Really good book. This book was recommended to me by one of my favorite authors William J Bernstein when I asked him for Singapore specific investment advice.

A must-read for folks living outside the US looking for solid money and investment advice.

Top 3 Learnings:

1. Live like a millionaire. Millionaires wear cheap watches, buy second hand cars, and live in the suburbs. Real millionaires live frugally and invest wisely.
2. Compound interest is the most important mathematical concept you need to know. The earlier you start investing, the better it is for you as compound interest will take over. Invest in simple plain vanilla index funds (same as Bernstein’s advice.. the value add here is clear steps for folks living in Canada, UK, Australia, and Singapore) and remember that financial service firms are out to eat into your money. Actively managed mutual funds are a no-no.
3. Every generation is gripped by irrational financial madness at some points (the tech bubble being an example). When you see a market behaving irrationally, be fearful. The relationship between the value of a stock and it’s earning is similar to a dog on a leash with it’s master. One can be far ahead of the other for only a short while.

Click here for book notes from the book

2. BUY it! · Book Review Actions · Book Reviews · Money

BR 134: I Will Teach You To Be Rich by Ramit Sethi

Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Ramit’s book is very US centric but many of the principles hold true wherever you are. I think this book is worth reading because he explains very basic personal money management concepts very well. I liked his no-bullshit approach and his simple-yet-good advice.

Top 3 Learnings:

1. Don’t buy the Dave Ramsey advice of “cancel all your credit cards.” If you are sane about using your credit cards, improving your credit score and credit history can save you 1000s of dollars in terms of better interest rates over a lifetime.

2. The following ratios off your paycheck are healthy –
50-60% Fixed costs – rent, utilities, debts, transport, normal food, health
10% Investment
10% Savings for upcoming expenses vacation, gifts for friends and family
20-30% Guilt free spending

3. Conscious spending is key. Spend on great experiences and never regret.

Book notes.

1. Read ASAP! · Book Review Actions · Book Reviews · History · Money

BR 132: The Ascent of Money by Niall Ferguson

Category: 1 – Read ASAP! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: This is the sort of history book I enjoy. Hot on the heels of “A Splendid Exchange” and “Guns, Germs, and Steel,” this book is fantastic for those interested in understanding the story behind the financial infrastructure that exists today. Given the increasing spotlight on financial instruments (thanks largely to their failure), this is compulsory reading for anyone interested in understanding the real “infrastructure” of our development.

Top 3 learnings:

1. The world would NOT be a better place without our financial evolution. Credit and debit are critical to the growth of economies, businesses, and are the foundation to economic progress. Finance has underlined the big shifts in our societies. For example, the era of colonialism (or the first attempt at globalization) was only made possible by financial innovation – the dutch VOC was the first “public” company with a swath of public shareholders. The British emulated the Dutch and did it better.

2. War is the mother of all things. War was the real reason behind financial innovation. The concept of the bond market was created to fund wars between Italian states, the stock market was invented for better success in colonial wars.. and finance also played it’s part by being the real cause for wartime success and failure. The British triumph against Napoleon and the defeat of the south in  the American civil wars were determined more by financial causes than any other.

3. Credit is critical for growth. The biggest benefit of the modern day financial system is that a larger proportion of the population are able to escape the clutches of loan sharks who charge interest rates upto 11 million percent and thus keep the poor poor.

Book notes here

2. BUY it! · Book Review Actions · Book Reviews · Money

BR 130: The Investors Manifesto by William J Bernstein

Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: William Bernstein deals with the very basics of investing and dispels some commonly held myths. An excellent book. May not interest everyone but if you are interested in understanding personal finance and investing, it’s a great book.

Top 3 learnings:

1. You don’t invest to get rich, you invest so as to not die poor. Great investments are not risky investments that produce prolific returns. They produce steady returns and avoid worst case scenarios. Of course, you cannot get great returns without great risk.

2. Understanding financial history is critical for a good investor. Long term capital management’s famous failure was because their equation did not take financial history into account.

3. You are your worst enemy. You cannot time the market. Don’t try. And don’t look for patterns in the financial markets. There are none.

A collection of other conclusions I put together – if it interests you

A pre condition to being a successful investor is a firm grasp of financial history

– High returns can only be achieved with high risk

– losing money in a bear market is a part of being investor

– study and understand the Gordon equation to calculate real returns

– whenever you buy or sell an individual stock or bond, you are competing against the best in the world

– Stocks: a growth company stock generally pays out less than a collection of bad company stocks

– primary decision as investor is overall mix of stocks and bonds. Diversify diversify.

– focus on the portfolio. Do not pay too much attention to best/worst. They change.

– You are your worst enemy. You cannot time the market. Don’t try.

– Don’t look for patterns in the financial markets. There are none.

– Stock brokers are out to fleece you. It’s the nature of the business

– Mutual funds aren’t different unless they are owned by stakeholders/ are private

– Live as modestly as you can and save as you can for as long as you can

– The best gift to your heirs is not cold hard cash. Rather its the ability to save, spend wisely and invest prudently

– Remember pascal wager – goal of investing is not to get rich but to not die poor

– index fund – consistent 8/10. It will never hit 10/10 but it won’t be a 1/10 either. Returns are proportional to risk…..

– Pro Tip – House: Whenever you go to a realtor, find out what the house rents at and multiply by 150. If you are charged above that, you are paying too much.

2. BUY it! · Bio/Autobiographies · Book Review Actions · Business · Money

BR 107: The Big Short by Michael Lewis

Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: I am fast becoming a Michael Lewis fan. I loved the 2 movies his books inspired ‘The Moneyball’ and his fantastic article on Vanity Fair detailing the Irish bubble. ‘The Big Short’ was recommended to me by a colleague as a great book on the financial crisis.

This book takes a look at the unique characters who actually saw the collapse of the financial system coming and details the trials, tribulations and change they went through before and after the crisis.

Great book. A Dan Brown-esque page turner for those with an interest in understanding how we got to the biggest financial crisis since the great depression.

Top 3 Learnings:

1. ‘There is a fine line that divides investing and gambling.’ Not a new learning but the whole book’s essential synthesis was re-learning this concept.

2. The concept of rating agencies like S&P, Moody’s, Fitch and the like are broken. They are easily fooled by the smarter investment bankers far too often.

3. It’s amazing how badly broken the financial system was/is. When we pause for a moment, the financial system doesn’t really create anything. Yet, it accounted for 40% of the US economy in 2007. Banks essentially went from organizations that helped provide capital to businesses to profit generation machines. Sprinkle generous amounts of greed and take away any sense of principles/values from the dish and you can see the recipee for disaster.

And one more..

4. It’s amazing how each of the ‘outliers’ who actually saw the crisis coming was, by all accounts, a weirdo in his own right. Even the smartest people out there drank their own kool aid and got deluded in the mass hysteria.

2. BUY it! · Book Review Actions · Book Reviews · Money

BR 103: The Total Money Makeover by Dave Ramsey

Priority: 2 – BUY it!  (All Categories are 1) Read ASAP! 2) BUY it! 3) SHELF it 4) SOMEDAY it)

Comments: One of those books that is worth reading simply because it touches on a critical skill – money management.

Top 3 Learnings:

1. The journey to financial management is akin to cycling uphill. You learn by working very hard on yourself and your ‘fitness’ until you get atop the hill. That’s the moment when the money from your investments sustains your life. That’s the moment you become financially independent.

2. Money is only good for 3 things – investment, fun and charity.

3. I wrote out a summary of my learnings from the book here

Great book. Must read especially if you are learning money management/have difficulties managing money. Not all his concepts are applicable today (the book was written in 2003) but the principles do hold.

Add on Mar 16, 2016: This was one of my first ever personal finance books. Definitely had an impact in hindsight.

2. BUY it! · Book Review Actions · Book Reviews · Money

BR 71: The Millionaire Next Door by Thomas J Stanley and William D Danko

Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: If you haven’t grown up in a business family, I feel this can be a very good ‘awareness’ book as you (like me) probably haven’t grown up listening and understanding how to manage finances. It’s just a great book to debunk some myths about millionaires as we know of them. The book basically illustrates how thrifty self made millionaires really are and how we always tend to hear about the flamboyant lifestyles of those who are most likely not going to stay millionaires (like wealthy football players).

I wasinspired by how good financial habits can pay rich dividends. The most inspiring bit was how a person with an annual income of USD 90K in his 40s accumulated a million with excellent financial habits.

What to expect: I’ve summed up some of my learnings from the book here . A watch out for the book is that the authors are not very concise so they often meander around a point forever and dump a lot of data. The takeaways are good though..