Finally, after a lot of writing and editing, the first SmallIvy Book of Investing is available for purchase. They say that there is a state of purgatory between finishing the writing on a book and getting it published. I can say that is definitely true from my experience.
The book covers a lot of the topics I cover on the blog. The central theme of the book is the Serious Investing idea, where large numbers of shares of a select group of companies are purchased and then held for a long time. The book also gives the basic on different types of assets, talks about how to set up your cash flow to get money to invest and grow wealth, and gives information on what you should be doing at different stages of your life to become financially independent. I’m hoping to sell a few copies, but I doubt I’ll make even minimum wage for the hours spent writing and editing it. My main goal is to help people learn to handle money and grow wealth. It is really within many people’s grasp to retire wealthy and not need to worry about money – they just do the wrong things.
It will be available on Amazon soon. Copies can be ordered currently from Amazon’s affiliate, CreateSpace for $14.99. To order, please go to this link.
Here’s a sample from the book:
Many people dabble in the stock market. Just like the gambler in Las Vegas, people spend their time tracking different stocks, buying and selling on the latest news, and generally not making much money at the end of the day. The 1990’s saw the rise of the penny ante day trader. These individuals would sit at home on their computers or go to rooms full of workstations where they would attempt to make money trading stocks as they went up or down by quarters or eighths of a dollar.
They had visions of trading during the mornings and then playing golf in the afternoons. It was shown that an individual would need to be right about 80% of the time to make a profit this way, after paying all the fees and commissions. Obviously very few people did well over time.
For some who have already made their fortune through running a business or other means, the stock market is merely a form of entertainment – a way to get a little excitement during otherwise bland days. These people are not investors and they will never really make much from their activities. It just gives them battle stories to tell at parties.
A true investor is like the fisherman on the American frontier back in the 1800’s. Unlike the modern angler who plays around with different lures and may throw back much of his catch, the frontiersman needed to catch fish to eat. He would do what was effective, like placing a net under a waterfall or building a fish trap, rather than what was sporting. He did what worked, even if it wasn’t particularly exciting.
Investing for growing wealth, what I refer to as serious investing, is not exciting. It is not the talk of cocktail parties and chit chat for the water cooler. It is doing what works and doing whatever is needed to put the odds in one’s favor.
A serious investor is not the favorite of the broker since he rarely trades. He builds up large positions in a few great companies and then holds for years or even decades. He buys companies, not stocks. The price patterns of stocks, e.g. trends, ceilings, floors, etc… are not important to him except perhaps as a way to get a better price on a purchase or a sale.
The serious investor saves and invests a portion of his income because he understands that it is worth the delay of gratification to have a steady stream of revenue that requires no additional labor. He understands compound interest and knows that to become wealthy, one must receive interest instead of pay interest each month. The serious investor first wants to use investing to grow wealth and thereby gain economic freedom. Once there, he then wants to be able to ensure a lifelong stream of income without losing the principle he worked so hard to build.
This book is for the small investor who is serious about growing and then maintaining wealth. It first presents a strategy for a young investor with a long time to invest (30-50 years) who has little money and wants to grow assets. This strategy is not the typical investment spiel about diversification, proper balances of stocks and bonds, etc… provided by many financial advisers. It is not that diversification is a bad thing, it is that diversification is designed to preserve capital, not grow capital. The goal of this book is to present strategies to beat the market, not just match it, at least while one is young and has little capital to protect.
The strategy presented for the new investor is to invest concentrated amounts in a few stocks that one believes are going to grow for years and years, and then hold them for years and years. One wants to catch the next Microsoft, IBM, or Cisco. One may get a few losers along the way, but one big winner will make up for a lot of losers. As gains are made, some of the money is diversified into mutual funds and spread among a greater number of stocks to preserve the gains.
The book then presents strategies for the investor later in life who has grown a substantial portfolio and would like to preserve it while gaining some income for living expenses. It is here that diversification is increased and cash is maintained to reduce the risk of market fluctuations affecting one’s income stream. Some exposure to equities is maintained even at this stage, however, as a hedge against inflation, but mutual funds are more important.
Information on stock picking is not included in this book, but will be included in a second book. Indeed, stock picking is worthy of its own book since there is a lot of information one must absorb before becoming a good stock picker. Even then it is a craft that is learned through experience rather than something that could be distilled down into a procedure.
Having dispensed with the preliminaries, let’s end this introduction with a brief summary of the reasons for wanting to become wealthy. It goes well beyond the superficial lifestyle portrayed by celebrities and rock starts. In fact, if the reader is looking to have lavish parties and buy tons of superficial things, he will be sadly disappointed. The lifestyle of celebrities is more due to their large incomes than their money management skills. People who attain and hold onto wealth have nice things but tend to be more frugal than the average NFL quarterback.
Instead, the reason for becoming wealthy is to have freedom and security. The ability to just pay for things when life’s little disasters happen. To have all the things that coworkers have, but to actually own them rather than rent them with a credit card and a home equity loan. To not always be living always on the edge of default if a paycheck is lost. To be able to choose a job you love, instead of working to support a lifestyle.
It is also ethical to live in an economically sustainable fashion. Indeed, there is virtue in the growth and maintenance of wealth and many benefits to society. In the very least, those who can take care of themselves don’t burden others. It is also those who are firmly on the shore who can best rescue others who are drowning. It is the people who have money who are able to support churches, charities, and neighbors.