Derek Sivers

The Only Investment Guide You'll Ever Need - by Andrew Tobias

The Only Investment Guide You'll Ever Need - by Andrew Tobias

Go to the Amazon page for details and reviews.

Hm. Highly recommended, so maybe you'll love it. I've read many like this, so I only got a few good ideas from it. I preferred “The Smartest Investment Book You'll Ever Read” also here in my book list, for more punch per page.

my notes


A penny saved - not spent - is two pennies earned.

If you were planning to go out for dinner for around $50 but you ate at home instead for $10 . . . you’d have saved $40. To earn an extra $40, you’d actually have had to earn $80.

Loans to Friends: “It is better to give than to lend, and it costs about the same.”

Loans to Friends: A better solution may be to offer to guarantee a bank loan. You are still on the hook if your friend or relative defaults, but in the meantime the bank sends the nasty letters. What’s more, the fear of a bad credit rating might actually do more to get the loan repaid than the fear of losing your friendship. Sometimes, of course, the “loan” is quite intentionally just a face-saving way to help a friend too proud to ask for a gift but too poor to pay you back. Good for you for being such a nice guy.

Consider putting 5% or 10% of your long-term funds in timber: The wise forest manager diversifies geographically and by species, so that the risks from fire and disease are mitigated. Timber should be a good inflation hedge. Properly managed, income from timber should be lightly taxed. Uncle Sam generally views the revenue not as a taxable dividend, but as a “return of capital.” Until you’ve sold off most of the trees you started with. At that point, you can sell your forest for a lightly taxed capital gain. Lock up a small fortune in a timber partnership. Don’t put more than 5% or 10% into timber.

If you are in a terrible rush, convinced the stock is about to take off and there’s not a minute to lose, you are very likely reacting to some hot news. And believe me, unless you are trading (illegally) on inside information, chances are you are one of the last to hear this hot news. Nine times out of ten you will be buying your shares from someone who heard it first.

What if you could invest in an index fund that somehow skipped all the worst businesses and concentrated instead on only the best? And not just the best, but those of the best that were selling cheapest relative to their bestness? Joel Greenblatt: The Little Book That Beats the Market. Visit magicformulainvesting.com to learn more. Consider one of Joel’s Gotham Funds.

You can actually establish a valid living trust using Quicken Living Trust Maker.

Life is not a business. Set yourself up comfortably and stop worrying. Unless you enjoy worrying about money and taking risks and paying taxes on profits and stewing over your losses, simply structure your assets so as to give you security and peace of mind.

The “closed-end” fund: Such funds originally sold a set number of shares to the public, raising, say, $100 million to invest. Then they closed the doors to new money. Investors who wished to cash in their shares would sell them just as they would sell any regular stock, through a broker. Presumably, if the fund managers had turned the $100 million into $120 million, each share in the fund would be worth 20% more than it was at the outset. Or so everyone assumed. But things are only worth what people will pay for them, and shares in closed-end funds sank to discounts that ranged from a few percentage points up to 30% and more. (A few rose to premiums.) As I write this, for example, you can buy a dollar’s worth of assets in the Canadian World Fund for 70 cents. Or a dollar’s worth of assets in the RMR Asia Pacific Real Estate Fund for 80 cents. (Visit the Closed-End Fund Association [cefa.com] to see current data.) The discounts won’t do you much good if the managers of those funds have picked a dreadful assortment of stocks that all collapse - but it’s just about as hard to pick bad stocks as good, so that’s unlikely. More likely, you will have a dollar working for you even though you only had to pay 75 or 85 cents. The risk is that the discount, irrational to begin with, could widen still further by the time you went to sell your shares. On the other hand, the discount could narrow - which at least makes more sense, even if it’s not necessarily more likely to happen. There’s actually a sound reason for closed-ends to trade at a discount. They’re burdened by a handicap: namely, the 1% or more in management and administrative fees many subtract each year. If the stocks in the fund grew by 10% a year including dividends, the net asset value of the fund itself would grow at only 9%, after that 1%. (Of course, that’s true of open-end funds, too. Closed-ends offer two conceptual advantages over open-end funds. First, when trading at a substantial discount, a closed-end is like a less-than-no-load fund. You get $1 worth of assets working for you for 80 cents. Second, closed-end fund managers need not worry that, in a down market, they will be flooded with redemptions, forcing them to keep cash idle to redeem shares - or to dump holdings at what may be exactly the wrong time. So they may be able to do a better job managing the fund. Never buy a closed-end fund when it is first issued (because sales charges will be built into the price and it will likely fall to a discount). • Never buy a closed-end fund at a premium (because then you’re paying $1.05 or $1.30 to get $1 working for you).

ETFs that index various parts of the bond market. The best broad index fund is the Vanguard Total Bond Market ETF (BND).

The tide of falling interest rates has ebbed. So keep enough powder dry in banks or TIPS to endure what could be a nasty spill; and “average down” each time we have one.

It’s just as easy to live well when you’re poor as when you’re rich - but when you’re poor, it’s much cheaper.

Happiness lies less in how much you have than in which way you’re headed, which is a strong argument for saving something each year.

Many small investors in the stock market, without knowing it, secretly want to lose. Feeling vaguely guilty. Guilty over “gambling” with the family’s money, guilty over trying to “get something for nothing,” or guilty over plunging in without really having done much research or analysis. Then they punish themselves, for these or other sins, by selling out, demoralized, at a loss.

Instead of going to the store and laying out $10 for one bottle, you are laying out $108 for 12 bottles (full price minus the 10% discount). That extra $98 is your “investment.” By keeping at most $98 extra tied up all year, you save $1 a week on wine - $52 a year. And “earning” $52 a year by tying up $98 is earning 53%. If you were someone who planned to spend $10 a week on wine - $520 a year - and who would have LOVED to save 10% buying by the case but just couldn’t scrape up enough money all at once to do it, how much financing would you need? Would you have to go to a bank and ask for a $400 loan in order to change your buying habits? No, you would need only a $98 credit line - and you would only fully draw it down that very first week. After that, you would replenish it by $10 a week (the $10 you would otherwise have spent on wine by the bottle), which means that after 12 weeks, when you needed to buy the next case, you would not only have replenished the full $98, you’d actually have an extra $12 to work with (the money you saved buying by the case). So now you’d have to draw down only $86 of your $98 credit line. In other words, to finance this change in buying habits you’d need to borrow a maximum of $98. Works out to an annualized 177% rate of return. It’s still only $52 you’re earning - $1 a week by getting the 10% discount. But applied to all your regular shopping, it can be the best “investment” in your portfolio. Next step: find a vintage you like equally well that’s only $8 a bottle.

If someone is boasting about a stock that’s really zoomed, you can say: “Gosh, that’s terrific! Sounds like time to short some.”

The Tweedy, Browne Value Fund (TWEBX) and Tweedy, Browne Global Value Fund (TWGVX). The taxable distributions from these funds make them best suited for tax-sheltered retirement money.

Act as if the 10% you are investing has been spent, and don’t touch your treasure until it reaches at least ten times your annual salary. Then start spending up to 7% of it per year and, if it keeps growing at that rate, it will never be exhausted.