Investment's building blocks - always worth reinforcing
On the eve of the US presidential elections, The New York Times praised three personal finance books that share a common thread of reminding investors about the "building blocks" of sound investment and personal financial practices.
These books – by founder and former chief executive of Vanguard John Bogle, investment author Andrew Tobias and financial planner Carrie Schwab-Pomerantz – have become even more compelling reading as global markets immediately react to the election results.
In the wake of the US elections, Australian investors are being acutely reminded about how much is beyond their control – including the emotions of other investors and how world stock markets impact on Australian share prices.
Fortunately, as such books remind us, investors who follow the principles of sound investment practice have more control over their financial futures than they may think.
Investors have the power to choose their long-term goals, set appropriate strategic asset allocations and investment diversifications for their portfolios, to minimise their investment management costs and to efficiently manage their taxes. And disciplined investors can aim to keep their emotions under control by concentrating on their long-term objectives.
Heard it all before? Chances are you are a regular Smart Investing reader. (See How to climb the wall of worry, November 1.)
The Little Book of Common Sense Investing by John Bogle has been reminding us about investment's building blocks for almost a decade while The Only Investment Guide You'll Ever Need by Andrew Tobias has been at it for almost 40 years. Meanwhile, The Charles Schwab Guide to Finances after Fifty by Carrie Schwab-Pomerantz is a relative newcomer.
Consider some of the straightforward pointers from the three authors:
- Bogle: "Successful investing is all about common sense." Don't try to pick the best time to buy and sell stocks – consistent success with market-timing is virtually impossible; diversify to minimise risks (and spread opportunities); recognise the value of compounding, long-term returns; and keep investment costs as low as possible. "The more the managers and brokers take, the less investors make."
- Tobias: Again, taking a common-sense approach to looking after investments and other personal finances is his over-arching message. For instance, buy investments you can understand; stay away from investments that seem too good to be true; and don't carry credit card debt.
- Schwab-Pomerantz: Calculate how much you will spend each year in retirement, calculate how much capital is needed to finance that lifestyle and, finally, determine how you are going to save enough. (A few words of caution: This book contains details of the US tax, social security and retirement systems that are not relevant in Australia. You should focus on her big-picture messages, which are particularly aimed at those over 50.)
These authors appear to successfully deal with a challenge that many personal investor writers. This is challenge of making their explanations of disarmingly simple investment and personal financial principles high readable – even for more experienced investors.
Robin Bowerman
14 November 2016
www.vanguardinvestments.com.au
Latest Newsletters
Hot Issues
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
- The 2025 Financial Year Tax & Super Changes You Need to Know!
- Investment and economic outlook, March 2024
- The compounding benefits from reinvesting dividends
- Three things to consider when switching your super
- Oldest Buildings in the World.
- Illegal access nets $637 million
- Trustee decisions are at their own discretion: expert
- Regular reviews and safekeeping of documents vital: expert
- Latest stats back up research into SMSF longevity and returns: educator
- Investment and economic outlook, February 2024
- Planning financially for a career break
- Could your SMSF do with more diversification?
- Countries producing the most solar power by gigawatt hours
- Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
- Quarterly reporting regime means communication now paramount: expert
- Plan now to take advantage of 5-year carry forward rule: expert
- Why investors are firmly focused on interest rates
- Super literacy low for cash-strapped
- Four timeless principles for investing success
- Investment and economic outlook, January 2024
- Wheat Production by Country
- Time to start planning for stage 3 tax cuts: technical manager
- Millions of Australians lose by leaving savings in default MySuper funds
- Vanguard economic and market outlook for 2024: A return to sound money
- An investment year of ups and downs
- How to tame the market's skewness
- The Countries that Export the Most Wine in the World
- Tips for preparing for the best tax outcomes
Article archive
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
October - December 2016 archive
- Investor habits: The good, the bad and the ugly
- Keeping finances in the family
- The inter-generational financial squeeze
- Merry Christmas for 2016, a Happy New Year and a prosperous 2017.
- ATO set to clamp down on range of super issues
- SME retirement plans in jeopardy, research finds
- SMSFs show restraint in hot residential market
- Investment's building blocks - always worth reinforcing
- Warnings issued on traps with CGT transitional rules
- Meet SMSFs' early and late arrivals
- Beware, the ATO is on the hunt for lifestyle assets
- 'Brexit means Brexit' means what?
- SMSFs tipped to be hardest hit by pension changes
- SMSF assets hit record, but funds still hoarding cash
- Markets caution advised as economic bubbles loom
- Stretching retirement income
- Some financial terms explained
- Market Update – September 2016
- Checking in on our 2016 economic outlook - and looking ahead
- Making a fairer and more sustainable Superannuation System
- Going undercover
- ‘Winners and Losers’ from new super proposals