Book Review: The 4-Hour Workweek

I took a break from the heavy finance books to read Timothy Ferriss's The 4-Hour Workweek. The book has had excellent reviews from many respectable critics, so I thought I would give it a go.

Overview:
The book basically lays out a strategy to create automated income and free yourself from the dull life created from our 9 to 5 society. The basis of Ferriss's writing focuses on using DEAL (definition, elimination, automation, and liberation) to formally join the NR (new rich). Each chapter offers ways the reader can shift from a steady work-life, toward a life full of travel, leisure, and mini-retirements.

Personal Takeaways:
Honestly, the book is full of information. I am entirely convinced that all readers will find something of value embedded within Ferris's chapters. For me, the income via automation and comparison of travel costs vs. traditional costs were pretty compelling.

Automated income is very powerful and does not necessarily involve linking millions of databases together. Ferris details how to find your niche, use it to create a source of income, then automate it. The automation chapters explain that you can hire virtual assistants to do anything from responding to customer inquiries to sending your significant other flowers. Auto-response emails and a couple of outsourced resources can create a business with no maintenance. Amazing!

Ferris also busted the expensive overseas travel myth. In relation to the expense you are already paying now in the states, you could very well vacation as royalty practically anywhere else in the world.

Recommendation:
I recommend this book to everyone. It is informative and proactive (offering an array of activities to help achieve inner happiness) and will help readers uncover what is truly important in life. It is a quick read and will having you laughing more often than not.

And make this post finance related, consider borrowing this book from a friend or checking it out from your local library.

Book Review: Investment Titans

Jonathan Burton's Investment Titans does a really great job covering some of the smartest minds in the investment community. Each chapter in the book is dedicated to a well known investor and articulates that investor's particular niche. While I have taken an extensive portfolio management course at my university, the book still managed to share many unique strategies that I had never heard of!

Overview: I almost guarantee that everyone will learn something new after reading this book. I found myself skimming over the first two chapters because I already new about the Capital Asset Pricing model and using the Long and Hold investment strategy, but I was really interested in Jeremy Siegel's argument about Equity Premium. Readers will also get a heavy dose of index fund praise and asset allocation. In short, the book covers everything an intermediate investor should know when investing.

Personal Takeaways: I thought I would simply share some passages to cover my takeaways

• "Bonds and cash simple don't retain their purchasing power once inflation takes its toll."
• "... asking whether you should keep a stock... is whether you'd be willing to buy it."
• "Behaviorists combine psychology and finance - contending that preconceptions and cognitive errors lead investors to misinterpret events and to overlook opportunities."
• "Value stocks around earnings announcements outperform growth stocks... by four percent."
• "The better an investment has treated you, the more you should think about distancing yourself. The stock doesn't know you own it. It owes you nothing."

Recommendation:

I recommend investors of all skills levels at least flip through the chapters and find something new. Investment Titans has certainly given me a few tag lines to keep in mind when evaluating an investment and I am confident that the insights have contributed to my overall investor education.

Book Review: Come Into My Trading Room: A Complete Guide to Trading

Wow. I cannot believe how much I enjoyed this book. Before I detail how great this book is, I think it is important to note the type of person I am. I am a college student hungry to learn how to maximize my investment account values and overall net worth. I also get very excited learning about new investment strategies and vehicles. If you match these characteristics, I encourage you to finish reading this post and start reading Dr. Alexander Elder’s Come Into My Trading Room.

Overview:

So I definitely took three full pages of typed notes and created a whole Excel workbook with four worksheets all in an effort to better replicate Elder’s strategies. I do not consider myself to be a big note taker, so be prepared to get a lot from this book. The book is basically divided into three parts: characteristics of a trader and an introduction to the trading game, money management, and technical analysis techniques.

Personal Takeaways:

Elder details the typical make-up of a trader and the different environments traders operate in. He explains that there no such thing as a typical trader, but often times successful traders have muted emotions, above-average mental math skills, patience, and a drive to make a lot of money. If you feel you meet the mold then Elder encourages the reader to read on as he describes the types of markets, where to trade, and the time frames one should trade. Once you select your ideal trader make-up you are ready to learn about technical analysis and making money on the psychology of investing.

The technical analysis section is certainly provides the deepest content by informing readers about indicators and oscillators as well as offering strategies for trading once readers understand the basics. I could really go on forever, but I will just give you a taste of what Elder offers. Elder suggest that before trading do the following: identify your favorite time frame and move to the next broad frame (if you like weekly trading, move to monthly charts) and use the indicators to locate a trend, move back to the intermediate time frame and wait for an entry point based on your oscillators, set your profit target and exit strategy, and set what you are willing to loss on the trade by setting a stop.

The final section discusses money management. The core of this section highlights the importance of sticking to your main goal of maximizing your account value. Elder preaches that an individual should never risk more than two percent of his/her account value on a trade and never have more than six percent of the account value at risk during a given month. Traders should also keep diligent records helping traders notice where they are succeeding and which strategies need to be modified.

Recommendation:

I recommend investors interested in active portfolio management seriously consider reading this book with pen and notebook. The book has help diversify my investment strategy and I am eager to use more technical analysis in my quest for wealth.

Book Review: All About Index Funds: The Easy Way to Get Started

All About Index Funds: The Easy Way to Get Started by Richard A. Ferri was the third book I read this summer, and I must say, it was a bit of a laggard compared to the other two. I am not very to motivated to write about this book because readers could find the same information on Wikipedia and other common investment sites, but I write on in an effort to convince readers to seek other pieces of financial literature.

Overview:
The book has several sections that introduce mutual and index funds, offers some notes about asset allocation with these funds, evaluates fund performance, the array of different types of funds, and the future of these investment vehicles.

What a typical investor may gain from this book is a better understanding of the difference between mutual and index funds. A mutual fund is run by a manager who sticks to an asset selection strategy, as specified in the fund's prospectus, and is evaluated on the fund’s overall performance. An index fund tracks an index, or collection of a particular set of securities, and is evaluated on the accuracy of imitating that index’s returns. An investor who wants to target a specific group of stocks may want to look into investing in an index fund who tracks that particular group of stocks. If an investor is looking toward achieving above average returns, may look into investing in a speculative mutual fund.

Personal Takeaways:
I think the most important takeaways from this book relate to asset allocation and fund fees. An investor should use asset allocation to achieve his/her return goal. This investor could use a variety of funds to achieve his/her unique asset mix ideal for the investor's target return. In addition to using allocation to address investment goals, an investor should consider fees when choosing an investment vehicle. Index funds are almost always cheaper than mutual funds, which means that they actually give you better overall returns (on average). Many times, these funds are also more tax friendly, another important part of assessing your overall returns. Still, these benefits are highlighted all over the web; no need to read these chapters to uncover potential secrets.

Recommendation:
I think a potential financial planner may enjoy this book if he/she does not have his/her facts straight already, but my overall opinion on the book directly correlates with my positioning of this post. Readers can appreciate that I strategically wrote this review on the third book I read this summer before the review I am going to write for the second book I read. This position will allow readers to simply pass over this post, much like they should pass on this book.

Book Review: Running Money

One of my summer goals is to read a massive amount of investment and personal finance books. I plan on giving a quick overview and detailed recommendation on each book I read this summer. The first book I read was Running Money by Andy Kessler.

Overview:
Kessler documented his five years running a Silicon Valley hedge fund detailing his struggles raising money, dealing with high-flying technology boom, and surviving during the market downturns. Kessler's hedge fund sought tech stocks with valuable intellectual property and demonstrated the potential to double or triple in the near future. The fund, in fact, was a primarily long-only fund that usually kept its holdings for more than a year.

Personal Takeaways:
One particular aspect of the book that I liked was how Kessler articulated hedge fund price manipulation during conference calls. He pointed that funds with a strong short position often ask management utterly ridiculous questions to simply drive down the after-hours prices down half of a percentage point. I also liked the simplicity of his fund. The fund was run above an art studio and employed only one additional employee. Unlike the sexy funds run by Soros and others, Kessler was able to yield an average run of 50% without massive overhead.

Recommendation:
I really liked several parts of the book including the series of chapters documenting the accumulation of capital and his personal take on achieving money in any type of market, but many parts of the book ran on offering only tidbits of concrete content spanning across several chapters. In short, I think this book is ideal for the long-term investor really interested in Silicon Valley. Personally, I enjoy short-term investing and doing so across all of the different industries not specializing on an isolated market segment. Go ahead and read the spark notes on this bad boy, they should give you the whole story in a couple pages.