Book Review: The Investment Answer: Learn to Manage Your Money & Protect Your Financial Future

The Investment Answer is written by Daniel C. Goldie and Gordon S. Murray. They both have a career in the investment field. However, Mr. Murray passed away in 2011. The authors want to change the way readers think about investing though this book.



Layout of The Investment Answer

The Investment Answer consists of a prologue, an introduction, eight chapters, and A Personal Note from the Authors.

The first five chapters are the decisions that the authors want the readers to make.

The next three chapters contain the conclusions of this book.



Highlights

The Investment Answer gives the readers answers to these five questions: 1) do-it-yourself, 2) asset allocation, 3) diversification, 4) active versus passive, and 5) rebalancing.

In short, the authors advise us to enlist advisor (independent, fee-only), have an asset allocation plan, diversify, invest passively, and rebalance the portfolio periodically. Apart from the engage an advisor recommendation and perhaps passive investing (which I am not practising fully), I have done all that they recommend.

One advice that I find interesting is that the authors’ timing of buying and selling correspond to when we have the money and when we need the money. I do not totally agree with it but there is some truth to it. So, it is up to you to judge its appropriateness.

Another good piece of advice is that we should select the correct benchmark for our investment portfolio. As an example, S&P 500 can only be considered as an appropriate benchmark if that portfolio only contains US large company stocks. For my Malaysia equity portfolio, I am using KLCI as the benchmark.

The author does not recommend investing in alternative investments such as hedge funds and commodities. They think that these investments involve higher costs, lack diversification, and have liquidity constraints. On the other hand, they think that bonds are a tool to reduce the portfolio volatility. Nonetheless, I am not too sure about this function of bonds in the current financial environment.



Conclusion

I think this book may be too simple for experienced investors. Nonetheless, it is a great book for someone who just embarks on the investing journey. By answering the questions in the book, the beginner would be able to devise a clear investment plan.

Let me end this review with some quotes from the book.

“The common denominator in all measures of risk is the uncertainty of future results.”

“You should know that whenever you buy or sell a security, you are making a bet.”

“Investing is not about winning and losing.”



Recommended book

If you are interested in The Investment Answer, you may get the book through one of the links below*.

Get the book here from Kinokuniya Malaysia

Get the audio book here from Rakuten Kobo

*Disclosure: The links are affiliate links. If you buy the book using one of the links, I might get a small commission from your purchase.



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