We review the best small business and investing books
Investing For DummiesTM
by Eric Tyson, MBA
Book review of 1st edition of Investing For DummiesTM
Eric Tyson's Investing For DummiesTM and Personal Finance For DummiesTM keep showing up on the business bestseller lists, so we decided to give Investing For DummiesTM a quick read.
Investing for Dummies gives readers, new to investing, some good advice, such as you need to save money to invest, and that you should fund tax-deferred retirement plans before paying down a mortgage. Tyson also advises keeping cash reserves, not in ultra-low-yielding bank savings accounts, but in a money market fund. He urges you to seek "ownership" investments, e.g., stocks, real estate, or your own small business, rather then buying bonds or borrowing your nephew money to start his business.
The above advice is common sense, as Tyson admits, and shows up in many good personal finance books. So, what does Tyson offer that the other investing and personal finance books don't?
Well, there are some really funny cartoons. Tyson also covers real estate investing and investing in small business in more detail than most investing books. However, if you contemplate starting a business or buying one, there are far better books to read.
Of course, a small section devoted to starting a business won't do a complete job of teaching you what you need to know. But, at least Investing For DummiesTM exposes the reader to the small business and real estate possibilities, which many investing books fail to do.
Investing For DummiesTM also recommends index funds and foreign stock funds, which are very good directions to consider. Tyson, in fact, counsels investors not to buy individual shares of common stock, but, rather, to invest exclusively via mutual funds. Of course, he urges you to keep expenses low and select mutual funds carefully.
It seems Tyson runs out of meaningful investment advice to give and degenerates into promoting his views on tangent issues in several places. For example, he devotes a full section to criticizing radio talk show host Rush Limbaugh on issues like global warming. Come again? How does that help us become a better investor?
Tyson later gives a short plug for Handgun Control, Inc., saying its agenda is to "educate" people about the dangers of guns. At least Tyson does a better job of working this into the flow of the book, saying that some people who start businesses have goals besides money. And, non-profits have agendas other than profits. Thanks, Eric. We might have missed that.
OK. Everybody has his or her own ideas, and we can forgive Tyson for straying off the topic, occasionally, but it really galled me when he attacked ham-and-cheese-filled croissants, blaming them for heart attacks. Another story of a restaurant entrepreneur had the partially non-profit agenda of teaching people to eat healthy. Maybe, we can look forward to a Eating Healthy For Investors For DummiesTM in the future!?
Tyson also wisely suggests we not try to follow a stock market guru. We strongly agree. Nobody can predict the future. Tyson also criticizes other investment writers who try to sell ongoing investment advice, but, we think, when he criticizes Peter Lynch and Simon and Schuster for trying to sell Lynch's books, Tyson is going a little too far. After all, this is coming from a writer who is famous for pumping out For DummiesTM books!
Unlike Tyson, who is by trade a writer, Lynch retired rich, as a successful mutual fund manager, and Lynch passed up the opportunity to start his own mutual fund which would have earned him tens of millions of dollars more than selling any investing book. So, what is the ulterior motivation for Peter Lynch to write that he believes individual investors can beat the pros? None. Lynch believes this and explains why in detail in his books.
Tyson claims to have read hundreds of investing books, but he totally ignores Lynch's rational, that individuals can beat the pros. He never addresses this, just sarcastically dismisses it.
Lynch's rational, that the professionals are all consumed with short-term performance and need to diversify widely, not for diversification's sake, but simply because they have too much money to invest, should not be dismissed lightly.
Tyson tells investors who try to buy their own stocks to examine the portfolios of mutual fund managers to see what they are buying. Boink!! Never mind professionals often recompose their portfolios before disclosure, so it looks as if they have been buying the best stocks of the day. Never mind that these professionals might well be selling long before you are notified of the change. And, never mind that most individuals are seeking stocks to buy-and-hold, while professional money managers are more frequent traders. Not Tyson's best advice.
Tyson correctly mentions that your earnings power is probably your greatest asset and that you should give enhancing your career some attention. But, we assume you knew this, also.
Overall, we do recommend Investing For DummiesTM to those individual investors who are totally new to investment and who want a quick overview of mutual fund investing, real estate investing, and small business.
Investing For DummiesTM can be obtained at most local, public libraries. But, if you are already a saver, know how to evaluate an income statement and balance sheet, and have read a superior personal finance book, such as Jane Bryant Quinn's Making The Most Of Your Money, Investing For DummiesTM is probably too basic for you.