Over the years, I’ve developed a system for personal investment that has enjoyed considerable success. The major reason I undertook this book was a desire to explain the investment approach I have been using for some time to friends and family. While I haven’t made a practice of volunteering advice, conversations on investing do tend to come up, and there has been interest in my approach, which I have tried to address by writing it down. Along with interest, there has been some skepticism, particularly concerning the possibility of market timing. I don’t think I can expect anybody to take my system very seriously unless it is well documented, so I will provide an explanation of the reasoning behind this system, and outline the record of historical success supporting it. In addition to stating what I am doing and why, I am providing my take on several fundamental principles of investing.

It seems in the modern era we are increasingly being forced to make the important investment decisions that will largely determine the future financial course of our lives, yet we often do not feel prepared for this responsibility. To a considerable extent, this increased need for self-direction of our investments is the result of the shift of company retirement plans from defined-benefit plans, in which funds targeted for retirement funding are invested professionally, to largely self- directed plans such as IRA, 401(k) and related plans. The desirability of this new structure, requiring self-directed investing for retirement, is questionable, since the average person has little knowledge of this field. Nevertheless, the large majority of us have to deal increasingly with the present situation, and manage as best we can our retirement savings plans and any taxable accounts we control.
In my discussions with friends and colleagues about self-direction of investments, I’ve encountered quite a bit of resistance to the concept of taking an active role in individual investment efforts. There seem to be several reasons given for the reticence to active participation, which are generally articulated as a lack of the specialized knowledge required for personal investing, and a perceived lack of time for implementation of an investment program. It is important to address the former perception, a widespread feeling that personal investment is beyond the capability of the average person It is my general philosophy in life, in fact, to “leave it to the experts” in the vast majority of areas. If there is a problem with the car, or something to fix around the house, or a problem with my computer I can’t readily handle, I will always call on and pay someone with real expertise to do the job. I have found by experience that is almost always the faster, more effective, and ultimately cheaper approach.
It is important to understand the important innovations in personal investing in recent years, such as low-fee stock index funds and bond funds, and invaluable online tools for investment management and trading. With these new tools, effective investing can be performed very read- ily and self-direction of investment is truly practical. Even if you choose to invest in a more traditional fashion through a broker or advisor, you will find that knowledge of basic investment principles is a great boon. Much of the mystery surrounding investment may fall away, and you will be able to deal with any financial advisor much more effectively.
While the average person may perceive a lack of investment expertise, they also may have a feeling that an active role in personal investing will be inordinately time-consuming, and they may have little interest in spending available time directing investments. When considered fully, however, the lack-of-time argument doesn’t really hold up. As to time, most of us put a great deal of effort into shopping around to find the lowest possible prices for purchases; we spend many hours shopping for the lowest airfare or the cheapest price for a pair of shoes. While frugality is commendable, we might consider the use of our time here as well, compared to managing our investment possibilities In the time it takes to find a $20 saving on a pair of shoes, we might be able to take some simple steps to enhance our investment performance by many thousands of dollars.
There is a great inconsistency in working hard all your life and saving money, and then having little involvement in protecting and growing those earnings through investment. The money you are directing in your retirement instruments or taxable accounts is the tangible reward for many years of your daily labors and saving. We’ve worked very hard to make this money and save it, and it is both unwise and inconsistent to not devote at least some effort into its direction.
While one claim ignorance and/or lack of time to deal with investments, these are not wise approaches; too much is at stake. The knowledge required for superior investment performance is really not very complicated, and can be mastered with just a little time and effort. If you keep your investment strategy as simple as possible, as outlined in this book, it will not be difficult to invest successfully without undue effort or attention on your part. A very straightforward investment scheme, realistically implementable by the average person with a minimum of effort will be presented in this book. It will be clearly shown that this scheme has been capable of greatly enhancing investment rates of return in the past, and can reasonably be expected to perform as well in the future. Maximizing rates of return is, in fact, the bottom line for any method of investment Our goal, while maintaining reasonable safety, will always be to grow our nest egg as rapidly as possible.