Good Times Review
A Very Useful Guide
This Book Could Make You a More Savvy Investor
By Olev Edur
Retirees throughout Canada and elsewhere who own investments have been violently jarred by market-related events over the past 10 or so years. If they'd been able to read Managing Retirement
Wealth, they might have been able to avoid at least some of the grief—and the financial losses—they endured. The book is by US investment guru Julie Jason, and the subtitle sums it up nicely: An Expert Guide to Personal Portfolio Management in Good Times and Bad.
Early into the new millennium, there was the "high-tech bubble" and subsequent sectoral collapse, in which Nortel Networks share prices plunged from almost $125 to penny stock status before disappearing entirely. Many retirees and other investors held substantial amounts of these shares—entirely understandable given that, at their peak, Nortel's shares represented a whopping 36.5 per cent of all the capital comprised by the Toronto Stock Exchange's index.
Even worse for many investors, the broader market collapse of late 2008 ravaged everyone's retirements savings portfolios, a second whammy that came just as investors were recovering from the high-tech debacle.
Of course, this book wouldn't have helped investors avoid completely the damage caused to their portfolios, but it can help you become a much more informed investor who won't be ravaged as badly the next time around (there's always going to be a next time for the investment marketplace, cyclical beast that it is). In the meantime, it may help you to achieve better overall returns from your remaining savings.
The book takes readers through all the thought processes and calculations involved in establishing realistic investment objectives and then creating an investment portfolio that meets those objectives while maximizing returns and minimizing risk. It doesn't play down the risks—indeed, it acknowledges that there's some risk in almost every investment—but it does explain exactly what they are, and what trade-offs you can make to achieve a balance among growth, income, and capital preservation.
The first two parts of the book—seven short chapters—are devoted to explaining in broad strokes what you should be trying to do as an investor. The author also here dispels some of the misconceptions and uncertainties that can cloud your investment decisions. Then she moves into the nuts and bolts of how to create a properly diversified portfolio of assets to meet your preferences and ob
jectives. Subsequent chapters discuss how to find and then buy (timing is important) the most appropriate stocks and mutual funds, as well as when to sell them.
In later chapters the book also deals with the importance of continually monitoring your investments and provides a 10-step guide to measuring your progress. This is a process often overlooked by armchair investors whose strategy is based on taking great pains to choose the best investments and then forgetting about them until something bad happens. Regular monitoring could certainly have taken some of the sting out of those recent downturns.
Finally, the book contains extensive appendices explaining how to read and interpret corporate financial statements—an essential skill in selecting any stock market investments.
Although the book is a relatively easy read, parts of it may be too technical for some readers because it's geared to those who already have some investment acumen. As acknowledged in the final chapters dedicated to helping you find a good portfolio manager, you probably shouldn't take on the complex task of managing your own investments unless you already have some experience managing a portfolio and making investment decisions. Even so, the other information in this book will help you ensure your portfolio manager is doing exactly what's best for you.
On the downside, this book was written for and about the US marketplace, so parts of it aren't applicable in Canada, but the differences don't detract from the book's overall value as a good ground-level guide to the ABCs of investment management. For those retirees who want to take complete control over their retirement nest eggs, it's a recommended read.
Managing Retirement Wealth, by Julie Jason, published by Sterling Publishing, 2011. If your bookstore doesn't have a copy, you can contact Canadian Manda Group, 165 Dufferin St., Toronto, ON, M6K 3H6; 416-516-0911.