There’s no shortage of stuff you really should be learning in this world, and no shortage of books about exactly that same stuff. Every bit of knowledge you could ever hope for is already waiting right there in a book somewhere. Or a whole shelf of books. Heck, you could probably fill an entir underground parking garage with all the books that have been written on the subject of investing alone, and still find more pouring out onto the ground when you climbed back out.
The problem is that most of those books are boring and you end up setting them down with a bookmark somewhere around page 25, never to return. Even with the best of skills and intentions, I find that the writers of most books about stock investing cannot seem to get it right. They drag it out painfully or write paragraphs so dry and dense that you find yourself rereading the same passage over and over for half an hour while your mind wanders off to more interesting pastures.
SUCCESSFUL INVESTING IS ALL about common sense. As the Oracle has said, it is simple, but it is not easy. Simple arithmetic suggests, and history confirms, that the winning strategy is to own all of the nation’s publicly held businesses at very low cost. By doing so you are guaranteed to capture almost the entire return that they generate in the form of dividends and earnings growth.
This book was written to offer encouragement and basic information to the individual investor. Who knew it would go through thirty printings and sell more than one million copies? As this latest edition appears eleven years beyond the first, I’m convinced that the same principles that helped me perform well at the Fidelity Magellan Fund still apply to investing in stocks today.
Since money is the single most powerful tool we have for navigating this complex world we’ve created, understanding it is critical. If you choose to master it, money becomes a wonderful servant. If you don’t, it will surely master you.
“But Dad,” my little girl once said to me, “I know money is important. I just don’t want to spend my life thinking about it.”
For me this was eye-opening. I love this stuff. But most people have better things to do with their precious time than think about money. They have bridges to build, diseases to cure, treaties to negotiate, mountains to climb, technologies to create, children to teach, businesses to open and build.
After my dad, Dick Pecaut, passed away in 2009, I wrote a loving tribute to him in my investment firm’s monthly newsletter. Days later, I received one of the newsletters back. Handwritten, on the back of that newsletter, was a note from the Oracle of Omaha, Warren Buffett. The man whose mindset, strategies, and investing insights my business partner, Corey, and I have studied for three decades. The man whose wisdom we are honored to share with you in the coming pages.
This book tackles a lot of big topics, but we’ve tried to keep things simple, clear, and to-the-point. We’ve culled the best, juiciest information from a good sampling of For Dummies books on personal finance and compiled them into one fat volume. It’s absolutely packed with easy-to-grasp advice on all things having to do with managing your money. Whether you’re a homemaker, truck driver, burger flipper, or CEO — whether you’re interviewing for your first job or you retired ten years ago — we bet you’ll find scads of great tips and sound advice in these pages that will help you get a handle on everything from your credit cards to your health insurance, from your groceries to your taxes to your will.
The key to successfully expanding your investment opportunities is, of course, information. This book introduces you to high-powered investing techniques and options you can pursue as you expand your portfolio — all in plain English. Whether you’re just beginning to explore more advanced investing or have been dabbling in it for a while but need strategies to increase your success, this book can give you the information you want.
The financial crash and subsequent recession exploded many people’s ideas of how money was supposed to work. Assumptions—about risks and rewards, markets and returns—lay in ashes. People saw the value of their biggest assets, their homes and their retirement portfolios, plummet faster and farther than they’d ever thought possible.
A reporter recently asked me about the changes I have noticed among the American millionaire population since the current economic meltdown. She wanted to know if the millionaire market is dead given the recent reversals in the market value of stocks and homes. I replied that the millionaire next door is still alive and kicking even today in this recession. Since 1980 I have consistently found that most millionaires do not have all of their wealth tied up in their stock portfolios or in their homes. One of the reasons that millionaires are economically successful is that they think differently. Many a millionaire has told me that true diversity has much to do with controlling one’s investments; no one can control the stock market. But you can, for example, control your own business, private investments, and money you lend to private parties. Not at any time during the past thirty years have I found that the typical millionaire had more than 30 percent of his wealth invested in publicly traded stocks. More often it is in the low-to-mid-20- percent range. These percentages are consistent with those found in studies conducted by the Internal Revenue Service, which has the best data set on millionaires in the world.
This book is not designed to give you one simple formula for investing success — or even to concede that such a formula exists. Rather, this book is designed to teach you a variety of strategies and concepts so you can learn to think outside the box and craft your own personal strategy for no money
down investing. It’s designed to open your mind to new ways of thinking, not to force any particular master plan down your throat. As such, this book does not offer overnight success or instant riches, but it does promise skills and knowledge that will serve you the rest of your investing career (and life) — if you so choose.
Real Estate Investing For Dummies, 3rd Edition, covers tried and proven real estate investing strategies that real people, just like you, use to build wealth. Specifically, this book explains how to invest in single-family homes; detached and attached condominiums; small apartments including duplexes, triplexes, and multiple-family residential properties up to 20 to 30 units; commercial properties, including office, industrial, and retail; and raw (undeveloped) land. We also cover indirect real estate investments such as real estate investment trusts (REITs) that you can purchase through the major stock exchanges or a real estate mutual fund.
I’ve spent years watching real estate “gurus” rip-off eager new investors with high-priced seminars and training programs. I’ve seen the late night infomercials that lead starry-eyed newcomers to believe that making money in real estate is as easy as making a phone call, buying a system, and waiting for the money to start rolling in. I’ve spent several years in this business talking to up-and-coming investors who have paid thousands (or even tens of thousands) of dollars to these scam artists hocking their courses.
This book will likely ruin your life, as great books tend to do.
It will challenge the way you look at life, finances, and real estate. It will lead you to envision a different life for yourself, one not suggested by your parents, society, your alma mater, or the media. It will encourage you to step out and create a whole new path for yourself, one that you construct out of thin air. It will introduce you to numerous ideas, paths, strategies, and concepts for achieving financial freedom through rental properties. It will give you answers to questions you never knew to ask, and likely leave you with a few more questions I didn’t think to answer (but don’t worry, that’s not a bad thing).
Does school prepare children for the real world? “Study hard and get good grades and you will find a high-paying job with great benefits,” my parents used to say. Their goal in life was to provide a college education for my older sister and me, so that we would have the greatest chance for success in life.
The Securities and Exchange Commission (SEC) of the United States defines an individual as an accredited investor if the individual has:
• $200,000 or more in annual income, or
• $300,000 or more in annual income as a couple, or
• $1 million or more in net worth.
The SEC established these requirements to protect the average investor from some of the worst and most risky investments in the world. The problem is that these investor requirements also shield the average investor from some of the best investments in the world, which is one reason why rich dad’s advice to the average investor was, “Don’t be average.”
The White Coat Investor, though, suffers from a flaw, which is that Jim’s too nice of a guy to tell you the very hardest truths about physician investors. Since I don’t have his sunny bedside manner, I’ll play the gruff attending so you can benefit from his wisdom to the fullest possible extent. A substantial minority of physicians—perhaps even a majority of them— fail at investing because of a particular character flaw compounded by an intellectual failure.
The core principles of this book remain unchanged; individual investors, through a laddered portfolio of individual interest-bearing bonds or zero coupon bonds, are able to preserve their principal while obtaining satisfactory returns. The events of the past three years certainly underscore the importance of maintaining well-balanced portfolios with the fixed income portion designed to avoid the four biggest risks to fixed-income portfolios:
1. Maturity risk (also known as reinvestment risk)
2. Credit risk