A Chapter-By-Chapter Guided Tour By The Author
See Also: Download A Free Chapter, Book Disclosures, Download Tables & Charts, "Since You Asked"
In 16 chapters I have distilled the most important messages I present in my free investment workshop and the most compelling things I've learned from more than 40 years of helping people with their finances.
If you're thinking about buying "Live It Up without Outliving Your Money" (which I hope you are!), you may want to know a little bit more about what's inside. Elsewhere on this site you can examine the Table of Contents and then download the Introduction and Chapter 4.
This article is my attempt to put a little flesh on the skeleton of that outline.
Introduction
I wrote this book partly to protect investors against practices I experienced first-hand when I was fresh out of college many years ago. Unfortunately, most of those same practices are still rampant on Wall Street, where the emphasis is too often on selling, and where doing the right thing for customers can be merely an afterthought.
Here I list the Ten Steps to a Perfect Retirement promised in book's subtitle and tell where to find each one inside.
Chapter 1
Why Investors Fail is my way of telling why investors need this book. It's a list of problems for which I propose solutions. People fail to have written plans, they take either too much risk or not enough. They don't know what they need. They trust people and institutions that they shouldn't. They don't know how to tell a good investment from a bad one. They make decisions based on emotions instead of facts. They ignore how much money they routinely give away in expenses, fees and taxes. It's not a pretty picture, but it's why people need help.
Chapter 2
A Tale of Two Investors paints a picture in words of retirement done right and retirement done wrong. In this chapter you will meet two real-life people. George has done nearly everything right and is reaping the rewards. Roger, on the other hand, has made - and continues to make - many of the mistakes outlined in Chapter 1. He started out with plenty of money but has had a terrible time making it work for him. His marriage and his retirement have suffered, and he's not fully Living It Up.
Chapter 3
Lessons From Smart Investors describes the attitudes and behaviors I've observed in the smartest people I know. This discussion goes beyond strictly financial concerns to focus on what makes life really satisfying and worth living, regardless of how much money you have. In my view, this chapter alone is worth more than the price of the whole book for anybody who takes it seriously.
Chapter 4
The Psychology of Successful Investing goes into detail about some of the toughest issues investors must face when they try to make and carry out good plans. You'll learn how your emotions, your mind, your habits, the financial media and Wall Street sometimes team up to work against you.
If you take this topic to heart, you're likely to make your life more pleasant, you'll probably have more money to spend in retirement and leave more to your heirs. If you ignore this, I promise you'll pay for your ignorance. I hope you'll download and read this free chapter.
Chapter 5
Who You Are and What Are Your Goals tells you how to put together a retirement plan - and how to review your plan if you already have one. You'll learn how to figure out how much income you will need in retirement and what that means about how big your portfolio should be when you retire. This is a critical step in applying the information in this book to you so you can Live It Up in your golden years.
Chapter 6
Your Perfect Portfolio introduces the concept of "smart diversification" using charts that my company shows to new clients. You'll learn how standard pension plans invest their assets and how you can emulate their approach. Then I make a bold challenge: to show how you can get better returns than the pension plan model while you take less risk. This challenge will be the topic of this and the next three chapters. In Chapter 6 I also show you how to get the optimum combination of risk and return from the largest single component of the pension plan model, fixed-income investments.
Chapter 7
Why Size Really Matters is about the terrific advantage that long-term investors get from investing in stocks of smaller companies. You'll find half a dozen dramatic graphs showing how small-cap companies go in and out of favor. You'll learn how to capture this effect using no-load mutual funds. A table in this chapter quantifies the reliability of the small-cap premium over hundreds of periods from 1926 through 2004. Using this information, I show readers how to make two simple changes to the standard pension fund portfolio that could add nearly 50 percent to the long-term return of a retirement nest egg, with only slightly more risk.
Chapter 8
Value: Owning What Others Don't Want takes a similar look at value stocks. Virtually all the famous portfolio managers of the past half century made their marks by investing in value stocks. This chapter shows you why that's smart, how reliable this effect is and how you can get this benefit in your own portfolio.
Chapter 9
Putting the World to Work For You adds the final essential asset class to the ideal retirement portfolio: International equity funds. You'll learn why it's a bad idea to rely only on companies in the United States and why I recommend that up to half of every equity portfolio should be invested in international funds. The primary attraction of international stocks, something that should be especially important to retirees, is their ability to reduce volatility in a portfolio. By the end of this chapter, you'll see exactly how to modify the standard pension fund portfolio into what I call Your Perfect Portfolio, using small-cap stocks, value stocks and international stocks to increase the long-term compound return of the pension fund model by 26 percent while reducing risk.
Chapter 10
Controlling Risks shows how to fine-tune this ideal portfolio so it's just right for your individual situation. I describe my own risk tolerance and how it applies to my investments. Then I show how the advisors in my company determine the risk tolerance of our clients. In case you think this is arcane stuff, the chapter also shows something that seems to defy all logic: two retirement portfolios that have nearly identical long-term returns, one of which went broke after a few decades while the other grew to 10 times its initial size. The only difference was that the "survivor" portfolio had only about half the risk in its mix of assets.
Chapter 11
Meet Your Enemies Expenses and Taxes is about keeping your hard-won investment gains for yourself instead of giving them up to others. This is a chapter that many people on Wall Street hope you won't read. Routinely, fortunes are made in the investment industry from gouging investors over and over and over in small ways. I tell you how to recognize and avoid the unnecessary costs of being an investor. You will learn about some expensive but common tax mistakes, including paying taxes twice on the same income.
Chapter 12
Putting Your Portfolio to Work is where you'll learn exactly which no-load mutual funds will give you the asset classes that I recommend in the book. You'll find suggested portfolios for investors at Fidelity, Schwab, Vanguard and T. Rowe Price. You'll learn how to use exchange-traded funds and tax-managed funds. You'll learn about a family of what I regard as the best mutual funds in the world, those of Dimensional Fund Advisors.
Chapter 13
Withdrawals: When Your Portfolio Starts Paying You covers some very important information that isn't readily available anywhere else I know of. And that's a pity, because it can easily make the difference between running out of money and making your dreams come true with money to spare. In a way, this topic is like a final salary negotiation between you and your portfolio. Two critical choices play a big part in whether you'll truly be able to Live It Up without outliving your money. The first is how aggressively you want or need to tap your investments for retirement income. The second is whether you need a fixed income in retirement or can tolerate one that varies according to your investment results. Only you can make these choices, and I show you how.
No matter how much you have in retirement, your money by itself cannot bring you peace, comfort, serenity or satisfaction. Whatever level of wealth you have, your challenge in retirement is to know where you are, to accept where you are and to focus on the most important priorities in your life. This chapter tells you how to do that.
Chapter 14
Hiring an Investment Advisor shows you how to figure out whether your advisor is working for your interests or contrary to them. If you get the right kind of advisor, you improve the odds that you'll make more money while taking less risk and that you'll achieve your goals so you can Live It Up. Here you'll learn exactly how to find an advisor whose interests are aligned with yours.
Chapter 15
Your Action Plan is in the book because I know all the things you're being asked to do may seem overwhelming. Where do you start? Is this the right time? Should you wait? I can convince you (I hope) that there's a better way. However, only you can do something about it. This chapter tells how to make it easy to do that. Getting your whole financial picture organized may seem daunting. But if you can pick up the phone and schedule an appointment with somebody, if you can have a discussion with your spouse or partner or attorney, then you can do everything you need to get un-stuck when you're stuck. This chapter is a list of specific tasks, any one of which can get you moving.
Chapter 16
My 500-Year Plan tells how I've set up my estate so that after I'm through Living It Up, my money will outlive me - and keep growing - for many lifetimes. Building on the portfolio I've described in Chapters 6 through 9, you'll read how I made a $10,000 one-time investment that I believe will become a $20 million gift to charity as well as a comfortable retirement for my grandson. And you'll see how my will provides for my children and then leaves what I believe will grow into a huge amount of wealth to be distributed to charities for possibly hundreds of years.
I'm not recommending that readers necessarily follow my plan. But I want to encourage successful investors to consider new ways to express their generosity and love.
