Review of The Safe Investor by Timothy McCarthy

I received a review copy of Timothy McCarthy’s The Safe Investor: How to Make Your Money Grow in a Volatile Global Economy a few weeks ago.  Any book that can give me at least one good idea is a win.  It usually covers the cost of a book, or an e-book, or a membership to a site.  This book had many good ideas for me.

There are common threads among finance books, particularly personal finance books and investing books.  Few will say, “spend more than you earn,” or “bet it all on red.”  What makes books like these different from one another is the wealth of experience that the author brings in.  Tim McCarthy certainly has the creds: he was president and chief operating officer of Charles Schwab & Company, and he’s worked in over two dozen countries.  This affords him the ability to talk about managing money (he’s managed lots of it) and how to diversify internationally (he’s seen the countries first-hand).  Lots of unique insights into international investing.

Major takeaways from the book

Here are a few of the big ideas that I pulled from this book:

  • Three pockets; unequal sizes.  The savings pocket, the investing pocket, and the trading pocket.  The third is substantially smaller than either of the first two.  “Don’t risk more than you can afford to lose.”  Play with the trading pocket; the others should be safe.  (This is The Safe Investor, after all!)
  • Avoid single points of failure.  They can appear anywhere.  Investing in one country, with one brokerage, in one asset class, with one financial advisor, etc., bring in single points of failure.
  • Independently verify.  Is your financial advisor doing right by you?  Ask another one.
  • Risk is everywhere.  Nothing is a risk-free investment.  He points out many areas of risk that I hadn’t considered before.
  • Young demographics are good for growth.  Because old people don’t spend as much.  Some countries’ big growth times have passed.  He names names.
  • Diversify.  A well-diversified portfolio smooths out the rough spots in any particular country, asset class, sector, or maturity time frame.  But being well-diversified — and staying well-diversified — isn’t always easy.  He explains how the makeup of some investment products can change over time, and hence why their composition needs to be monitored.
  • You should plan to live longer than you expect.  This will decrease the chance that you’ll run out of money before running out of years.  Near the end of the book he outlines a general strategy for broad ranges of age that can be used as a starting point with a financial advisor.
  • Know what management tasks you can delegate, and what ones you shouldn’t.  You can hire financial managers for many things, but not all.  He outlines which tasks to hold close.

I thought The Safe Investor was excellent.  It went into detail in important ways that helped me to understand the many facets of investing a bit better overall.

John Wedding

Husband. Father. Web publisher. Musician. John has blogged at Mighty Bargain Hunter since 2005, helping people to recognize life's good deals.

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