What are the timeless principles we can follow in order to become better investors?
In this podcast episode you’ll learn:
- How a book’s permanence makes it different from a podcast.
- How David’s book got written and published and why his publisher just recalled the hardcover version of the book.
- What are the 10 questions we should answer before we invest in anything.
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Successful investing is a lifelong pursuit that baffles many. How do you accomplish it? How do you know where to invest your money? The questions are endless, but David works to answer them in his new book, Money For the Rest of Us: 10 Questions to Master Successful Investing. David sought to create a modern guide to investing that encompasses his strategies from years of working in the industry. This episode covers his writing process and a detailed outline of what is covered in his book. Don’t miss it!
The art of writing a book
The right book at the right time can change your life. David read many such books as a teenager. He articulated that he spends a lot of time and energy into crafting his podcast, but believes there is something special about the permanence of a book. It’s carving. It’s crafting. It’s timeless. It’s one sentence at a time, meticulously crafted to convey meaning.
David acknowledges the plethora of great investing books available, but none of them teach all of the methods and principles for investing that he’s found successful. He wanted to write something that covered a specific strategy, without being pinholed to a specific niche. David’s desire was to create a timeless book—whether a publisher would pick it up or be self-published.
What does the process of writing a book entail?
David knew the approach he wanted to take and the questions he wanted to answer in his book. If you’ve never had the experience of writing a book, the process is extensive—but David greatly enjoyed it. He wrote a proposal in 2018. It was a strategic plan—a framework—that included a chapter outline, sample chapters, as well as a marketing plan, the target audience, and how the book would be promoted.
The project was sold to McGraw-Hill, and from January 2018 to January 2019 David wrote the book. After a year of meticulously crafting exactly what he wanted to say, he had 21 volunteers review his manuscript. After receiving feedback and making changes, he turned in his book to the publisher.
From there he engaged in back-and-forth with editors doing line-by-line copy edits. They worked on cover design and writing a glossary. But the extensive process culminated in a published book that belongs to the readers—those interested in finally mastering successful investing.
How to Master Successful Investing
David structures his book to answer 10 questions—a checklist of things that one can ask before investing, to compare one investment opportunity to another.
Question 1: What is it? A person needs to seek to understand and explain in simple terms an investment’s characteristics. If you are unable to understand and explain an investment to someone, don’t invest in it.
Question 2: Is it investing, speculating, or gambling? Take time to classify where the opportunity falls and if the outcome is uncertain. If you can categorize it you can then decide whether to invest in something that only has a positive expected return.
Question 3: What is the upside? Focus on three drivers: cash flow, the cash flow growth, and what investors are paying for cash flows.
Question 4: What is the downside? What is the maximum potential loss and the personal financial harm caused by that loss? It’s all about defining risk and managing it.
Question 5: Who is on the other side of the trade? Understand the dynamics of the market.
Other criteria to consider when choosing an investment
David continues his synopsis of his book and covers some of the final questions that must be asked:=
Question 6: What is the investment vehicle? This chapter takes a deep dive into the structure of investments, particularly ETFs, closed-end funds, and mutual funds. Do you know how to understand the vehicle that houses an investment strategy?
Question 7: What does it take to be successful? There are specific attributes that you use to help determine performance. Successful portfolios have a diversified mix of dependable return drivers that we have identified beforehand.
Question 8: Who is getting a cut? Different entities take a portion of your return in fees, taxes, and expenses. Do you know where and to whom that money is going?
Question 9: How does it impact your portfolio? You want a diversified portfolio that gives you creative freedom that aligns with your knowledge, interests, and values.
All of the questions you must process and ask yourself come down to this pivotal final question: Should you invest? How much should you invest? When do you invest? David’s book seeks to answer all of these questions in a way that is true to his beliefs about investing—and true to the last 5 years of answering questions on this podcast.
To hear more specifics about his process and details about his book that was just released, listen to the whole episode now!
- [0:20] How David decided to write a book.
- [3:00] The right book can change your life.
- [4:20] The art of writing a book.
- [7:00] The extensive process of writing a book.
- [9:57] Recording the audiobook.
- [11:32] Question 1: What is it?
- [13:36] Question 2: Is it investing, speculating, or gambling?
- [14:32] Question 3: What is the upside?
- [15:54] Question 4: What is the downside?
- [16:42] Question 5: Who is on the other side of the trade?
- [18:06] Question 6: What is the investment vehicle?
- [18:58] Question 7: What does it take to be successful?
- [20:20] Question 8: Who is getting a cut?
- [21:03] Question 9: How does it impact your portfolio?
- [22:05] Question 10: Should you invest?
- [23:06] What happened to the book launch
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host David Stein. Today is episode 274. It’s titled, “10 Questions to Master Successful Investing.”
Just over 2 years ago, I received an email from Paul Lucas of the literary agency Janklow and Nesbit. He had been listening to my podcast for 6 months or so, was a fan. His father used to be a Wall Street analyst, so Paul mentioned that he found many of the topics on the show both familiar and engaging. He wrote, “One of my dreams is to represent a useful book that could live forever, a modern version of The Only Investment Guide You’ll Ever Need. I was wondering if you were interested in pursuing a book and if it is something you’d like to discuss with me?”
The Only Investment Guide You’ll Ever Need came out in 1978. It was written by Andrew Tobias. It’s a good book, but it’s 40 years old. It’s a classic investment book. So this idea of a useful book that could live on for decades, I admit, it piqued my interest. So, had some calls with Paul, and I decided to write a book.
The right book at the right time
I was reminded recently how the right book at the right time can change your life. My daughter and I were recently in Ohio to visit family and we attended my 40th-year reunion for my 8th grade graduating class from St. Margaret Mary in North College Hill, OH. One of my friends was there, and I don’t think I have seen him, maybe since I left school. Because most of my friends went to private, Catholic high schools and I went to public school. He might have been at the 10th year reunion, but as soon as I saw him, I thought of the sled.
My mother had a sled growing up. It was a Flexible Flyer. We used it as kids. When I was 10 or 11 it was snowing, I went out with my friends, we’re going sledding. I happened to leave the sled at my friend’s house in his storage shed. I didn’t think about it for several weeks, and then it was a month. And by then it was spring, there was no snow. And I was embarrassed to go walk the 3 blocks to his house to get the sled. Because I didn’t want anyone in my neighborhood watching me walk down the road in spring with a sled. Now that’s pretty pathetic, but that was my mindset as a 10 or 11-year-old.
But then, my mom began to sell real estate. And all these books started coming into my life. Classic books, they had been around for decades. And I read them. Think and Grow Rich by Napoleon Hill, came out in 1937. How to Win Friends and Influence People, Dale Carnegie, 1936. Richest Man in Babylon, G.S. Clason, 1926. The Magic of Thinking Big came out in the ’50s. The Greatest Salesman in the World, Og Mandino, 1968. A newer one, Zig Ziglar, See You at the Top. We had tapes about Zig Ziglar. And we also had tapes from Steven R. Covey, who hadn’t published 7 Habits of Highly Effective People, but he had tapes about it. And he actually came to Cincinnati a few times when I was in my teens, or early teens, and had a profound influence.
Those books changed my mindset. I don’t even remember what most of them were about. Zig Ziglar said, “don’t kick the cat,” I do remember that. But it instilled in me a greater sense of confidence and a greater understanding, to some extent, of money and how you network to earn money. I haven’t touched those books since. I sort of overindulged on self-help sales training books and tapes as a 12-14-year-old. So much so, I just don’t partake anymore.
Writing vs. speaking
But could an investment book be a classic like that? And how would I go about writing such a book? How would it be different from a podcast?
I’m reading a fascinating book right now by Joe Moran titled First You Write a Sentence. It’s a book on writing. Here’s a quote, “Writing exists, not to be wasted on the air like speech, but to be committed to permanence.” Now that doesn’t say a whole lot about podcasts. Lots of speech committed to air, but certainly, at least in my case, well-crafted speech, given the number of hours I put into each episode.
Another quote, Kurt Vonnegut, novelist. “Writing allows the mediocre who are patient and industrious to revise their stupidity to edit themselves into something like intelligence.” Writing. It’s carving, it’s crafting. Permanence. It’s timeless. One sentence at a time. And that’s how a book differs from a podcast. A book can live on for many, many years.
Now many of you go back and listen to older episodes of the show, but the idea of a book on how to invest. People ask me all the time, “Do you have any books on how to invest that you recommend?” And there are a lot of great investing books out there and personal finance books I’ve mentioned a lot of them on my show. But they’re not how I, necessarily, approach investing. And they don’t teach the principles that I believe are the foundation for how we invest as portfolio managers.
You and I are portfolio managers. And a portfolio manager compares different investment opportunities and allocates their money among them. Many of the investment books are very niche, in terms of focusing on real estate or picking individual stocks or cryptocurrencies. But in analyzing the market, there really wasn’t a book that I looked at and said, “Well should you be investing in real estate or cryptocurrency or value stocks? And how do you decide that?”
Back in episode 203, we covered Annie Duke’s book. She is a former professional poker player and decision-making strategist. Her book is Thinking in Bets. She wrote, “what makes a decision great is not that it has a great outcome. A great decision is the result of a good process.” A great investment decision isn’t because it has a great outcome, it is the result of a good investment decision process, an investment philosophy. And that’s what I wanted to put in a book. An investing framework. Something to help you decide where to invest and how to invest.
Annie Duke—I asked her if she would endorse my book. She said she would consider it, but she had to read every single page. So I sent her the draft, she read it. She liked it and she endorsed it. On the front cover it says, “This is a high impact framework for making any decision, not just investing.”
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