Читать книгу The Gone Fishin' Portfolio - Alexander Henry Green - Страница 12

In early 2003, I created a new investment portfolio for subscribers to The Oxford Communiqué and gave it a lighthearted name: the Gone Fishin’ Portfolio. After a few years of market-beating returns, multinational publishing house John Wiley & Sons asked if I would write a book about it. I agreed.

I knew I had an excellent strategy to share with the world. However, I also realized that most financial advice has a short shelf life. Things change quickly in the world and in markets. Even the best investment letters written by the most insightful analysts are soon lining the reader's birdcage. A book, by contrast, gives an author the opportunity to make a considered argument, flesh out his or her case, and answer potential objections or criticisms.

But then, who needed another investment book, then or now? The shelves in my home were already groaning with titles on stock selection, value investing, trading strategies, asset allocation, global diversification and many other topics. I learned a lot from those books, but it wasn't always what the authors intended.

I discovered that no matter how smart, how experienced or how insightful the advice-giver, investment predictions—with the luxury of hindsight—can appear not just wide of the mark but foolish. Indeed, many investment books from years past stand out primarily as cautionary tales about pride and hubris.

The authors who made a compelling case for their investment approach were often short on specifics. For example, if high returns could be made investing in value stocks, great—but which ones? Sure, the author could offer a screen using price-to-sales, price-to-earnings, price-to-book, dividend yield or other financial metrics. But how many readers were actually equipped to do this—and to follow through with an equally rigorous sell discipline? Not many. The author could make specific stock recommendations, of course, but, in most cases, that is better done in an e-letter since the economy and financial markets change quickly.

The advice given in most investment books is either too ambiguous or, conversely, specific but soon dated. No wonder so few investment books are considered classics.

My goal was to break this trend and offer timeless investment advice that told readers exactly how and where to invest their money and in what percentages. And that's exactly what I did with the first edition of The Gone Fishin’ Portfolio.

I soon learned there was an eager market for this kind of book. The week of its publication it soared to No. 2 on Amazon's list of nonfiction bestsellers and hit The New York Times’ bestseller list the following week.

Timeless investment advice is an ambitious goal, however. And much has changed since the book's publication in 2008.

We witnessed the housing bust and the biggest financial crisis in nearly a century. Oil prices plunged as new technologies—horizontal drilling and hydraulic fracturing—made formerly inaccessible deposits economically viable. Interest rates dropped all the way to zero—and into negative territory in many countries.

We enjoyed the longest U.S. economic expansion and bull market from 2009 to 2019.

Eleven years of extraordinarily high stock returns were followed by a global pandemic, the greatest spike in unemployment since the Great Depression, the largest economic contraction ever, and the fastest—and shortest—bear market in history, quickly followed by the fastest market rebound and largest quarterly economic expansion in history.

With all these booms and busts, the Gone Fishin’ Portfolio was truly put to the test. And it came through like a champ, delivering solid returns with less risk than being fully invested in stocks, and without a single modification to the original strategy.

This last point is key. The idea behind this investment system is to quit worrying about the economy, inflation, interest rates or the financial markets and instead use a strategy designed to grow your assets in good times and protect them in bad, despite the fact that we cannot know in advance when these expansions and contractions will arrive.

My goal with this book is to show readers the safest, simplest way to achieve and maintain financial independence.

I'm not talking about people with great connections, incredible talents or innate genius. I'm talking about everyday, ordinary people. People like Ronald Read.

Read, a longtime resident of Brattleboro, Vermont, died in 2014 at age 92. He lived modestly, as you might expect for a man who worked 25 years at a gas station and then 17 more as a janitor at a local J.C. Penney. Yet his relatives were shocked when they discovered that he left behind an estate valued at almost $8 million.

Read's story puts the lie to the conventional wisdom that to get rich you have to be well connected, highly educated or a successful entrepreneur with his or her own business. He made his fortune in the stock market, where anyone with even a modest amount of savings can take an ownership stake in many of the world's best businesses. He had no formal training in business or economics. But, as he proved with his own example, that's not necessary for long-term investment success.

How did a janitor and gas station attendant build a net worth that put him in the top 1% of the nation? Read was patient. He thought long term and wasn't buffeted by daily events or the regular caterwauls of market pundits. He didn't mistime the market because he never tried to time it. And he diversified broadly.

(Some investment pros will tell you the key to making a fortune in the stock market is owning a concentrated stock portfolio with just a small number of names. The assumption, of course, is this limited selection will do exceptionally well. But what if it doesn't? What if it does exceptionally poorly instead? A smart investor spreads his bets not only to reduce risk but to increase his chances of holding a lot of big winners. In the pages ahead, I'm going to show you how to own not just a few of the market's biggest gainers in the years to come but every one of them—and not just possibly but definitely. So stay tuned.)

Read kept his investment costs minimal. He didn't use a full-service broker or other high-paid advisor. He used a discounter only to execute his trades. And he lived frugally. Although his stock portfolio hit the multimillion-dollar mark many years before he died, he didn't flaunt his wealth. He was generally seen in the same flannel jacket and baseball cap. His most expensive possession was a 2007 Toyota Yaris valued at $5,000. He foraged for his own firewood and would often park several blocks away to avoid paying parking fees. As a result, he went from being a janitor to a philanthropist.

What did Read do wrong? From an investment standpoint, almost nothing. But from a commonsense standpoint, I question whether it was wise to live a life of such extreme frugality.

(As we'll discuss, that isn't necessary with the Gone Fishin’ strategy. Living like a miser so you can spend your money in retirement is a bit like saving up all your sex for old age. It doesn't make a lot of sense.)

Read could have enjoyed some of the fruits of his success while he was alive, treating himself or someone he loved to something special every once in a while. Then again, that must not have been important to him. (And, after all, it was his money.) Clearly, he enjoyed the challenge of living modestly, something beyond the imagination of most Americans today.

On the other hand, his local library and hospital in Brattleboro are grateful. Read bequeathed them more than $6 million.

Why would I lead off with a story about a janitor and gas station attendant who accumulated a multimillion-dollar fortune? After all, someone like Read must clearly be the exception, not the rule.

Not so. I've met many men and women from humble circumstances who have developed sizable fortunes … and heard about many more. One of my regular golf partners recently told me he had just settled his father's estate.

“The man was a barber. He never made more than $10,000 a year. So I was surprised to find he left a seven-figure estate.” How? By saving regularly and investing in stocks.

Read and my friend's father are typical of the thousands of men and women surveyed by Thomas Stanley and William Danko in The Millionaire Next Door: The Surprising Secrets of America's Wealthy. Stanley, and later his daughter, Sarah Stanley Fallaw (also a researcher), spent decades learning how middle-class workers and other men and women of modest means become rich.

The best part? It has nothing to do with founding a computer company in your garage, recording a platinum-selling album or playing third base for the Yankees. Rather, most people who achieve financial freedom in this country follow a remarkably similar path. They adopt work, spending, saving and investment habits that lead—almost inevitably—to a seven- or eight-figure net worth.

All you need are knowledge, discipline and patience. This book provides the knowledge. And in Chapter 15, I'll also address the factors that will challenge your discipline and patience in the months and years ahead.

The principles of wealth creation are well understood. But that doesn't mean that most people understand them. A few years ago, the Securities and Exchange Commission (SEC) released a wide-ranging report on financial literacy in the United States, and the conclusion was clear: We're not there. We're not even close. Yet the consequences of financial illiteracy have never been greater.

Corporate pension plans have gone the way of the passenger pigeon. And without serious reform, Social Security—according to the agency's own website—will eventually be bankrupted by time and arithmetic.

One health and retirement survey concluded that most Americans “lack even a rudimentary understanding of stock and bond prices, risk diversification, portfolio choice and investment fees.” The most common response to most questions in the survey was “Do not know.”

As a nation, our financial illiteracy is appalling. Even good students graduate from high school without understanding compound interest, IRAs and 401(k)s, or why we even have a stock market. And when it comes to money basics, ignorance gets expensive fast.

Here are just a few highlights from that SEC report.

When asked the primary benefit of portfolio diversification, respondents were given three choices: (a) risk reduction, (b) increased returns or (c) reduced tax liabilities. Only 56% knew the answer was (a). (Even if they had no clue, respondents still had a 33% chance of getting it right.) The reality is that most respondents didn't even know this most basic piece of financial knowledge.

When asked whether a young investor willing to take moderate risk for above-average growth should invest in (a) Treasury bills, (b) money market funds or (c) balanced stock funds, 63% of respondents chose the wrong answer—and even 49% of fund owners didn't know the correct answer was (c).

When asked whether a traditional IRA, a 401(k) or a Roth IRA offers withdrawals that are tax-exempt, only 44% knew the correct answer was a Roth.

This is really a shame, especially in a country like ours where citizens are given unprecedented freedom and opportunity to better their financial lives. Instead, too many learn the hard way, falling for the siren song of an expensive insurance agent or transaction-based broker … or committing hara-kari in a discount brokerage account.

What is the solution? Teaching basic financial literacy in every public high school in the country would be a good first step. But education reform is slow and difficult, not least of all because less than 20% of teachers polled said they felt competent to teach saving and investing.

This book intends to fill this gap. I'll cover the investment basics and unite them in a simple, straightforward investment strategy that will allow you to earn higher returns with moderate risk, ultra-low costs, and a minimal investment of time and energy.

Let me get started by telling you a little bit about my background and how I developed this investment system.

My circumstances were not as modest as Ronald Read's or my golf partner's father’s. But I wouldn't call them privileged, either.

I grew up the second of four sons, in a middle-class family in the South. I lived in a house with no air conditioning and went to public schools without it. My family had little money to travel. A vacation was the six of us piling into an old station wagon and driving to Daytona Beach to see relatives. (It wasn't until two years after I graduated from college that I took my first commercial flight.)

As a young man, I worked a series of lousy jobs: maintenance on a truck terminal, night shift in an auto-parts warehouse and so on. I had no connections. I had no inheritance. But I worked and saved and invested. And things worked out, as they did for millions of other Americans who followed a similar path. I now spend my days trying to light that path for others.

My financial fortunes did get a tremendous boost when I got into the money management industry in 1985. The work suited me. Sixteen years later, I had gone from a net worth of approximately zero to financial independence. And I retired from the industry.

I was now free to do whatever I wanted, wherever I wanted, with whomever I wanted. It's called total financial freedom. And I can tell you from experience, it's a great feeling.

Unfortunately, many of my clients had not become financially independent. This was not because I advised them poorly. As an investment advisor, I dealt with my clients honestly and gave them the best advice and service I could.

Yet, in many ways, they operated at a disadvantage. Some clients had a poor understanding of investment fundamentals. Others found it impossible to commit to a long-term investment plan. Many were simply too emotional about the markets, running to cash at the first hint of danger.

Contrarian instincts are rare, too, I learned. Few people are emotionally stirred by low stock prices. But I am one of them. Every time there was a correction, a crash or a financial panic, I'd get an adrenaline surge, my pulse would rise, and I'd start buying.

My clients often did just the opposite. They were more inclined to curse loudly, sleep little and hurl epithets, some unrepeatable. Unfortunately, strong emotions like these are often a prelude to bad investment decisions.

Then there was the other small matter of my firm's fee schedule. Investment professionals don't get into the industry because the work is meaningful but low paying. You become a broker, a financial planner, an insurance agent or a money manager to get rich. And most of us do, eventually. In truth, what you're paying your financial advisor is probably too much. Many investors aren't doing that well because their advisors are doing too well.

This story is as old as Wall Street itself. In his book Where Are the Customers’ Yachts?, originally published in 1940, Fred Schwed Jr. tells the story of a visitor to New York who is taken to the harbor and shown the impressive yachts that belong to the bankers and brokers. A tad naïve, the visitor asks, “But where are the customers’ yachts?”

Where indeed.

I'm not suggesting that this is all Wall Street's fault. Clients are rarely abducted and forced at gunpoint to sign account-opening forms. Nor can advisors make important investment decisions without their clients’ consent (not without landing in the hoosegow, anyway). We all need to take responsibility for the decisions we've made, including the decision to delegate important responsibilities.

Since retiring from life as a registered investment advisor 20 years ago, I've been busy living what I call “the second half of my life” as a financial writer.

For more than two decades I have been the Chief Investment Strategist of The Oxford Club, the world's largest financial fellowship with over 170,000 members. I am also an editor of Liberty Through Wealth, a free daily investment research service with over 600,000 subscribers.

Frankly, writing about investments rather than dealing with individual clients suits me better. I can give advice freely, and no one who heeds it has to wonder whether my real motive is to earn fees or commissions or capture their assets. I can offer opinions about the market without a compliance officer scrutinizing my words. And my readers don't have to worry about the objectivity of my analysis. I have no business relationships with the companies I cover, no investment banking colleagues seeking customers for new bond issues or secondary offerings, no reason to tell anything but the plain truth as I see it.

I don't mind telling you that many of these truths I learned the hard way. You can save yourself a lot of trouble—not to mention a boatload of money—by learning from my experience. As I've told my regular readers, “I've made the dumb mistakes so you don't have to.”

In the pages that follow, I'm going to share with you the best long-term investment strategy I know.

The Gone Fishin’ Portfolio will allow you to successfully manage your money yourself using a simple yet highly sophisticated strategy to increase your returns, reduce your investment risk, eliminate Wall Street's high fees and keep the taxman at bay, too. The idea is simple: Get Wise, Get Wealthy … and Get On with Your Life.

In Part I, Get Wise, we'll examine the challenges you face as an investor. I'll review the fundamental relationship between risk and reward in the financial markets. You'll also get an insider's view of how the investment industry really works.

Get Wealthy, discussed in Part II, means understanding and, I hope, adopting the Gone Fishin’ strategy. You'll learn why this is arguably the safest and simplest way to reach your long-term financial goals. I will also address the financial and psychological challenges you're likely to face in the years ahead.

Get On with Your Life, which we will discuss in Part III, means taking your financial destiny into your hands and, at the same time, reclaiming your most precious resource—your time.

Setting up the Gone Fishin’ Portfolio is a snap. Maintaining it takes less than 20 minutes a year.

You may not believe you're qualified to manage your money yourself. If so, I beg to differ. Investing can be made endlessly complicated, or paint-by-numbers simple. If you keep things simple, you're perfectly qualified to manage your money yourself—and in a highly sophisticated way.

As an investor, your overriding goal is to achieve and maintain financial independence. Your savings are the fuel. The Gone Fishin’ Portfolio is the vehicle to get you there.

Let's get started.