Investment Book Reviews

The following short reviews hopefully will allow potential investors and real estate purchasers to choose between some useful titles. These books were all bought in Australia, and may be most applicable to Australian context.

See also the list of useful investment websites.

Books reviewed below:

• Renton’s Understanding Investment Property (3^rd ed.) by N. E. Renton
• Real Estate Mistakes by Neil Jenman
• Building Wealth Story by Story by Jan Somers
• Rich Dad Poor Dad by Robert T. Kiyosaki and Sharon L. Lechter
• The CASHFLOW Quadrant by Robert T. Kiyosaki and Sharon L. Lechter
• Rich Dad’s Guide to Investing by Robert T. Kiyosaki and Sharon L. Lechter
• House Hunting (2^nd ed.) by Jerry Tyrrell
• How to Own Your Home Years Sooner! (2^nd ed.) by H. Gill and S. Therry
• Investing in Residential Property (4^th ed.) by Peter Waxman
• Making Money (4^th ed.) by Paul Clitheroe
• Common Sense on Mutual Funds by John C. Bogle
• Family Trusts (2^nd ed.) by N. E. Renton
• Smarter Property Investment by Peter Cerexhe
• The Richest Man In Babylon by George S. Clason
• How To Be Rich by J. Paul Getty
• The Millionaire Next Door by Thomas J. Stanley and Willaim D. Danko
• Money Secrets of the Rich by John R. Burley and Bruce Whiting
• The Mystery of Capital by Hernando de Soto
• The Warren Buffett Way by Robert G. Hagstom, Jr
• Seven Steps to Wealth (2^nd ed.) by John L. Fitzgerald
• Money Masters of Our Time by John Train
• Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher
• The Intelligent Investor (revised ed.) by Benjamin Graham

Renton’s Understanding Investment Property

N. E. Renton
3^rd ed. Information Australia. 2000.
Approx. $32.95

Nick Renton has produced an extraordinary number of books about law and investment in Australia, including titles relating to wills, negative gearing, family trusts, and the stock market. In this book, he explains the various aspects of property investing. It is not a “how-to” book, but more of a “what-is” book. Renton explains the risks and economic factors to consider when investing in property trusts, parking spaces, mortgages, and both commercial and residential property, amongst other topics. This 496 page volume is very thorough, but quite readable, although it probably wouldn’t make for the best casual reading. The occasional touches of dry humour I found surprising and delightful. Understanding Investment Property is ideally suited as a reference tool, for investigating different classes of property investment as opportunities become available. Hence you could probably just borrow this book from a library or a friend as needed, rather than purchase it yourself.

Real Estate Mistakes

Neil Jenman
1^st ed. Griffin Press. February 2000.
Approx. $21.80

Neil Jenman is obviously revolted by the typical real estate agent approach. In this book, he goes to great lengths to explain why this approach is bad for buyers, bad for sellers, bad for agents, and unethical to boot. He convincingly argues that auctions are a bad idea for sellers, and likewise open inspections and mass advertising. He also provides useful tips for buyers to use when negotiating with unskilled agents and at auctions. This is not a book oriented around property investing, but around the buying and selling of one’s home. Jenman doesn’t advocate looking for bargains, paying agents cheaply, or seeking to pay much less than you might be able to afford when buying, and this is to some extent related to the book’s focus. However, the education afforded by reading this book will prove useful to all those who buy or sell property.

Building Wealth Story by Story

Jan Somers
Somerset Financial Services Pty Ltd. September 1998.
Approx. $26.95

Jan Somers is one of the high profile residential property investment successes in Australia, and this is the third in her series of books for encouraging others to succeed like she has. There are 101 different arguments for why property investment is worthwhile, presented in the form of short anecdotes. It contains nuggets of information that makes it worth reading, but the amateur “Microsoft Word”-type layout detracts slightly from the professional content. Somers’ approach is to build equity through capital growth, using rental income to balance interest payments in the short term – no predictive ability should be required. Her company sells financial software packages to assist with these calculations, and some of the anecdotes concern the software. The view that “anyone can do it” is emphatically presented, and would be a good introductory read for those considering or just beginning with residential property investment.

Rich Dad Poor Dad

Robert T. Kiyosaki and Sharon L. Lechter
TechPress Inc. 1998.
Approx. $19.95

This book is the first in Robert Kiyosaki’s trilogy of investment guides. He is always very careful not to advocate a particular path to building wealth, but instead tries to teach a mindset for achieving great wealth. Specifically, the mindset of the very rich, based on his own experiences and the teachings of his “rich dad”. Rich Dad Poor Dad lays the educational foundation for the other two volumes, although it stands on its own as an eye-opening and very enjoyable read. Through defining assets, liabilities, balance sheets, and income statements in simple ways, Kiyosaki conveys the basics of financial literacy from the point of view that “cashflow is king”. It doesn’t try to be consistent with typical accountancy teachings, but strives to highlight the aspects of one’s personal finances that should be given priority. It’s a book that could’ve done with a proper editing, but has noble goals, and should be required reading for all those contemplating a life of employment, at the very least for the fresh perspective on investing that it brings.

The CASHFLOW Quadrant

Robert T. Kiyosaki and Sharon L. Lechter
TechPress Inc. 1998.
Approx. $19.95

In this second guide, Kiyosaki introduces four classifications of people based on how they earn income. These classifications form the quadrant for which the book is named. People “on the left side” of the quadrant earn income directly from their own labour. Those on the right side earn income through others’ labour. This book discusses the steps to take in order to move oneself from the left to the right side of the quadrant, particularly to the classification based around earning income from investing where the greatest potential income streams can be found at the lowest risk. Kiyoski seeks to help people understand themselves better, and through this understanding improve themselves to eventually control their personal financial situations.

Rich Dad’s Guide to Investing

Robert T. Kiyosaki and Sharon L. Lechter
TechPress Inc. 2000.
Approx. $21.90.

In Kiyosaki’s third guide, the final in the series to date, he tells the tale of how he learned his financial skills, both from his “rich dad” and through his own life. He notes that there is no magic formula, and becoming a successful businessman or investor is hard work. Kiyosaki discusses the need for planning, support from a clever team of financial/business professionals, and what different types of investors do (the best types of investor have more control over their investments). He now works at being the type of investor that takes companies public, profiting from the sales of their shares, but he has previously been the type of investor that buys into businesses, and this is the type of investor that he recommends for most people. This book solidifies the theories presented in the previous two guides, and gives real advice on how to “do” what the best investors do, compared with the previous books that focussed more on how to “be” a good investor.

House Hunting

Jerry Tyrrell
2^nd ed. Allen & Unwin. 1997.
Approx. $16.95

In this brief but comprehensive guide, Jerry Tyrrell draws on his experience as a property inspector to provide step by step advice on how to purchase residential property. He discusses topics such as choosing a property, engaging professional help, bidding strategies at auction, legal considerations, choosing a loan, and moving in. There is an emphasis on the use of property inspections, and you may come away from the book believing that the most important step in acquiring property is the property inspection. However, the book gives a very thorough treatment to many of the issues, and may require later reference as a buyer steps through the purchase process in order to make full use of the book.

How to Own Your Home Years Sooner!

H. Gill and S. Therry
2^nd ed. I.G.C. (Aust). 1997.
Reviewed: November 2000
Approx. $24.95

This short book covers the simple mathematical principles behind housing loans. From this basis, the authors explain the now well known benefits of Offset and Line Of Credit loans. Gill and Therry are mortgage brokers and they are apparently frustrated with how banks sucker people into home loans that cost them a lot. They outline the benefits of the different home loan structures available from banks, list the typical lending criteria used by banks and how to calculate them, show how to keep track of personal expenses and choose the best home loan, and offer tips for paying off a loan quickly. This book is great for those trying to tell the difference between the banks’ loans, and although is helpful for increasing investors’ understanding of loans, is ideally suited for those looking for a home loan.

Investing in Residential Property

Peter Waxman
4^th ed. Wrightbooks. 2000.
Approx. $32.90

This book is an extended, scholarly discussion on the economic forces that affect changes in the residential housing industry. The subtitle of the book (“Understanding the market in the New Millennium”) more accurately reflects the contents than the title does. There is very little guidance on how to invest in residential property – most of the issues discussed are things that the average investor has very little control over, eg. current account deficit, interest rates, taxation or migration levels. However, this book teaches an economic perspective of the housing industry, something that is relatively uncommon. It is filled with facts, figures and tables, and at times can be quite overwhelming. I came away with an appreciation for how complicated the economic environment is, and the difficulty in making predictions about the medium-to-long term future of residential property investing. Although too heavy to be a beginner’s introduction, its completeness makes this book a worthwhile read for the investor serious about understanding the risks inherent in property.

Making Money

Paul Clitheroe
4^th ed. (Year 2000 edition) Penguin Books Australia. 1999.
Reviewed: April 2001
Approx. $24.95

Eventually all media personalities get around to writing a book, and so it’s no real surprise that financial planner come television presenter, Paul Clitheroe, has become an author as well. The surprise is how good the book is. It isn’t light reading, but it is aimed squarely at the novice investor. Clitheroe covers both investing philosophy and technique, including topics such as saving, tax, property, shares, and retirement. Although his favourite forms of investing are superannuation and managed funds, he provides reasonable arguments for these without ignoring other alternatives. The more involved (and perhaps profitable) investing techniques are not really covered, but the level of detail provided should easily protect the unwary from some of the self-proclaimed gurus around. If you want a sensible backgrounder to investing in general, then this one is for you.

Common Sense on Mutual Funds

John C. Bogle
John Wiley & Sons, Inc. 1999.
Reviewed: June 2001
Approx. $56.00

John Bogle started Vanguard in the mid 1970s, the first fund company to operate a public fund based on a stock market index, and has been a crusader for index funds ever since. In this regrettably wordy and repetitive book, he provides a compelling argument for avoiding investing in actively managed funds, and details the historical and philosophical background of the Vanguard group of funds. His argument is addressed to those who wish to have their money invested without fuss for the long term: there is no way to tell in advance which managed funds will perform the best in the short-term, all funds will perform at best equivalent to the market before costs long-term, and actively managed funds cost substantially more than passively managed funds. Hence low- cost, passively managed funds, such as index funds, are the preferred investment vehicle. The argument and conclusion are supported by copious figures and charts, and as a result this book will appeal to the more academically-inclined investor.

Family Trusts

N. E. Renton
2^nd ed. Wrightbooks. 2001.
Reviewed: September 2001
Approx. $27.95

Nick Renton has again written a very detailed book to help investors understand the intricacies around an aspect of Australian law. This is the most popular general book for understanding how to use trusts, but it has a bias heavily towards family trusts, as indicated by the title. So if you aren’t interested in setting up a family trust, you will have to wade through much irrelevant material. Another issue is the dynamic situation with respect to taxation of trusts recently. This book was completed after it was determined that legislation to tax trusts as companies was to be postponed indefinitely, but not all of paragraphs in this book are as recent – this minor fault is not a concern if you read the whole book. Until specialist books or pamphlets are prepared for different investors and their needs concerning trusts, this is an essential text to read before meeting with your accountant or solicitor.

Smarter Property Investment

Peter Cerexhe
Allen & Unwin. 2001.
Reviewed: November 2001
Approx. $24.95

This down-to-earth book, written by ex-solicitor Peter Cerexhe, contains something for any but the most experienced property investor. The focus on both residential property and buying for investment makes this book especially valuable compared with other property or investment books. Areas covered include tax considerations, CBD vs. suburbs, steps involved in buying well, and various strategies for different types of investor. This book may scare off the novice investor, and does not contain any ground-breaking new approaches, but strives (and I believe, succeeds) in being sensible. It is especially suited towards people who already own some property and want to invest in additional property.

The Richest Man In Babylon

George S. Clason
Signet. 1988.
Reviewed: December 2001
Approx. $16.95

George Clason, credited with the production of the U.S.A.’s first road atlas, was an avid publisher, and created a number of pamphlets on financial self-help. Many of these pamphlets (originally written as long ago as 1926) have been collected into this book as chapters. Also unusual, is that this book is basically a work of fiction – each chapter tells a different story based on characters from Babylon. Arkad the money lender, Dabasir the camel trader, Sharru Nada the merchant price, and others tell their tales of how they overcame adversity and became successful. Although this theme is presented repeatedly, it is still an engaging and interesting book, and reminded me of Rich Dad Poor Dad in many ways. Clason presents his advice with equal parts of motivation and education, and should capture the imagination of those who have yet to establish a financial plan.

How To Be Rich

J. Paul Getty
Jove Books. 1983.
Reviewed: February 2002
Approx. $15.00

Self-made billionaire Paul Getty was once credited with being the richest man in the world, and here he presents some of his philosophies on life. The book is not titled “how to become rich” since that isn’t its focus, and contains Getty’s advice about the sort of person you should be, if you are rich or to be rich. Intelligently written, it presents the gritty reality of Getty’s accomplishments, and the good and bad sides of being successful in business. Although targeted mainly at the novice in business, it has wide appeal, and in separate chapters also covers Getty’s opinions on investing in stocks, real estate, and fine art.

The Millionaire Next Door

Thomas J. Stanley and William D. Danko
Longstreet Press, 1997.
Reviewed: May 2002

These are the real secrets of America’s rich and not so famous. The authors are academics who have conducted several surveys of affluent America, and have discovered that a majority are not living a glamorous lifestyle, but instead are obsessively frugal and avidly investing. They have the appearance of a traditional worker husband-homemaker wife couple, living in an average home in an averagely decent suburb. The authors suspect that the internal drive that makes them live this relatively humble lifestyle is responsible for their prodigious wealth. The chapter on how children of wealthy parents fare is very telling, with those who become dependent on an easy life finding it hard to become motivated to create their own success. Although more descriptive than prescriptive, this is an interesting look at how the average successful people live, and good for investors finding it hard to defer lifestyle purchases.

Money Secrets of the Rich: Learn the seven steps to financial freedom

John R. Burley and Bruce Whiting
Treasure Chest Unlimited, 2000.
Reviewed: October 2002
Approx. $27.95

Financial seminar guru John Burley’s book for the Australian investor is a motivating description of a programme for financial self-improvement. Written in a casual but thorough style and filled throughout with pithy quotations, it guides the reader towards higher levels of investor skill. Burley’s seven levels of investor range from non-investor (zero) through the passive investor (three) up to the capitalist (six), and supplies strategies for moving step-by-step up the ranks. Copious tips and web site references are supplied for almost every significant financial topic, eg. buying a car, choosing health insurance, or selecting positively geared property. I believe that this book contains the substance of Burley’s seminar series, normally costing thousands of dollars, and will be educational for Australians at almost any level of experience.

The Mystery of Capital

Hernando de Soto
Black Swan. 2001.
Reviewed: April 2003
Approx. $24.95

Hernando de Soto is an economist, ex-CEO, and economic reformer in South America. In this book he argues “why capitalism triumphs in the west and fails everywhere else” (from the subtitle), with a particular emphasis on the real estate assets of third-world people. In forming his argument, he tries to find the unique mechanism by which first-world people have become wealthy, and convincingly targets the titles system, and the legal processes that encompasses it. de Soto estimates the value of extra-legal property assets held by the “poor” in the third-world as US$9.3 trillion, almost as much as the total value of all major world stock exchanges. This interesting, academic book is useful for investors in understanding a key mechanism in their wealth building.

The Warren Buffett Way

Robert G. Hagstrom, Jr
John Wiley & Sons Ltd. 1994.
Reviewed: April 2003
Approx. $29.95

Hagstom manages an investment trust, and has written several books relating to business and investment. In this book, he clearly articulates investment strategies outlined by Warren Buffett, the single most successful investor. Investment and business tenets are presented, and applied to examples of Buffett’s investment decisions. It would be hard not to learn something about business or investment from this book, and although it would be hard to replicate Buffett’s success with United States’ business and stocks, Hagstrom writes in such a way that makes it seem easy.

Seven Steps to Wealth

John L. Fitzgerald
2^nd ed. Toogoolawa Children’s Home Ltd. July 1999.
Reviewed: April 2003
Approx. $19.95

One of the more influential real estate “gurus” is John Fitzgerald. In this book, he presents his basic formula for success in property investing. Fitzgerald strongly believes in the buy-and-hold strategy, and that while land appreciates, buildings depreciate. Accordingly, in his no-nonsense style he suggests seven steps for Australians to follow to reach financial independence. Some of his facts are a little dated now, eg. GST and capital gains tax hints, but the book still has much to offer those at the beginning of property investing.

Money Masters of Our Time

John Train
Harper Collins. 2000.
Reviewed: July 2003

John Train manages investment funds and writes books, generally on the topic of finance or investment. In this book he tries to put himself in the shoes of famous investors through history and give us an idea of what motivates them, what their approaches are, and how successful they have been. People from George Soros to Warren Buffett to Benjamin Graham are profiled, as well as a few lesser known names. The investor profiles are interestingly written, and it would be hard not to learn something from this book. Given the final chapter, it seems the main intent is to help the reader spot the attributes of an investment master, rather than educate them towards becoming one themselves.

Common Stocks and Uncommon Profits and Other Writings

Philip A. Fisher
John Wiley & Sons, Inc. 1996.
Reviewed: December 2003
Approx. $39.95

Phil Fisher started his funds management company in 1931 and continued to invest over the next five decades, gaining a reputation for success, particularly from his pick of Motorola. This volume contains three books first published in 1958, 1975, and 1980, where the first is the arguably the most engaging, and influenced Warren Buffett’s investment approach. Fisher outlines fifteen points for selecting good companies, particularly those with higher than usual growth prospects, proven to work with manufacturing style companies. He places an emphasis on an investigative style approach, relying on “scuttlebutt”, to determine the quality of management, and the research and sales divisions. Fisher is often unconventional, for example in advising not to “overstress diversification”. Due to the full-time nature of his approach, readers are advised to perhaps select a manager who invests by these principles, rather than take on the load themselves.

The Intelligent Investor

Benjamin Graham
Revised edition. HarperCollins. 2003.
Reviewed: December 2003
Approx. $49.95

The father of fundamental securities analysis and value investing is Ben Graham, and The Intelligent Investor was his book designed to educate the masses. This edition is based on the fourth revised edition, published in 1973, and every chapter is footnoted and followed by additional material by Jason Zweig, who has an almost encyclopaedic knowledge of investment facts. Rather than distracting from Graham’s work, Zweig’s material is very interesting, relevant, and helps the investor of today understand Graham’s advice. Reading this book is almost obligatory for any investor who wants to invest in the stock market over the longer term. Despite its length at almost 600 pages, this book provides a thorough education on the hows and whys of value-based investing.