Comments on: Review: Automatic Wealth for Grads http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/ Financial talk for the rest of us Sat, 16 Feb 2013 01:14:45 +0000 hourly 1 http://wordpress.org/?v=3.5.1 By: Chef http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-111182 Chef Thu, 15 Nov 2007 20:48:48 +0000 http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-111182 Why’d you go to college and come out with a minimum wage job?

]]> By: Minimum Wage http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-35436 Minimum Wage Sat, 16 Jun 2007 07:07:14 +0000 http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-35436 Wait a minute…how are you supposed to save 15% if you start out with student loan debt and a minimum wage job?

]]> By: Kevin in NC http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-35345 Kevin in NC Fri, 15 Jun 2007 22:43:52 +0000 http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-35345 The stock market advice from Chapter 8 is pretty generic…same ole stuff you get from many of these books. Would you ever go to a grocery store where you were not allowed to see prices? You simply shopped for all the items you wanted and then after your payment was processed you were told the total that was already deducted from your account. The store could basically charge you ANY PRICE they wanted…no matter how outrageous. Well, most of us always ask “how much?” before we buy groceries but we never ask how much when we buy stocks or funds. Warren Buffett says that “we should buy our stocks like we buy our groceries, not our perfume”…always asking how much? It’s important to know that price is what you pay, but value is what you get. If you fail to ask how much then you are likely buying without any margin of safety. Simply saying that you should sell a stock if it drops 25% below the purchase price is in no way a substitute for margin of safety.
If you are going to buy stocks then it is important that you can have some sort of quick and dirty method of placing a value on that stock(or index), then compare that value to the quoted price. Anyone of average intelligence can do this with a little homework. You don’t need to derive a precisely calculated method, because value is something you should recognize when you see it. It should almost jump off the page at you. Margin of safety is simply getting more than what you paid for. Isn’t that the essence of our frugal lifestyle? Why should we do it any differently with our investments?

Probably the best way for the average person to get value(in a passive manner)is to buy stocks through a program of dollar cost averaging. This means that you will contribute a set amount into a portfolio of well selected stocks(or an index fund) on a regular basis through thick and thin, good markets and bad markets(dividends and distributions automatically reinvested). This ensures that you buy more shares when the market is cheap, and less shares when the market is extended in price. This is really value investing by default. Warren Buffett said “When dumb money realizes its limitations it then ceases to be dumb”

If you would like to learn more about simple valuation metrics used for buying stocks at sensible prices, and always with a margin of safety, then I’d recommend these books…..

Wall Street on Sale…by Timothy Vick
How to Pick Stocks Like Warren Buffett…by Timothy Vick
The Little Book that Beats the Market….by Joel Greenblatt
The Essential Buffett…by Robert Hagstrom
The Dhando Investor…by Mohnish Pabrai
Beating the Street…by Peter Lynch
One Up on Wall Street…by Peter lynch

The following publicly traded investment companies will allocate capital into investments on your behalf using a deep value oriented framework as a guide. These guys are good and their long term stock charts and track records are highly impressive. The managers of these companies all own a signifigant amount of the stock, so their money is invested with you. They eat their own cooking. these options would offer a somewhat passive way to ensure that you are always asking “HOW MUCH” and that you are always getting that critical “margin of safety”. These companies have outperformed 99%(or better) of all mutual funds over long periods of time. These companies don’t(or rarely) pay dividends because that money can be retained, reinvested, and compounded at high rates of return on your behalf. There are no tax issues to interrupt the compounding dynamics. Dividends are always taxed as income, and the likelyhood that you could compound these distributions yourself at the same rate as management is unlikely…given their impressive track records.

Sears Holdings(SHLD)
Leucadia National(LUK)
Berkshire Hathaway B shares(BRK B)

I own shares of each, and this is in no way a recommendation by me to buy or sell a mentioned stock.

]]> By: Brad http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-35326 Brad Fri, 15 Jun 2007 21:58:55 +0000 http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-35326 You can find out more of Maserson’s philosophy at http://www.earlytorise.com. He has a daily email letter (weekdays I believe) that goes into a lot of detail.

I will warn you that you need to have a filter present, especially with the related ads that come, but he has some really good tips and the price is right (free).

Keep your eyes open though. A good follow on book review might be _Automatic Wealth_.

Brad

]]> By: Pat http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-35259 Pat Fri, 15 Jun 2007 17:21:43 +0000 http://www.thesimpledollar.com/2007/06/15/review-automatic-wealth-for-grads/#comment-35259 As a college senior, I think this book is a good introduction to young people to the different ways to become wealthy, whether it be through consistent contributions into stocks, real estate investing, or starting your own business. Obviously, some of the numbers provided are a bit rosy, and some of the real estate advice given is sketchy. Personally, once I saw the end result of saving now for the future, it made it a much bigger priority to learn about some of the things not covered in the book, like budgeting.

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