Book review: ‘The Smartest Investment Book You’ll Ever Read’

There are many personal finance books out there, useful to people in all stages of personal finance. I have a lot to learn before reaching financial independence, and the editorial elves thought it would be useful if I shared some of what I learn with you.

My recent reviews include “More Money, Please: The Financial Secrets You Never Learned in School” and “The Money Book for the Young Fabulous and Broke.” This week, I'm reviewing “The Smartest Investment Book You'll Ever Read” by Daniel R. Solin.

Daniel Solin is an attorney and a registered investment adviser. He has written another book, “Does Your Broker Owe You Money?” and his goal is to help prevent individual investors from being taken advantage of by financial professionals who do not have their clients' best interests in mind. He has appeared on numerous radio and television programs. More information about him and his book is available on his website.

Philosophy Behind the Book

“The Smartest Investment Book You'll Ever Read” is aimed at beginning investors, anyone who actively trades stocks or who invests in actively managed funds, and anyone whose retirement funds are managed by an investment professional. This is a pretty wide audience. The book is very short (150 pages or so, plus some appendixes) and the chapters are short as well — about three pages each, on average.

As a result of the short chapter lengths, it is possible to read this book at your own pace. You don't need to worry that you will stop in the middle of a complex idea/chapter and get confused when you return to the book. In addition, the main idea behind the book is very simple: no one can time the market.

People who believe they can are deluded, and people who claim they can for professional gain are, well, basically crooks. And in many ways, the system is unfortunately not set up to protect you against them. In other words, many investment professionals are crooks who are acting legally. Fortunately, as Solin points out, it is fairly easy to protect yourself. That's because one of the secrets to investing is that it doesn't need to be nearly as complicated as you may think it does.

What I Didn't Like

It's a good thing the chapters are short, because boy are they repetitive! I definitely read this book in short bursts. The book is divided into four sections:

  1. Become a smart investor: change your investment life forever

  2. Your broker or adviser is keeping you from being a smart investor

  3. Smart investors know better

  4. The real way smart investors beat 95 percent of the “pros”

He starts each book with a quote from a reputable/well-known investment or financial professional to support his point that no one can time the market. He quotes Nobel laureates in Economics such as William F. Sharpe and Merton Miller. He quotes investment professionals including Peter Lynch and Warren Buffett. The chapter following each quote gives a specific and brief example to support the main idea of the book. No one can time the market.

I am sure Solin assumes that the people reading his book need quite a bit of convincing that passively managed index funds are the way to go. Part of this is understandable: people don't like to change. Even if they realize after chapter 7 (out of 44) that actively managed funds are a ripoff, they may not take action.

By repeating the same point over and over, he is trying to help people understand just how big of a deal that this is. However, my retirement account is with one of his preferred brokers and in one of the account types he recommends, I didn't need to be beaten over the head with his message. I guess I'm just not his target audience.

What I Loved

Despite the fact that this book came out in 2006, the advice contained within it is still good. The fees and commissions associated with actively managed funds can undo even the most impressive gains made by the fund, even if they do manage to consistently outperform the market. And most actively managed funds underperform compared to the market, at least over time.

In other words, because the whole point of the book is that you should ignore “hot stock tips” and other financial news of the day or week, his investment style is going to be good advice for years to come. He emphasizes basic concepts: determine your risk tolerance, choose an investment allocation that complements your risk tolerance, and rebalance once or twice a year.

If once or twice a year is too much work for you, invest in a target date fund that rebalances itself periodically. Simple as that! He does deal with other issues, such as how to fire your investment broker once you've seen the light. He also covers what to do if your employer's retirement plan only offers actively managed funds (in short: complain to HR and ask for passively managed index funds to be added to the plan).

He doesn't say this, but his advice boils down to nobody cares about your money more than you. And it's true!

Who Should Read “The Smartest Investment Book You'll Ever Read”

If you have recently or will soon be entering the land of full-time employment, 401(k)s and 403(b)s, then this is probably a good book for you to pick up. You may or may not need to read the entire thing to be convinced that index funds are the best bet. However, Solin himself says several times throughout the book to go ahead and skip to chapter 36 as soon as you've internalized that message. That's where you'll find the step-by-step instructions for picking the best funds for you.

Or maybe you have been picking your own stocks or taking the advice of a commission-based investment broker. If that's the case, then some of the anecdotes and examples in the first 35 chapters may be eye-opening for you. Solin's bibliography will help you find the original sources if you don't believe what you're reading.

Or maybe your intention is to invest in passively managed index funds but you want to know what questions to ask to determine the fund and/or asset allocation that is right for you. You might find this book useful, and as a bonus, you could skip all the boring repetitive middle chapters!

Once you've internalized the main idea of the book and chosen your funds, it's unlikely that you'd need to refer back to this book again. Worthy of a library check-out, but perhaps not a need-to-own.

What's your investment strategy? How often do you check or change your portfolio?

Please note: I bought this book on my own a couple of years ago, fair and square. I am not affiliated in any way with Daniel R. Solin or his publisher, and my opinions are entirely my own.

More about...Books, Investing

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
18 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Jon @ MoneySmartGuides
Jon @ MoneySmartGuides
7 years ago

I haven’t read the book, but from your review, it sounds like it is right up my alley. I’ve also done a fair amount of research into investing and agree with the points you made. It is virtually impossible to beat the market consistently every year, so why even try. Invest in low-cost index funds and you will earn a healthy return, assuming you stay invested for the long-term. Staying invested is the key to success. You have to learn to ignore the news when they report breaking news that the market was down X number of points today and… Read more »

FI Journey
FI Journey
7 years ago

Folks should keep in mind that “investing” and “trading” are very different. I don’t think you mean that traders are crooks! 🙂

No Waste
No Waste
7 years ago

Is it possible to beat the market year after year?

Sure.

But you’re gonna WORK for it. And it won’t come without a few stomachaches along the way.

Is that worth it? I say no.

Derek @ MoneyAhoy.com
Derek @ MoneyAhoy.com
7 years ago
Reply to  No Waste

I say that it is nearly impossible to do this consistently over a 40-year period without inside information. Maybe you can for 5 or 10 years, but not 40.

Matt @ YLB
Matt @ YLB
7 years ago

Hmm. I’ll have to look at this at the bookstore before I buy it. May not be for me.

Alea
Alea
7 years ago

Another good book is “The Little Book of Common Investing” by John C. Bogle. Actually, all his books should be required reading. (Go to Amazon for a list of his books) Once I read his books, the proverbial “light bulb” came on. We are in the middle of switching providers for our 401(k) and it came down to two companies. I have been asking for indexes as an option in our plan. The good news was that one of the companies offered indexes, but they blew the presentation. The bad news is that the company that came after them offers… Read more »

Honey Smith
Honey Smith
7 years ago
Reply to  Alea

I’ve heard great things about Bogle! And investing is the hardest thing for me to grasp. I need to read more on this topic.

Matt
Matt
7 years ago

I’m not sure about others, but I’m getting tired of these weekly book reviews. I also can’t help but wonder if GRS is receiving compensation from the authors in exchange for posting these reviews. It just seems cheap and leaves me feeling shortchanged.

Loryll
Loryll
7 years ago
Reply to  Matt

We’re sorry you haven’t enjoyed these posts. Get Rich Slowly has no financial relationship with the authors or publishers of the books in these reviews.

Honey Smith
Honey Smith
7 years ago
Reply to  Matt

These reviews are once a month, not once a week (which I agree would be a lot!). And I’m definitely not told what books to review or what to write. These are my honest opinions 😉

J
J
7 years ago
Reply to  Matt

Ditto this – when I see that the newest entry is a book review, I almost always close the page without reading. I’m more interested in hearing people’s personal experiences as they relate to personal finance then a review of a personal finance book and whether the message spoke to the post’s author or not. I might be missing a few posts or something, but I feel like every time I see a post from Honey, it’s a book review (I recall one not long back about her progress against goals like wiping out one of her student loans but… Read more »

El Nerdo
El Nerdo
7 years ago
Reply to  Matt

Funny thing, I like book reviews because they give me an idea of what “serious work” is out there and whether I should try to read something or not. I mean, personal experiences are good and all but a) they deal with personal/particular circumstances, and b) it’s rare when they can be universalized. Monthly book reviews break the monotony of the “me” approach. They also offer the chance to discuss ideas/theories/mental models rather than narrow personal circumstance. And while some books may not interest me (me me me!) this one actually did. And I’m actually hoping William Cowie shows up… Read more »

Hoping to Adopt
Hoping to Adopt
7 years ago
Reply to  Matt

I like the book reviews, but I would prefer to see book reviews on newer books.

Honey Smith
Honey Smith
7 years ago

Thanks for the feedback! I do try to mix it up. Both “More Money Please” and “Change Your Life in 7 Days” were new releases. I’ll see what I can do for next time! However, one of the main points that the author made in this book is that if you are basing your investment decisions on what is “hot” right now, what market projections are saying, or talking heads’ analyses of trends and where they *might* be headed, you are probably not making the most optimal investment decisions. Since you should be investing in broad index funds that track… Read more »

Madeline
Madeline
7 years ago

I recently finished Daniel Solin’s “The Smartest 401(k) Book You’ll Ever Read” and found his style refreshing. His theories are clear and he makes his readers feel like higher returns is an obtainable goal. I appreciated his comparisons between actively managed funds and low-expense index funds and his reasoning behind choosing between them was blunt and persuasive. I just found his “The Smartest Portfolio You’ll Ever Own” at Goodwill and am looking forward to reading the whole series, though I anticipate some of it will be repetitive.

Jane
Jane
7 years ago

Regardless of the content of the book, I could never bring myself to buy a book with such a terrible, hubris-filled title.

It’s kind of like I could never attend a conference named “World Domination Summit”.

Kurt J. Keilbach
Kurt J. Keilbach
7 years ago

Dan’s book is well worth reading, here is his variation of an easy three fund portfolio — he focuses on Vanguard Funds due to low costs: 1. Figure out your personal risk tolerance and decide your stock/bond/international percentage split 2. For stocks, buy the Vanguard Total Stock Market Fund (VTSMX) 3. For bonds, buy the Vanguard Total Bond Market Index Fund (VBMFX) 4. For international stocks, buy the Vanguard Total International Stock Index (VBMFX) 5. Re-balance once or twice a year to maintain your risk-based percentages and that’s it. He has a few other slightly more complex recommendations as well,… Read more »

The Forex Guy
The Forex Guy
5 years ago

These books are oldies but goodies, I think sometimes Dan goes a little bit to far with the broker conspiracies.

I guess back in 2006 the industry was a different beast it is today.

shares