Monday, January 28, 2008

Success Book Review: Ben Stein's Latest

I have been reviewing books on personal prosperity here at the Success Books blog for over a year now. I have found something instructive in nearly every book I have read, but Ben Stein’s books have been among the few that I have not only read, but outlined, reread, and actually profited from. His latest, Yes, You Can Supercharge Your Portfolio!: Six Steps for Investing Success in the 21st Century written with financial planning expert Phil DeMuth, is no exception.

Ben Stein’s mission in this book is nothing less than to transform our portfolios from random accumulations of stocks, funds, etfs, whatever, which we have collected over the years because of articles, fads, relatives, brokers (good or bad), etc, into a mathematically sound, high-return, low-risk collection, carefully selected and weighted for maximum reward-to-risk.

Stein is essentially bringing Modern Portfolio Theory down from the Ivory Tower of endowments, hedge funds and similar esoteric entities, to us, the investing public. What Modern Portfolio Theory tells us is that groups of high-return, but weakly correlated assets deliver the financial equivalent of a “free lunch”: the returns add up, but the risks, because of the weak correlations, can, in part, cancel each other out, leaving us with more predictable returns over the years. This reduced volatility will theoretically allow us to spend more of the returns, since they will not vary as dramatically year-over-year, as other, less ingeniously-constructed portfolios might.

Chapter by chapter, Stein and DeMuth teach us how to start with a strong core portfolio of broad stock indexes, and both supercharge returns and reduce risk, through the addition of various other asset classes: bonds, stocks indexes of various capitalizations, international equities, REITs, commodity funds, and even individual stocks, hand-picked to fit like a glove within the design of a model portfolio.

Stein and Demuth also point us to a website where we can “test-drive” our shiny new portfolio, and even (gulp) take a peek at how well (or dismally) our current, non-supercharged portfolio might do over the years.

This book is infused with Stein’s droll wit, and he keeps the tone upbeat and lighthearted…an amazing feat given the weightiness of the subject matter. It’s a relatively short book, at 178 pages. Worth a day’s read, if by chance you want to save your financial future from disaster.

Read this book.

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