There are many highly technical books about saving and investing. This isn’t one of them. And that’s not a bad thing. In fact, NICK MAGGIULLI, chief operating officer with Ritholtz Wealth Management, has done the public a favour by addressing some of the most frequently asked questions in personal finance in ways anyone can understand. And the central tenet of his philosophy is particularly relevant now after the recent volatility in global markets: investors should just keep buying into stocks, regardless of the current market climate.
One of our favourite personal finance websites at the Evidence-Based Investor is Nick Maggiulli’s Of Dollars and Data – one of those rare publications on the internet that is not trying to sell you anything apart from the virtue of sound common sense when it comes to saving and investing.
With his experience as a data scientist, researcher and someone who has seen in his personal life the results of bad decisions with money, Nick has now brought together in a single volume his wisdom for even the most unsophisticated investor.
Just Keep Buying: Proven Ways to Save Money and Build Your Wealth eschews the customary jargon and false promises of the financial industry to offer practical guidance for ordinary people about managing money for their long-term benefit.
Simple, slow-and-steady strategies
As the title suggests, this isn’t a guidebook to timing the market or using fancy derivatives or excessive leverage to get rich quick. It is about simple, slow-and-steady strategies to building and maintaining wealth. And, importantly, it starts by focusing on an aspect of finance many experts overlook — saving and sticking to a budget.
Maggiulli uses his own experience as an example, noting that as a youngster he would spend hundreds of hours analysing his investment decisions and maintain excel spreadsheets of his projected future net worth, while overlooking his spending.
“Despite my intense fixation on my investments, I spent no time analysing my income or spending,” Maggiulli writes. “I would regularly go out to dinner with co-workers, buy rounds and rounds of drinks, and then Uber home.”
So lesson number one is that building wealth starts with saving. If you don’t have much money invested, then the best thing to focus on is putting more money away so that it can work for you. As Maggiulli puts it, “saving is for the poor and investing is for the rich”.
Saving and investing
So the book is divided into two parts — the first on how to save and the second on how to invest. In each segment, he uses data to show that many of the common pieces of advice about money are based more on conjecture than evidence.
For instance, you actually need to save less than you might think. Credit card debt is not always bad. You are better to hold the entire market than focus on individual stocks and big market corrections, as we are seeing now, are usually a buying opportunity.
While tactical asset allocation is frequently sold to us as a way of dealing with volatile markets, Maggiulli again steers the reader away from calls to “gut feeling” and argues for a data-backed approach built on dollar-cost-averaging.
Avoiding “psychological hell”
“Trying to buy the dip and doing all these fancy things doesn’t tend to work for a host of reasons,” he says. “Yes, you can try moving to cash/bonds early, but when exactly do you get out? Go too early and you may have to sit on the sidelines for years while the market rockets higher. And if you do get out, how do you know when to get back in? It’s psychological hell on the exit and the re-entry.”
Maggiulli walks the talk on this view of the world in his daytime role as chief operating officer with Ritholtz Wealth Management, a firm which proudly espouses an evidence-based investing built around controllable factors, not speculation.
Just Keep Buying is a well-timed and welcome addition to the investing canon and a publication you can dip in and out of without having the follow the thread all the way.
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