Tobias’s comprehensive guide to investing is filled with insightful anecdotes and actionable tips throughout each chapter. His book really might be the only investment guide you ever need, and I do not make that claim lightly… I am a big fan of other introductory investing books, such as the The Bogleheads’ Guide to Investing. Tobias’s book, though, has made its way higher on my recommendation list because of the sheer number of life “hacks” it provides. Here are just a few I wrote down for myself:
- Photocopying your wallet in case it gets stolen.
- Buying two one way tickets instead of a round trip for savings.
- Full freezers insulate better, so fill empty space with containers of ice to use at later dates.
- Placing “riskiest” investment holdings in a taxable account to take advantage of tax-loss harvesting (for losses) or charitable contribution deductions (for gains).
The Only Investment Guide You’ll Ever Need is broken up into three parts composed of 11 chapters and an appendices. See below for descriptions of each:
Part One – Minimal Risk
- Ch. 1 – If I’m So Smart, How Come This Book Won’t Make You Rich?
- Describes what his book is and what his book is not.
- Ch. 2 – A Penny Saved Is Two Pennies Earned
- Literally hundreds of tips/websites you can use to save money.
- Ch. 3 – You CAN Get By on $165,000 a Year
- Discusses budgeting, saving, and setting realistic goals.
- Ch. 4 – Trust No One
- Examples why you should not blindly trust when invetsing.
- Ch. 5 – The Case for Cowardice
- Describes all types of bonds, notes, and other “safe invetsments”.
- Ch. 6 – Tax Strategies
- Introduction into income taxes and ways to reduce your tax burden.
Part Two – The Stock Market
- Ch. 7 – Meanwhile, Down at the Track
- 13 tips/suggestions about stock investing.
- Ch. 8 – Choosing (to Ignore) Your Broker
- Makes his case for why you should [passively] manage your own money and investments.
- Ch. 9 – Hot Tips, Inside Information — and Other Fine Points
- Discusses several types of investment vehicles and reasons why you should or should not consider each one.
Part Three – Family Planning
- Ch. 10 – Kids, Spouse, Heirs, Folks
- Estate planning, caring for aging parents, and examples of how to instill financial literacy in your children,
- Ch. 11 – What to Do If You Inherit a Million Dollars; What to do Otherwise
- A step-wise plan about what to do when inheriting money and tips on how to save/spend without it.
- Earning 177% on Bordeaux
- Contains a great wine recommendation.
- How Much Life Insurance Do You Need?
- A formula you can use to determine if, and how much, life insurance you “need”.
- How Much Social Security Will You Get?
- A Few Words About Taxes and Our National Debt
- Cocktail Party Financial Quips to Help You Feel Smug
- Selected Discount Brokers
- Selected Mutual Funds
- Fun with Compound Interest
- Still not Sure What to Do?
I particularly enjoyed Tobias’s method on calculating the amount of life insurance needed. His “formula” considers your heirs/dependents, social security, the time horizin of funds you would like to provide for, funeral expenses, and assets considerations. Since I currently have no kids and my wife is not dependent on my income, I really only need enough life insurance to cover funeral expenses, which the life insurance provided by my employer more than covers already.
SCENARIO: Let’s say we did have a newborn kid, though, and wanted to replace my income (~50k/year) for the next 25 years (through kid college) in the event of my untimely death:
- STEP 1: Tobias recommends aiming for 75-85% of your income, so let’s say $37,500 in my case for 25 years, to provide through college ($937,500).
- STEP 2: My current social security survivor benefit for the newborn would be $1,377 a month until they turn 18 ($297,432).
- STEP 3: The difference between what is “needed and what my S.S. benefits would provide is $640,086 (or $25,603/year on average). So, for 25 years, we would mulitply by 18 ($460,862)
- STEP 4: My employer policy already covers a full year of my salary which would cover funeral expenses and several months of time off for the spouse.
- STEP 5: Subtract our assets, which we will say is $100,000 for this scenario ($360,862).
- STEP 6: Round up to the nearest $50,000 ($400,000).
- So, I should take out a $400,000 policy to meet our needs in this scenario.
So, his formula is quite useful for removing the guesswork and potential anxiety associated with determining how much life insurance to buy.
Speaking of, you should totally log into https://www.ssa.gov/ to view your social security benefits if you haven’t yet! You can view your earnings records and your estimated benefits based on retirement, disability, death, etc.
This book is jam-packed with HUNDREDS of ways you can improve your financial life. Trying just one of his recommendations will, in most cases, easily pay for for the cost of the book and much more.
“By and large you should manage your own money (via no-load mutual funds). No one is going to care about it as much as you. And no one but you is going to manage it for free.“Andrew Tobias
Have you read The Only Investment Guide You’ll Ever Need? What are your thoughts, likes/dislikes, and biggest takeaways? Comment below!