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Book Review: The Lazy Person’s Guide to Investing
A Book for Procrastinators, the Financially Challenged, and Everyone Who Worries About Dealing with Their Money
by Paul B. Farrell, JD, PhD
BFN Book Reviews
Over the years, I have found it tremendously helpful to see what other people with similar interests have been reading on the topics of personal finance. That is why I am periodically publishing my own reviews – to hopefully be helpful to others. I will provide a brief overview of the book and the author, touch on the good and bad in the book, and finally, give you my personal recommendation for whether you should borrow the book, buy the book, or neither.
What is this book about?
The Lazy Person’s Guide to Investing covers the basics of investing but it is not your basic investing book. As the title states, the author spends the majority of the book discussing "lazy portfolios." A lazy portfolio is one that is easy to setup and does not require constant monitoring (basically "set it and forget it"). If you read the little blue words up in the right corner of this blog, you’ll see that this type of investing is precisely what I am looking for!
Besides focusing on what a lazy portfolio is and providing examples of some lazy portfolios, the book also challenges some of the commonly accepted investment practices. And for those of us who are not as lazy as others, Dr. Farrell does devote some pages in the book to discussing some "less lazy" strategies for investing.
Who is the author?
Paul Farrell is a currently a columnist with MarketWatch – he has been a columnist since 1997 and has written more than 1,400 columns. He has also written nine books. Before his work with MarketWatch, he was an investment banker with Morgan Stanley, Executive Vice President of the Financial News Network, Executive Vice President of Mercury Entertainment Corp, and had some other stops along the way. His PhD is in Psychology – strangely, I think that is probably a really good field for someone who writes about investing.
What are the best parts of the book?
The meat of this book is the collection of lazy portfolios that the author provides. He did not create these portfolios, rather he found successful ones and listed them here in his book. Some of the lazy portfolios that I found most interesting are:
- The Couch Potato Portfolio (Scott Burns)
- The Coffeehouse Portfolio (Bill Schultheis)
- No Brainer Portfolio (William Bernstein)
- The No Brainer Cowards’ Portfolio
- Kiplinger’s Keep-It-Simple Portfolio
- FundAdvice.com No Load Portfolio (Paul Merriman)
I’m not going to make you read through the specifics of each portfolio here. If you are really interested, try a search or send me an email or grab the book.
Also of importance in this book is the explanation of what a lazy portfolio is and why the author feels using such a portfolio is a good investing strategy. Basically, the author piggy-backs on Modern Portfolio Theory and other previous research that provides the following main points:
- Diversification (holding non-correlated assets) can increase the return of an investment portfolio while also reducing its overall risk
- Costs are the only statistically significant measure that accurately determines future investment performance
If you put those two things together – you come up with the case for a lazy portfolio comprised of diversified low-cost index mutual funds. I’ve read a number of books on the subject and seen a number of statistics, and I admit it doesn’t make sense to me that most actively managed funds fail to beat index funds each year and hardly any beat them year after year. But that is what I’ve learned. And that is what makes a lazy portfolio so attractive to me. (pick an asset allocation, put in the money, re-balance every year or 18 months, change the asset allocation slightly as you age…that’s it…that’s lazy and that’s effective and that is sweet!)
What is not-so-good about the book?
To be completely honest with you, I didn’t really enjoy reading this book. I felt that it was somewhat disorganized and quite repetitive. Maybe it was just me, but I kept having the feeling that I read the same information before. (Maybe it wasn’t Farrell’s fault…maybe the Matrix got reloaded while I was reading or something) I also didn’t feel the format was consistent when discussing the various portfolios. I guess that my brain and Dr. Farrell’s simply do not operate the same.
I also found it somewhat strange that the beginning of the book focused on the case for lazy portfolios while some latter chapters seemed to contradict earlier ones with information on how to do more active management of your money.
So what is my recommendation?
To summarize, I found the collection of lazy portfolios extremely useful but didn’t really enjoy reading the book. The list of lazy portfolios contained in this book is extremely useful information. In fact, right now I am trying to close on asset allocations for two of my accounts and I am heavily referring to the portfolios in this book to do that. That is why this book also lands on my virtual bookshelf .
Now, as to the buy/borrow recommendation, I would recommend that you borrow this book from the library and study the portfolios the author includes. Once you get your asset allocation set up, you shouldn’t need to refer back to it too much. On the other hand, it might be worth the purchase if you want to have it around as a reference on lazy portfolios (I’m considering checking it out again myself).
Check out the other books I’ve chosen for my virtual bookshelf .
Want to borrow this book? Search your local library
Want your own copy? Buy this book now at amazon.com
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