25 Myths You've Got to Avoid--If You Want to Manage Your Money Right: The New Rules for Financial Success

by Jonathan Clements

Book Overview

With wit and style, the award-winning writer of The Wall Street Journal column Getting Going debunks cherished old saws--such as the belief that bonds are the best bet for income and that home... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0684839822
• ISBN13: 9780684839820
• Release Date: February 1998
• Publisher: Simon & Schuster
• Length: 239 Pages
• Weight: 1.05 lbs.
• Dimensions: 0.9" x 6.4" x 9.5"

Customer Reviews

Solid Introduction To Personal Finance

"25 Myths You've Got To Avoid If You Want To Manage Your Money Right" is a great personal finance book. The book gives a solid overall philosophy to managing your money. It's probably best for new to intermediate investors.Each chapter begins with an investment or personal finance myth. Clements explains where each myth goes wrong and concludes each chapter with new rules to replace the myth.Clements discusses the myth that you should invest in bonds for income. He says that investors love bonds because they love income. But, Clements says that investors loving bonds is a "masochistic relationship" when we factor in all of the negatives of bond investing. Clements explains that the callable feature of bonds means that if interest rates drop significantly, bonds will probably be called in, depriving investors of the desirable and higher interest rate on their existing bonds. But, if interest rates shoot way up, the bonds won't be called in, and investors will be locked into receiving a low rate of return. Clements says that the call feature of bonds is a case of "heads I win, tails you lose." And, as much as investors love bonds, Clements notes that the taxman loves bonds even more. After factoring in taxes and inflation, Clements shows us that bonds are a dismal investment. (Especially when we toss in default risk and interest rate risk). The chapter about bonds is particularly good and will give investors much to think about. So, what about investors seeking income? Does Clements go along with the "No problem. Just sell some shares when you need some money" crowd? No. Clements realizes the inherent risk in needing to sell shares for income. The market might be down, and you could take a clubbing.Clements explains that stocks or mutual funds holding stocks "are your portfolio's engine of growth. Everything else is there to reduce risk, so that you won't get unnerved by market swings and can tap your portfolio for spending money without selling stocks at fire-sale prices."So rather than following the conventional advice of holding a portfolio balanced between stocks and bonds (usually 60% stocks and 40% bonds), Clements suggests investors consider holding a portfolio of 25% cash and 75% stocks. I strongly agree that this is something to consider.Ultimately, Clements tells us that it's our asset allocation which will determine the long-term rate of return our portfolio achieves. Rather than holding a portfolio composed of only 50% stocks and then trying to seek the next Microsoft, investors would probably do much better holding a higher percentage of stocks and foregoing the search for the next big winner.Clements says it's a myth that you can beat the market. In addition to not liking market timing, he doesn't believe in sector rotation, or individual stock selection. Further, Clements doesn't tend to like actively managed mutual funds. Because Clements is of the earliest columnists to cover the mutual fund industry for The Wall Street Journal, we

Highly recommended, original, entertaining, intelligent

This is the single best book on personal finance that I've ever read. It debunks some of the most common truisms of financial management, and it does so by providing very good explanations that really teach you the concepts, and by teaching you what to do instead. The writing is non-technical but very, very intelligent and enjoyable to read. I first got this book from the library, and I found its wisdom so valuable and so original that I then BOUGHT a copy--something I have NEVER done with other investment/ financial planning books. Get this book and it will change the way you think about protecting your money!

A must read for anyone interested in their money.

Probably the best book I have read - fiction or nonfiction. I have read many books dealing with personal finance and nothing comes close. It is clearly and concisely written and easy and enjoyable to read. It gives practical advice and clears up misconceptions that many people have about money management. I am reading it for the 2nd time.

This book takes the dread out of investment education.

I'm a freelance writer and jazz musician. Nothing makes my skin crawl like a typical discourse on "wise" investing. Like dental work, investment education frequently centers around the idea of pain and shame as inevitable consequences of despicable indulgence. "It's all so simple and self explanatory if you would just buckle down and do it. And remember - if you don't, you'll be sorry," intones the Victorian voice. "25 Myths" is different. Its beauty is two-fold. First, it exposes the flaws in traditional investment strategies, thus validating my misgivings. Second, it provides an easy-to-latch-onto structure that the reluctant beginner can use to get started.Perhaps Clements' most important precept is that we should ignore short term market fluctuations focusing instead on the real enemies - taxes and inflation. From there, he goes on to outline several beginners' axioms from which one's first investment strategy may be painstakingly! formulated.Has he uncovered the holy grail? Probably not, and he's the first to admit it. Remember the old saying, "you have to know the rules in order to break them?" Clements has set down a list of rules - not familiar chestnut adages but pragmatic responses to the investment climate as it exists today.In a field overrun with "paralysis by analysis," Clements forgoes the role of beacon in the darkness, and instead simply shines a flashlight in a darkened garage to guide us to safety.

The one best book on achieving financial success

The best book I have read on financial planning strategies and tactics. If I had my own financial planning business, 25 Myths is the one book I would give to to clients to explain the basic rules to follow in implementing a successful financial plan. I enjoy reading Jonathan Clements's Getting Going columns in the Wall Street Journal. Don't worry his book is not a rehash of his articles, although many of his ideas and recommendations are familiar from reading his column. He takes 25 familar financial myths and explains how each myth arose, where we go wrong in following those myths and what the new rules are. Myth: Stocks are risky. Reality: Stocks are not risky compared to the risk you suffer from inflation if you concentrate your money in safe investments like bonds. Myth: You can beat the market. Reality: You can't beat the market but you can cut the costs by using discount brokers, no load mutual funds, low cost funds, and income tax efficient funds. Clements recommends keeping 80% of a person's investments in stocks (which shifts to 60% as you approach retirement). To ensure that upon retirement a person has a cash balance Clements offered the tactic of using zero coupon bonds to fund the cash balance for retirement. So long as one focuses on the maturity value in retirement, the possible fluctuations in value of zeros doesn't matter. I also liked his analysis of inflation indexed bonds as way to hedge against inflation and interest rate fluctuations. I will list the myths here because the book review does not list the table of contents: 1. You can have it all. 2. Get a good job and you'll be set for life. 3. Stocks are risky. 4. You can't go wrong with IBM. 5. You can beat the market. 6. Your investments will make 10 percent a year. 7. You can't go wrong with mutual funds. 8. You can find the next Magellan. 9. Index funds are guaranteed mediocrity. 10. Nothing's safer than money in the bank. 11. If you need income, buy bonds. 12. Hedge your bets with hard assets. 13. You should own a balanced portfolio. 14. You need a broker. 15. Keep six months of emergency money. 16. Debt is dangerous. 17. Buy the biggest house possible. 18. You can't beat the mortgage tax deduction. 19. Invest in your house. 20. Trade up as soon as you can. 21. Protect against every disaster. 22. Life insurance is a good investment. 23. Invest in your kid's name. 24. Max out your IRA every year. 25. One day, kids, all of this will be yours.