Title: Money with a pin
Author: Pete Comley
A good explanation of why keeping your costs down is so important
I’m going to start by saying this was one of the first books I ever read on investing, and to be honest I only actually installed it on my kindle because it had a guy on the cover wearing a monkey outfit! ‘What on earth is that all about?’ I thought at the time.
However, after reading the first chapter I was hooked and it really did put a few things into perspective when thinking about trading on the stock market. In fact, it made me change my strategy from actively trading (and losing money), to regular long-term investing.
Monkey With a Pin (Why you may be missing 6% a year from your investment returns), to give it its full title, deals with the not-often-considered horrific costs levied by the finance industry.
These costs which come in the form of purchase fees, performance fees and annual fees, can seriously erode the value of your trades. The author tries to re-address this situation by educating the reader on how costs can lose you 6% a year from your returns. It’s horrifying to think how much money you could lose if you invested poorly over the course of 20 years or so.
There’s more to it than just picking stocks
The main message of the book is that stock picking by amateur investors is a loser’s game and that the internal costs of active funds are generally much higher than the quoted annual management charge.
Even if you think you’re pretty savvy on investment issues, the breadth of the investment options he covers, the clear explanations and the ability to explain investment language all contribute to the books overall readability. There are also interesting chapters on the historical returns from cash and descriptions of ETFs, Mutual Funds and Investment Trusts.
Whilst I think he focuses a little too much on the merits of Index trackers without spending enough time on their disadvantages compared to active funds, Pete Comley’s well-researched, thought-provoking book is essential reading for all private investors, whether experienced or new starters.
I’m hoping that one day soon there will be a backlash from private investors against the big asset management companies that will force them to lower their fees once and for all. Until that day comes it might be worth your while reading this book to learn exactly where that 6% of your hard-earned money is actually going.