Summary of The Only Investment Guide You'll Ever Need by Andrew Tobias

Put your investments on autopilot

Investment advice is everywhere. There are books, blogs, podcasts, videos, and even apps designed to help you navigate the world of investing. But how do you know what advice to trust? How do you separate fact from fiction? And most importantly, what does it really take to become successful?

In "The Only Investment Guide You Will Ever Need" author Andrew Tobias distills his decades of experience into a single book. This book cuts through the clutter and tells you exactly what you need to know about investing.

This guide covers everything from understanding basic concepts like diversification and compounding interest to managing risk and taxes. It explains why index funds are often the best choice, and provides practical tips for choosing among mutual funds. Finally, it teaches you how to build a solid financial plan that works for you.

This book is written for anyone looking to learn more about investing. And like our review on The Little Book of Common Sense Investing this is not one we recommend for the Barbell Investor. Here we scoff at the idea of passively investing our money to pray and hope the bond and stock markets continue to rise. We take unique, active approach to grow our wealth in a faster, more predictable manner.

This investment book is written for the average person who wants to put their investments on autopilot. And also for people who don't want to use an investment professional who will put them in load index funds... This is for bond and stock market investors looking to self-direct their retirement investments.

Why Listen to Andrew Tobias

Andrew Tobias is an award winning journalist who writes about finance. He is the author of four books including Fire and Ice, winner of the 2015 Pulitzer Prize for general non-fiction. His most recent book, The Invisible Banker, explores how big banks manipulate our financial system and why we don't know it.

Tobias graduated from Harvard Business School. But he didn't take the traditional route and join an investment bank. His whole life was a bit unconventional... Which he documented in a pseudonymous autobiography. 

His easy going writing style is a breeze to get through. But his books are packed with information... And his personal finance advice books are worth reading for the average person.

Mini Summary

The book covers every aspect of investing, from how to invest in stocks, bonds, real estate, and cryptocurrencies, to how to manage taxes and retirement accounts. There are chapters on topics such as understanding risk and return, diversification, asset allocation, and portfolio management. The Andrew Tobias explains each topic thoroughly and provides examples of how it applies to real life situations.

His First Lesson: There are No Reliable Methods to Quickly Grow Wealth

I'd agree with this point... With one caveat. This is for people who don't study the markets, learn specialized investment strategies, and look for asymmetric investment opportunities like we do at barbellalpha.com.

But most people should stick to basic investment vehicles like passive index funds. Any extra money they make should be methodically invested from time to time into no-load passive funds. No fancy investments are needed.

Great advice for our non-investing friends.

Have a Financial Plan Before Worrying About Investments

Having a financial plan lets you avoid unnecessary debt. Having a financial plan helps people achieve goals faster. You can set yourself up to succeed if you have a financial planning process.

People should consider investing before worrying too much about retirement. If you don't invest now, it could affect how much you are able to save later.

A good investment strategy begins with having a financial plan.

Tobias says people should have a greater income then expenditures. Great, simple financial advice.

The Only Way to Reliably Make 18% a Year

Pay down credit card debt. He says no investments will make 18% a year. So pay down your credit card debt and other high-yielding debt as soon as possible.

What To Do With Your First $5,000

Put this money into an account with no risk of losing value. And just be happy with a low interest rate. This will be your emergency fund.... So if an unexpected expense comes up, you won't have to go back in credit card debt. There is no substitute for money. 

After that you can think of what to do with your investments.

The first place to start savings

"One should employ tax-sheltered accounts to invest for one's retirement and for advanced academic education of one's progeny."

Tobias says we should utilize IRAs, 401(k)s, and their Roth components.

From there he places an emphasis on stocks and bonds to grow wealth. And he gives plenty of advice on risk. But since we don't follow his methodology here, that's all I'm going to say about this. If you want to learn more about financial planning of this nature read the book or seek professional advice.

And in a recent interview Andrew Tobias gave his thoughts on some newer investments like crypto assets and venture capital.

Crypto Is Not an Investment

The term "cryptocurrency" is often used interchangeably with the word "bitcoin." This is wrong. Cryptocurrencies are digital assets designed to work like currency, but there are many different types of cryptocurrencies. 

There are three main reasons why cryptocurrencies are not investments. First, they don't provide any financial return. Second, they're not backed by anything tangible. Third, they're volatile.

People make fortunes investing in cryptocurrencies, but most of those investors are speculators looking to profit off the price swings. They're hoping that the value of the cryptocurrency will go up, rather than down. If you want to invest in cryptocurrencies, you'll need to have a plan to sell them for a profit once the price goes up. Otherwise, you could lose everything.

These are his words, not mine.

Venture Investing

The term "venture capital" refers to the practice of financing start-up businesses. In recent decades, venture capitalists have become increasingly sophisticated about how to evaluate potential investments. They are now able to analyze the financial performance of startups, assess the quality of management teams, and predict future trends.

In addition, many VC firms have developed sophisticated models that help them make better decisions about where to allocate their resources. These include quantitative models such as Monte Carlo simulations, and qualitative models such as value chain analysis.

As a result, venture investors have been able to generate returns that exceed those of traditional stock market indices. For example, according to a study published by the National Bureau of Economic Research, venture-backed companies outperformed publicly traded S&P 500 companies by over 20 percentage points per year.

However, there are risks associated with investing in early stage technology companies. A startup may fail to deliver on expectations, or it could go bankrupt. If you do decide to invest in a startup, you must agree to take some risk. This includes accepting the possibility that your investment might lose most or all of its initial value.

Three Favorite Quotes

Investing is a personal choice. You don't have to do it. But if you want to make money, you've got to put some skin into the game.

There are three main ways to go about investing: stocks, bonds, or mutual funds. Each one has pros and cons.

Index funds beat the market over long stretches of time. They're like a hedge fund without the fees.

The Final Say

We just scratched the surface of what is covered in the book. Anyone looking to automate their investments should read this cover to cover. The advice here is just as applicable as now as it was when this book was first written 40 years ago. 

It's good to have this basic financial knowledge in your tool belt when talking to friends who aren't that interested in stocks. But this is just that - basic knowledge.

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