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The Intelligent Investor by Benjamin Graham

Main lesson of the book: There is a difference between an investor and a speculator

This was the first if not one of the first books ever of its kind. It was one of the originators of the current market system of the finance world. It helped structure a lot of financial business models and inspired more than a few investors on how to improve their wealth. This praise is of course based on the feedback gained from Warren Buffett. This book is without a doubt one of the core books on investing you should have in your personal library.

The intelligent investor covers a wide range of concepts related to investing and how the intelligent investor should maneuver through these dangers’ woods. The biggest point this book supposes is the difference between a Speculator and an Investor. In simple terms an Investor buys stocks, or securities for the long run. Whereas a Speculator buys securities to sell them within a short period of time. A speculator thus invests in stocks with the priority to make a quick buck and grow his assets in the short terms. To do this efficiently the speculator would have to make sure he buys a stock he knows will go up in value. He can either do this by “timing the market” or buy buying stocks when they first start out in the hopes the company will become popular and thus increase in value. Both of these options are based on the premise that the specular can read far enough into the future to ensure his financial gain. And right there starts the issue with speculating. Its based on a concept that the speculator knows whats going to happen in the near future.

Where an investor buys stocks in companies he knows will be around for a long time and have a solid foundation as its management or business model. And that brings us to the point the book is extremely focused on, if you are to be an investor, you should be an intelligent investor. And as an intelligent investor you should make your stock choices while keeping these points in mind:

  • When you buy a stock in a company, you’re not buying a piece of paper or a digital piece of information. You are buying ownership of a company and the true worth of that company isn’t always reflected in its market price.
  • If the market were a person it would be without a doubt a certifiable lunatic. Whose mood swings would vary between extremely positive and extremely negative. The intelligent investor has to make sure he knows the difference between these moods and buys and sells his stock according to the mood of the market. Never buy when the market is too positive which means it will overvalue its stocks. Instead buy them when the market is negative and is almost giving its stocks away as it is undervaluing its stocks.
  • You don’t make money when you sell, you make money when you buy. So, buying a stock at a really high price means you’re not making any money.
  • No matter how much you prepare or research, you will make a mistake with your investments. It’s a 100% mathematical certainty that you will fail with some of your investments. So the rule behind all your investments should then be that you always have a “margin of safety” included in your purchases.
  • Investing in stocks in itself isn’t risky. The risk exists within yourself. An intelligent investor needs to control himself. The market is a psychopath who will always try to take you with him on his wild chases for big money. The moment you let the momentum of the market take you with it on a wild goose chase, you are certain to lose most if not all of your money. And that is the key difference between an investor and a speculator. Control of one self.

The beauty of this book is that it actually gives you a set of rules to follow to make sure you buy stocks that offer a safety margin. These rules were made decades ago, but they still ring true to this day.

  • Adequate size. Only buy stocks from companies that have a market value of no less than 2 billion. Which will immediately cancel out a LOT of companies.
  • Strong financial condition. This means that the company has at least twice as many assets as its debt. This will make sure the company has a strong staying power.
  • Earnings stability. You would make the assumption that a stock that passed the restrictions so far would of course be stable, but you still need to check. A lot of companies have fancy accountants that can make things look better than they are.
  • Earnings growth. A company should at least be able to grow its business by 3% every year. Check its past records to verify this.

There are of course more points but these are the core ones in my eyes. The Intelligent Investor isn’t a book for the casual investor who just wants to be a part of the stock market. This book was meant for people who seriously want to play this game and make money at it. The fact that you are buying a part of a company comes with responsibilities. You will need to do due diligence on the company you’re buying into. That means that you will have to read their financial statements and their proxy statements. By reading these, you will see the actual worth and value of the business. By reading and understanding these statements, you can find a lot of red flags that will immediately show you if the company is a good or bad investment. Companies will often hide their dirty laundry in these statements because they know that most people won’t read them. The intelligent investor is that because he does the homework and does the research. Only after being sufficiently informed will the intelligent investor purchase a stock. And the investors portfolio should be properly diversified. The portfolio should consist of a minimum of 25% stocks with a maximum of 75% stocks and the remaining ratio should consist of bonds.

This book has a lot of great examples of the past and how companies failed their shareholders and the public in several ways. It has some amazing advice on how I should conduct myself in the stock market. The psychological part of the market is something that should be feared and not tried to be understood. A must read for anyone who wishes to seriously engage in the stock market. I had but one problem with this book and that is that I have read several books which seemed to base their entire premise on the information in this book. Which made it feel like I was reading stuff I already heard. But still a great book.

The Alchemy of Finance by George Soros

Main Lesson: An insight into the psychology of Financial Economics

This was a very hard read. And after finishing the book, I feel like I have a grasp of the abstractness of what he tried to portray. While also obtaining a glance of the underlying concept he tried to convey. The Alchemy of Finance in my honest opinion can’t really be considered a book on how to get rich, nor can it really be considered a book on investing. This to me was a look inside the mind of one of the richest men in the world. Throughout the book I could just feel him read his own words and come through realizations as he went through them. This to me felt more like the diary of a genius investor who tried to come to terms with the absurdity of the market while trying to show that it can be somewhat rationalized.

In my limited understanding of the complete image of what he tried to teach me in this book I will try to tell you what I learned. The market is by definition flawed. Because the market functions on a set of principles that without those it would crumble upon itself. One of the big principles this book mentions is the concept of the Efficient Market Theory and that the market is always right. Soros, to combat this theory developed the concept of Reflexivity. Which means: “The participants’ perceptions are inherently flawed, and there is a two-way connection between flawed perceptions and the actual course of events, which results in a lack of correspondence between the two.” The book is filled with lines like these and they threw me for a loop more than a few times. Soros mentions several times in the book that he loves dealing with abstract concepts. But in laymen terms it means that the people who are in the market can’t really see the market for what it is, but rather see it how they want to see it. And because they see it how they want to see it, the market tends to actually reflect that. Right there is the connection between the two that a lot of economists tend to ignore, according to the book.

This perception of the people in the market is then of course their own Bias. This bias can be both negative or positive which will then affect the market in the exact same way, pushing the value up or down. So Soros states that by understanding and reading the mind state of the people in the market it is possible to see what is going to happen. Because most stock markets tend to move in trends. The trend is then of course for the market to Boom and then Bust.

What was very interesting is that Soros actually went head to head with “A Random Walk Down Wallstreet” stating that with his methodology he was indeed able to beat the market for several years. Which means that he was able to make money by indeed timing the market. But he does go on to state that he was extremely in tune with the market. To the detriment of his interpersonal relations as he got so swallowed up in the market that it became the top priority in his life. And as he stepped back to become a bit more social he lost his affinity with the market. Which to me translates to that it is possible to time the market and beat the market, but it has to be literally all you do, all day every day. And I doubt that many of us want to live that way. Another very interesting point he made is the concept of treating the market as a place to test hypotheses. This really got my attention, because by doing this he doesn’t only effectively remove his emotions from the situation but it can allow him to objectively look at his successes and failures and see where and how he went wrong. He mentions in the book that this exact same method of trial and error is being done in the market, the only difference is that the people in the market aren’t aware of it, so they aren’t able to learn from it. He does admit that this method isn’t perfect and at times he doesn’t learn anything from it, but if he does see a pattern or he can form a theory around a possible investment, it can pay off very handsomely.

The Alchemy of Finance seems to be a direct challenge to the finance theories that are floating around. Soros actually states: “As an undergraduate I studied economics, but I found economic theory highly unsatisfactory because it failed to come to grips with the problem; indeed, it went through great contortions to avoid it. Economics seeks to be a science. Science is supposed to be objective and it is difficult to be scientific when the subject matter, the participant in the economic process, lacks objectivity.” Which to me is a beautiful sentiment because the pursuit if science is the truth. The truth of how the world works, what the laws of governance are and how humans can use them to their advantage. But these truths are all based on facts. In finance theory the people in the market play a huge factor in its existence and their own personal perspective will play a part in the overall success of failure of the market. And no matter how many people try to convince you otherwise, an opinion or point of view is not a fact. And thus it is somewhat impossible to objectively gauge the market because it lacks coherent facts to be used as a valid science. And in this particular case he is talking about all social sciences.

And with that in mind, the concept of the market adhering to the laws of nature in that it will eventually correct itself is thus flawed. Because the parts that make the market run are capable of thought and can thus change it. Whereas the parts in nature move without thought.

Yeah, the book went deep. It goes into even more detail about how the concept of the market reaching an equilibrium is near impossible. Because the people within the market will at all times have a biased view of the market and thus it can never resolve itself. Because the value of the market is always wrongly gauged. Another concept he attacks is the theory of Perfect Competition. Because it is based on the premise of perfect knowledge, which isn’t possible as long as the participant is part of the market itself.

This book was very interesting. More so for the insight I gained from looking into his mind and thought patterns as he just wrote what he thought. What I really loved in this book is the fact that he fully embraced the contradictions in life and how they helped him come to terms with the abstractness of it all. The epilogue was without a doubt my favorite chapter of this book. Because its there that he is completely honest and even gives his personal view on life and death and the pursuit of perfection. This book is not an absolute must read on your path of financial freedom or becoming rich. But if you do insist on day trading and trying to time the market. Reading this book until you fully grasp what one of the best investors ever has to say, might just be the right way to go for you. This was a very pleasant palette cleanser after my last book.

Money Master The Game by Tony Robbins

Main lesson of the book: 7 Steps to Financial Freedom

Money Master the Game is written by the motivation speaker celebrity Tony Robbins. Who tries to use his energetic delivery and motivational tendencies to give the regular person a chance at financial freedom. I am going to do my absolute best to extract the information within this very thick book and condense it. The key point of this book that it wished to illustrate is that everyone should have a diversified portfolio that is allowed to compound over time in a Tax free environment. This will ensure that you can retire with peace of mind and certainty that your finances will last you your remaining years.

Tony Robbins actually interviewed 50 of the richest people and most influential investors in the world and turned their advice into this book. The first few chapters Tony actually goes into depth about certain financial terms and concepts that will greatly help any investor in understanding the market and how they should invest or not invest their money. The first chapter is about how changing the perception of your own story can greatly benefit you. And by taking control of your own life and finances you can secure a great future. Readers should also always keep in mind that they don’t know everything and should always be wary of what they don’t know. By doing this they can guard against potential losses in the future by diversifying their assets and not putting all their money in one basket. Another interesting point he makes is that we should all automate our savings. He doesn’t explain this in depth, but he does mention its something that we should all do.

The book then of course warns us about the dangers of investing and how learning before investing is crucial to your future success. Tony then goes in on Mutual Funds and financial companies that offer asset management or active portfolio management. Explaining the dangers of those seemingly small fees accumulating to devour over 50% of our possible earnings. And how Mutual Funds or Brokers 96% of the time don’t outperform a simple Index Fund. An interesting point Tony did make is that Target Date Funds might not be the best solution possible, because these funds are still based on speculation rather than set guaranteed amounts. One great term he did bring to light a bit more was the concept of Annuity. It seems there are Annuities that can actually provide a life time income under the condition that you live long enough to start receiving the money. Most definitely something worth looking into, because to receive that amount all you would have to do is pay a set amount of money which can be rather big, but it would guarantee a second pension that could greatly benefit you later in life.

Money Master the Game book really focuses on minimizing the risk when investing. Tony explains the concepts of Structured Notes, Market Linked CD’s and Fixed Indexed Annuities. Which would allow you to make money when the market goes up, but not lose any money if the market were to go down. You would of course have to research if these options are available to you, but if they are they can be of great benefit.

In the next few chapters Tony explains that you can speed up the process of retiring by saving more. By cutting costs and investing the difference you can greatly quicken your retirement, even cutting down your daily cups of coffee from Starbucks from 5 to 3 could help the process. Yes … he actually used the Coffee example in the book. Once you have figured out how much you can save its time to actually invest according to the book, and you will need to set up 3 “Buckets”. A dream bucket, a risk/growth bucket and a Security/peace bucket. This is all part of your Asset Allocation, which means that you need to be aware of where you put your money and how much money you put in each bucket. And every year, you will need to look at your Asset Allocation to make sure its balanced.

The last part of the book Tony actually gives us excerpts from his interviews with some of the 50 people he interviewed. We then get to hear what these billionaires and  titans of industry think about the market and if us simple beginning investors still have a chance in the market. The one question he seemed to ask all of them was “If you couldn’t leave your children any money, but only a portfolio and some advice, what would it be?” And the answers they give make this book worth its salt. Most of the answers of course, are that you should not do day trading but should buy and hold your stock over the long term. Timing the market is near impossible and should only be done if you have an infinite source of money which most of us don’t. And in this book we also get a look at the portfolio set ups of some of these men that we could then apply to our own portfolios as we try our hand at investing. Based on this book, the best possible portfolio is the All Weather Portfolio which is that of Ray Dalio who suggests owning the following type of portfolio:

Ok, so I have to be honest here. I had the hardest time getting through this book. I actually considered stopping several times and just putting the book down as unreadable. The first chapter is Tony explaining how great the book is and how he has helped people. I figured that it was just the introduction and thus OK and that from that point on he would get to the nitty gritty of how I could master the game. The first few chapter he does explain some financial concepts, but then it begins. He starts referring to the later chapters as these mythical pages that will help you, so you just have to keep reading. He tends to finish chapters on these cliffhanger type of sentences that are just not needed in a financial book. And he markets himself and his companies or companies he is affiliated with more than I could bear. He has a resort in Fiji that is ranked in the top 10 every year as one of the best places to visit in Asia and Oprah actually called it her favorite place to stay. Why do I need to know that? I did NOT like or enjoy this book. 3/4 of it could have been cut.

I don’t want to cheer you up

What I have learned so far

I don’t want to cheer you up

What reading all these books is teaching me.

Reading book after book on financial concepts and ideas kind of takes its toll on my time as well as my mind. Because with each book I learn something new and I try to apply its steps and or knowledge to my day to day life. The issue I am having however is to look at each book objectively as I write these chapters. Because each book brings with it the authors point of view and feelings regarding the topic I can’t help but be influenced by their words. Once I agree with them and the next book states something totally different I am extremely quick to dismiss it because I heard something else first. A prime example of that is Rich Dad Poor Dad stating that Real Estate is the way to go where as I will Teach You How To be Rich says that real estate isn’t a smart investment. Of course I am making up my mind about how I wish to follow the advice in each book but its hard to not let my opinion be colored by the books I have read.

However I am extremely grateful at all the knowledge that is being put in front of me by these books and the knowledge I am allowed to absorb. I have written a chapter for each book but I want to take this time to do a quick summary for myself on what the key points are of Money so far.

If I am going to invest I need to do it myself.

There is no way around this, because every book I have read so far clearly states that money managers, hedge fund managers, wealth managers and most stock brokers don’t know what the heck they are talking about. I should never trust them with my money because for all their fancy talk and so called expertise it is simply impossible to predict the market. And even if you find one who was really spot on with their investments last year it is extremely unlikely that they will be spot on this year as well. They are doing nothing more than beautiful guess work and charging me a hefty fee to do so. Those fees they charge can easily take up to 50% of my earnings without me even noticing it. I should never let myself be suckered in by promises of paying only 1% of the assets they will manage for me. And the most important point I need to keep in mind is that most Hedge Fund Managers don’t owe me a fiduciary duty. Which means that they do NOT have to have my best interests at heart. Their goal will thus without a doubt be to make money themselves first and use my money if they can to do so. If I wish to invest my money I will need to create my own portfolio and manage it and I will either do better than or equal to but it is very unlikely I will do worse. Stocks are similar to flipping coins in their predictability because it is just impossible to know what they will do.

When I invest, I need to invest for the long haul not the short term

The rule of investing in this day and age is very simple. You buy a stock and then you hold it. I learned that there is a difference between Traders and Investors. Traders make their money on the fluctuations of the market. So they buy a bunch of stocks and hope that they will go up or down. Some people get lucky, but most don’t and those that do get lucky don’t stay lucky for long. So the smart move is to create a portfolio of stocks that is well balanced and thus lowers your risk. The best way to create a solid diversified portfolio is to buy Index Stocks. Index Stocks are a collection of stocks that represent the market. So in other words, what I am buying is the market itself. And from what I have learned is that the market for the last 70 years the market has been growing a steady 8% every year. Which means that every year a person could have made 8% from their investments every year. Which brings me to the next point.

Compound Interest is the way to become rich.

Compound interest is a mathematical calculation about which Einstein had the following to say “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” Think about it, every year your money increases by 8%. In 10 years you could have doubled your money. Now if you keep adding to your initial amount you will not only double the original amount but whatever you add on to it as well. This is what it means to invest for the long haul because compound interest is amazing but it takes time to actually prove itself.

Set up pension plans that allow me to invest the money.

Knowing that compound interest is the greatest thing ever invented is one thing, but I need to make use of it to know how amazing it is. Knowledge is power, but information without action is poverty. So I have started the process of setting up accounts that will allow me to make use of compound interest. I am not an American nor do I live in America so I am not able to set up a 401K or a Roth IRA. But I was able to find similar plans and am currently in the process of setting them up. I will set up two accounts. On one account I will use the system suggested by Ramit in I will teach you how to become rich and use a Target Date Fund. On the other accounts I will use the Swensen Model. Which is the following:

With this model I will be using the same diverse portfolio as a guy who has become famous for his investment prowess. The Target Date Fund account and my Swensen based account will both run for a successive 5 years after which I will compare the two and see which one is more effective to let run for the full 20 years. I will keep putting 100 USD on each account every month for the next 5 years.

Taxes are the bad guy, whether you want to admit it or not.

Taxes per se aren’t a bad thing, but I loved the way that Rich Dad Poor Dad put it. It is the governments duty to get as much of my money as possible so it is my duty to protect my money. This might sound selfish but when you look at how taxes can damage your potential income its clear as to why the rich find ways to avoid taxes. Even with the beauty and strength of compound interest, once you factor in taxes, it loses all its power. That is why I need to make sure that my investment accounts are Tax free so that I can at least earn the most I possibly can. I will need to do more research on this because I still feel like there is more to learn about this topic.

Pay Myself First

Now here is the concept that every book so far keeps telling me. And they are repeating a lot of the same information and using the same historical situations as frames of reference. But this concept right here is without a doubt something that is so simple yet eluded me for so long that it irks me. Paying myself first means that I will give myself a certain amount of the money I make to NOT spend. Now this concept sounds very weird to people because most of us always believe that the money we make is ours. Its your hard earned paycheck after slaving away for all those hours, so it is yours. But when I thought about it for a second, I noticed that I made a lot of money these past few years but I have nothing to show for it. Which means that I was simply spending my money without any kind of plans for the future. And that is what a lot of people are doing. These books really imprinted this message on my brain. Really made sure it’s a concept that is embedded in my soul. I will without a doubt from here on out every month set aside money for myself that I am not allowed to spend. I will be using the 7/2/1 rule from the book Richest Man in Babylon. Which means I will use 70% of my paycheck to live, and 30% to give to myself. I cleared all my debt awhile ago so I am able to combine the 2/1 together. I will keep saving that money until it reaches a certain amount that I am able to invest.

Real Estate is the way to go.

The more I read about investing, the more I realize that the only way to go about it is to invest in something that is slow and constant. And to me Real Estate is just that. I am not interested in flipping houses or selling the property I buy. I want to start accumulating assets. And I will follow the principle of “An Asset puts money in my pocket and a Liability takes money out my pocket.” The reason why I am so focused on real estate is because my focus is without a doubt a steady cash flow. Investing in Index funds is a slow process that will pay off in the long run. Which means that I will have to keep working until the long run finally concludes. While with Real Estate I can escape the Rat Race the moment my Income exceeds my Expenditures. That is what I want, I want my assets to give me freedom as soon as possible while my Index Funds ensure my retirement. I know full well that I’m doing double, but I wouldn’t have it any other way. By making my Real Estate my main assets and my Investments my safety net I should be good.

Money is nothing but a problem to be solved.

All the books I have read have a similar feel to them with regards on how I should view or treat money. But only Rich Dad Poor Dad put it in a way that really resonated with me. Money is nothing more than a problem that needs to be solved. Which means that I should never tell myself “I can’t afford this” but instead I should ask myself “How can I afford this?” It is a very subtle way of making myself think of how I can improve my situation instead of just resigning to it. By asking myself how I can do something, I am forcing my brain to think and come up with solutions. If I simple gave up before I even started, absolutely nothing would have changed and I indeed wouldn’t have been able to afford it. This way of thinking will not only increase my financial IQ which is the most important thing of all but it will also help me to understand how I can make more money. Now I understand that this isn’t for everyone because I will be directly challenging my money. And for most people money is a big source of anxiety and thus they just wish to ignore it and or hide it away. The best solution I have read so far for these kind of people is the Automate Your Finances system introduced to me by I Will Teach You How To Become Rich. By automating your finances you are effectively creating a system where you don’t have to look at your finances anymore. Which is great, because then you save and pay for everything without looking at your money. But I would rather face my money and improve my financial IQ. Because with a high financial IQ I will be able to increase my earnings to make sure I can reach my investment goals and saving goals much faster. Plus knowing how to make money feels to me just as important as how to save money. But that’s just me.

Believe in myself

This may be the last point but it might just be the most important one. There are a lot of ways to make money and a lot of ways to lose money. The key in becoming rich isn’t in the making money, its in the keeping of your money. So if my goal were to make a lot of money by creating a business or something to that effect I will need to make sure that I keep as much as possible. But I want to talk about starting something for myself. I unfortunately don’t have any amazing business plans or concepts laying around in the back of my mind at this time so I can’t really focus on that. But if I were to do that, I would need to make sure that I believe in myself and whatever it is I am doing to the fullest. There will be no retreat and damn sure no surrender. The only way would be forward and excuses aren’t something I would allow. Even without a great plan or possible business system for me to set up, I will of course still believe in the goals I have set out. I will start my Real Estate assets portfolio and I will use compound interest to my benefit. That is what I have learned so far. I will be doing another one of these chapters as I go along this journey of consuming books. But I just wanted to do this one, to make sure that I didn’t forget anything important that I couldn’t fit into the actual chapters.

I Will Teach You To Be Rich: No guilt, no excuses – just a 6-week programme that works by Ramit Sethi.

Main lesson of the book: Automate your savings and investing.

Now this was a very interesting book. The focus of this book was strictly on the concept of Personal finances. Ramit Sethi clearly states that by mastering your own spending and finances you can become rich. And he then goes into detail about how you can go about it and what the steps are you should take. This book to me was a very good remix of “A Random Walk Down Wallstreet” with an updated methodology on how to function in the current market. This book isn’t about leaving the “Rat Race” nor is it about creating a steady cashflow, but it’s all about your financial future and achieving retirement as soon as possible.

To reach your goal of being rich, Ramit Sethi starts with clearing your debt and understanding the concept of Credit Scores. The first chapter solely focuses on credit cards and how they can be used to your benefit and what you should avoid. What really put a smile on my face is that Ramit tends to give you advice and then go into detail on how you should or could execute his advice. This can prove extremely helpful to those people who want to start changing but don’t know how to. Ramit will often give you the very words you need to say to your bank or credit card company. These conversations are usually about the fees that are incurred as you use your credit card. And making sure that the company doesn’t put a scratch on your Credit Score. Taking care of your credit cards is the first week of 6 but for many people this will be a huge part of the process. Because many of us tend to buy on credit and then pay it off in installments. By doing this, you’re creating a system of debt that can be really hard to breakthrough. The book mentions a process called the Snowball method in which you pay off the minimum on all credit cards but pay a bit more on the credit card with the least amount of debt. And once you clear that card you use the money you have set free on the next card with the least amount. Thus creating a snowball effect in which you clear them all. Not a bad method in my personal opinion. Because being able to clear one card can really help you out mentally, as it is a financial victory proving to yourself that it is possible.

In chapter 2 he goes in on banks and I mean he goes IN. His distaste for banks can at times feel as if his personal vendetta gets in the way of his message but his points are still clear. He also recommends Vanguard as a bank for people to use. Which came across a lot in “A Random Walk Down Wallstreet” as well. His point is that big banks are extremely vile in their handlings with customers and they get away with it scot-free because they are banks. This I have to agree with, because a bank is nothing more than a business and a business’s goal is always to make money. And that is often at the expense of the customer which is you and me. So by making sure you pick a bank that has your best interest at heart and doesn’t charge you exuberant fees you can make sure you don’t get cheated out of a lot of money. This step was something I never really looked into, because my assumption was always that every bank is the same, but it according to this book they are indeed different which if I think about it for a second makes sense. Ramit loves to challenge pre conceptions in this book and this is one of them. A great point he makes in this chapter that he keeps building on is automating your money management.

This concept isn’t necessarily new but the way Ramit explains it, it make a lot of sense and really helps relieve the stress of worrying about your money. All your money should be in one good checking account and all your monthly expenses should then be deducted from that account. You should have also put several saving accounts in place that will also deduct a set amount every month from your checking account. By making sure that a certain percentage is taken off every month for everything you need to pay for and or save for, you are effectively freeing up your time. Because what ever is left over will be “Guilt Free” spending money. Ramit is effectively saying that you should pay yourself first and then pay your bills and use whatever is left to have fun.

The next step in I Will Teach You To Be Rich is setting up your 401k and Roth IRA. These two are the main points of this entire book in my opinion. Because you need to clear your debt just so you can invest in these 2. And once you invest as much as you can into these two, can you do other things. Ramit really focuses on 25 to 30 years down the line. By saving your money and investing it in the safest possible options you will become rich. That is the entire premise of the book and it’s foundation is these 2 points. Your 401K and Roth IRA are pension plans that you build over time and you can use to invest. By investing them instead of just using them as glorified saving accounts you can double you money. This is of course based on the premise that the economy will maintain a steady growth rate and you can benefit from it. Creating these two accounts with the least amount of fees and proper investment portfolio will allow you accumulate wealth at a steady but constant pace. And by automating the process you don’t even have to look at it.

But this system would never work unless you take a good look at your own finances and how you actually spend your money. Ramit does make a valid point in stating that worrying about the small expenditures doesn’t do much and instead we should focus on the big wins. By cutting costs on our main expenses such as subscriptions and or life style choices we can reduce our monthly expenses by a lot. This of course sounds a lot like budgeting and that is something a lot of people don’t like to do. Hence the automation process, which will help you no longer needing to look at your budget. Because it’s all automated and thus out of your mind. But Ramit does recommend using apps or websites to keep track of your expenses such as https://www.mint.com/.

My favorite chapter would have to be chapter 7. In this chapter I will teach you to be rich goes into detail about how you should invest your money. He uses examples from scholars such as Swensen to illustrate his point. I personally will be using the Swensen model for my Roth IRA as it makes a lot of sense and based on what I have learned so far it is indeed properly diversified. Ramit however did teach me something else as well. The concept of Target Date Funds. These funds are automated investment portfolios that correct themselves to adjust to my personal preference without me having to look at them. Fully automated investments that will allow my money to grow without me having to look at it all the time or worry about the market. A beautiful system indeed for those who are looking for an easy way to invest that doesn’t give them an headache from all the possible options or keep them up at night.

The concept of automating my expenses and savings and investments has now been fully embedded in my psyche and I will follow his advice. I can surely recommend this book.

Selling the invisible – A field guide to Modern Marketing by Harry Beckwith

Main Lesson of the book: Position your brand in the mind of the consumer and in the market

This was an interesting and rather short read. I felt like this book made it a point to compress as much information as possible into as little amount of words possible. The book hints at concepts but never fully explains them in what seems to an understanding or perhaps hope that the reader is already aware of what the author means. This was a slight set back and after reading the 22 immutable laws, this felt somewhat like a repeat of what was already said. That is of course not the books fault but mine because I might just be reading a bit too much. This book never actually seemed to make a succinct point about what needs to be done or how it should be done but rather gives the reader a broad sense of what marketing is.

The book does make a clear point of the fact that consumers don’t necessarily want quality but rather want a story. So marketing needs to revolve around a story that the consumer can relate to. Which translate into a slogan that the consumer can either apply to themselves or a brand that feels familiar. Many a customer decide their purchasing decision based on feeling rather than logic. So it’s the brands responsibility to make sure that they are affiliated with a good feeling when it comes to the customers mind. That is what you call Brand Loyalty. It simply means that the consumer has positioned the brand at number 1 and they feel comfortable with it. Comfort means that consumers will no longer do any research on a better possibility or better quality because they will buy their preferred brand regardless. Even if they know that Brand “B” has superior quality, lasts longer and is cheaper, the consumer will still buy the brand they know and are comfortable with.

To make sure that your brand stays at number one within the mind of the consumer there are a few things your company needs to do. Your company needs to understand that every part of communication with your company is a part of your marketing. No matter how good the quality of your service is, or how inexpensive it is, if the sales person who is in contact with the customer all of the millions spent on advertising will be for naught. Your company needs to make sure that from the person who answers the phone to the CEO, all work in sync to make sure the brand is perceived a certain way. The CEO of Chrysler can’t be seen driving around in a BMW.

Selling the invisible uses McDonalds, Disney and FedEx as benchmarks for what quality should represent. It even went as far as to say that if you’re unsure on what service should look like, just copy Disney. Which if you think about it makes a lot of sense, because Disney puts in a lot of effort to make sure that everyone who is employed in their theme parks acts and behaves a certain. The goal of your company shouldn’t be to give the customer what they want, but to exceed their expectation and surprise them.

A method to improve your service and or quality is to admit that your product is bad. By admitting that your product is bad you are forcing yourself to improve it. And you also need to keep in mind who is setting the standard for your product. Is it you, the market, the consumer or your competition. Let go of your ego and accept that the consumers are setting the standards for your product. Which means that the consumer essentially decides what your marketing should be all about, and it is up to you to figure out what they want. A great point the book made is that some marketing campaigns actually make the mistake of telling everyone why their product is the best. Forgetting the rule that its not about them, but it’s about what the product can do for the consumer. Don’t make it about you, make it about them. Tell them a story about why your company is a great fit for their needs. Lower the boundary for your consumers by eliminating their fear. Keep it simple and try to own a word in their mind. Focus on that one word and make sure the consumer feels appreciated.

Selling the invisible made one point that really stuck with me and that was “never go for perfection”. I am a firm believer in that once one tries to obtain perfection they will do naught but procrastinate and wait for the perfect moment to reveal the perfect version of their product which will most likely never happen. The issue with waiting for the perfect moment is that your competitor will beat you to the market and leave you being second in a market you could have created. Another great point is that I shouldn’t trust my own experiences and memory. This might be weird for some because we have all been taught that we should trust our gut and our gut is based on our past experiences. But our memory isn’t some flawless machine that processes everything the way it exactly happened but rather it’s a flawed box where we just put the things we want to remember in. Basing our decisions or judgement on our past experiences will only mean we are bringing our own biases into it. Which is great in your own personal life, but when it comes to marketing, we need to let go of our ego and accept that the consumer might have a different perception than us.

The more companies are similar the more you need to make sure that the consumer knows the differences regardless of how small they might be. But make sure you don’t say too much, because the more you say, the less people hear. Keep it simple.

This book had a lot of similarities to the 22 laws of Marketing, so much so that at times they used the same examples. A point Selling the invisible made that really stood out was that Value isn’t a selling point nor is it a position point. Because everyone is selling value, everyone promises value, its inherent in the product you are offering. Selling the invisible isn’t a book you should read in the hopes to learn how to market your product, but rather a book you should read to open your eyes on the perspective you should use while marketing.  This book isn’t only for those who are selling a service but for everyone who wants to engage in communication with their consumers. Marketing isn’t a department, its your business.

The 22 Immutable Laws of Marketing by Al Ries and Jack Trout.

Main lesson of the book: Perception is key to marketing.

Before I get into what I learned from this book, these are the 22 laws or concepts you will need to abide by: Leadership, Category, Mind, Perception, Focus, Exclusivity, the Ladder, Duality, the Opposite, Division, Perspective, Line Extension, Sacrifice, Attributes, Candor, Singularity, Unpredictability, Success, Failure, Hype, Acceleration and finally the Law of Resources. Each one of these has been broken down by the book as to why each one of these needs to be adhered to unless you wish to court failure.

One of the main lessons I learned from this book is that being the first to enter the market means you will have the highest probability of becoming the leader of the market. The goal of any said leader in the market should be to link their brand name to the product they are selling. To the point where the brand name becomes synonymous with it to such a degree it becomes generic. For example Band-Aid, this is the name of a brand for adhesive bandages but it has become so popular whenever you request one would ask for a Band-Aid regardless of the actual brand name that is on the package. This should be the goal for anyone that creates a new market.

Now of course not everyone is lucky enough to break in a new market or be the first to the market. But a lot of companies still want to enter the market and take over the number one spot. The main method by which many people or companies would try to do this is by comparing their product to their competitors and making sure that their product is superior. Most business believe that if their product is superior the customers will obviously pick their product. According to this book that line of thinking is wrong. The key point to marketing isn’t having the best product and telling people that, its about understanding the customers perception of the market and your position within their reality. Reality for everyone is based on their perception of the world around them and how it relates to them. So if a company is the first into the customers mind, that company will have a firm foundation to become the number one brand for the product that is linked to the company. The next company to enter the market will then of course be rated second on the ladder of positions when it comes to brands and so on.

Now of course this has its drawbacks because once a brand enters the customers mind for a certain product they are forever linked to said product. The book gives the example of Atari in reference to this. Atari started as a gaming console company but wanted to enter the personal computer market which was dominated by IBM and Apple and failed miserably because they couldn’t step away from their original position in the customers mind. History is littered with companies who feel that brand name is strong enough to switch from product A to product B forgetting that their brand name is only strong because of the product they are selling. And that brings us to the law of Focus. In this chapter it becomes clear that a lot of companies have this idea that the more they sell, the more will be bought. That is why Coca Cola branched out and started selling clothing, new versions of their drink only to find out that these were extremely costly mistakes. Focusing on what you’re good at is the way to go for a brand. Don’t get deluded by the allure of success.

And because companies have to focus on what they are good it, it allows competitors to step into the market and offer the same product but in a different category i.e. Desktop – Laptop, Electric Shaver – Disposable Razors, Brokerage Firm – Discount Broker. Now if for some reason I wasn’t able to find a different category  to create and be the first in I still have the possibility to enter the market with a similar product. But in that case I will be up against the Big Dog which will make me the underdog. And people love rooting for the underdog. So my marketing should be based on my company displaying candor and showing the customers that we know we aren’t the biggest but we are doing our best. Another valid strategy mentioned in the book is creating an opposite position of that of your competitor. Take Pepsi and Coca Cola, McDonalds and Burger King. Pepsi was able to become the second biggest by focusing their brand on the younger generation and thus indirectly telling customers that Coca Cola is for old people. Burger King had an amazing slogan in “Have it your way” which indirectly told customers that McDonald was mass produced and thus not as fresh as BK. Find a way to discredit my competitor while showing my strong point is a valid marketing strategy for a number two in the market.

This was an interesting read that wasn’t necessarily paradigm shifting but still a very interesting point of view on what marketing is and should be. What I really enjoyed was the fact that certain laws are in direct opposition to what I learned in school. Perception of quality, One product instead of diversifying, focus on the brand instead of the numbers, don’t discount your brand for short gains but instead look at the long term consequences.

The 22 Immutable Laws of Marketing was a short read that felt slightly outdated but the points it made still ring true. This was a beautiful introduction into the concept of marketing after I have forgotten most of what I learned in school. The reason I felt I needed to also improve my understanding of marketing is because business and marketing go hand in hand. Setting up a business system is an amazing way to create cashflow that can provide me with financial freedom. With that in mind I will need to have certain aspects of business in the back of my mind as I go forward.

A Random Walk Down Wall Street by Burton G. Malkiel

Main lesson of the book: It is better to hold a diverse set of Index funds than it is to buy individual stocks.

I have the pleasure of reading the 12th edition of this book as it seems that the book is periodically updated to reflect the most recent developments in the market. That alone makes this this book invaluable to anyone who is interested in the Stock market. A Random Walk Down Wall Street is based on the simple hypothesis that Buying and Holding is better than Buying and Selling. To clarify that statement one needs to understand the difference between the concept of Trading and Investing. Trading is when one buys with the intent to sell within a short period of time and thus gain a “quick buck”, whereas investors are in it for the long haul and thus will only capitalize on their investments after many years or perhaps even decades. This book like some of the previous books I have read states that the only path to true wealth is a slow one. Build up your fortune, by using patience and minimizing your risk.

There are 2 main methods that investors/traders use to evaluate the market and stocks. One is the Firm Foundation Theory and the other is the Castle in the Sky theory. The firm foundation theory focuses on the company the stock is based on. The company’s possible growth, its assets and it’s value within the market. Whereas the Castle in the Sky theory is based on the promise of the markets response to the company. And past stock prices will then of course allow them to predict the future prices of the stocks. Within these 2 main methods there are an endless amount of strategies that investors/traders use to predict the market. People who use stock charts to predict future rises and falls of the market are Technical analyzers. These Technical analyzers tend to believe that the market 10% logical and 90% psychological. Which means that they fall under the Castle in the Sky theory because believing in the story of the company more so than its actual value will lead to Castles in the sky being built. There are the people who believe that the age old saying of “To know your future you must know your past.”

People who believe in the Firm Foundation Theory work with the premise that the market is 90% logical and 10% psychological.  Meaning that as long as the company is capable of growth, capable of paying its bills and has a function within society that can’t be replaced it will do well. I can keep going with further strategies and drop terms such as EP, Sharpe Ratio, Beta, REIT but I would be hard pressed to then keep this chapter within 200 pages. If you want an in-depth look and understanding of all the financial terms and how they are used this is an extremely useful book. And I can surely recommend it. All the terms and strategies described in this book however are merely used to show that they aren’t foolproof or 100% guaranteed success in the market.

The book states on several occasions that the average Stock Broker or portfolio manager never exceeds the earnings made if one were to simply hold a diverse set of Index funds. This might sound weird to most but when you look at the long run, it tends to make a lot of sense. Because if one keeps running at a constant pace and the others sprints but has to stop every few minutes, the chance that they will arrive at the same place at the same time is very likely.

The thing I did learn from this book is that the market tends to get over excited for something new. Whenever society finds a new trend that it clings to, or a new development that will affect the world, the market will reflect it immediately and go Hype Crazy for a bit. And in this craze the prices will soar. There have been several of these “Bubbles” where stocks and the market go feverish for possible money earnings. If you are lucky enough to step in at the very beginning and buy the right stocks you can indeed make a lot of money if you sell at the right time, which is before the Bubble pops. But most of us who aren’t that involved in the stock market, nor do we want to invest that much time into learning its ins and outs will not be able to seize that opportunity. Because the moment a stock or investment reaches the newspapers or news its often too late as the wave has already passed.

There are of course a few lucky people who pick the right stocks and make a killing in the market. But this can be seen as nothing more than luck, because no one is able to predict the future. The book gave a beautiful example of this by stating that if 1000 people enter a coin flipping contest and the ones who flip heads will proceed to the next round, the final 20 will be seen as geniuses and heralded as coin flipping savants. But if the others that were eliminated were allowed to keep flipping they would most likely match the amount of heads being flipped because those are the rules of chance.

My favorite chapter in this book was without a doubt chapter 12 where the author explains how to actually invest and how to take your random walk down Wall Street. The first step in its rules was simple “Know yourself”. Know your “sleeping point”. Your sleeping point means exactly that, the point at which you can sleep comfortably without worrying about your portfolio. Many of us are scared of the stock market, because the chances of losing everything exists and that could possibly bankrupt you. So if you are to invest know your tolerance for risk and find the amount of money you would be OK with investing without losing sleep over it if you were to lose some or all of it. And if you are to invest, have a goal in mind as to why you’re investing. Be it retirement, studying or making sure your relatives have something if you’re to pass away, take that into account when you buy stocks or bonds. Also make sure you know the tax rules of the country or state you’re in. By understanding the rules of taxes you can avoid losing a LOT of money and if done right you might actually be able to minimize a lot of risk involved in the stock market. Another great point made in this chapter is that you need to make sure that your Buying power stays current with the current market. Inflation can destroy long term investments if they don’t take inflation into account. You should also take your time and research other venues besides individual stocks, such as Bonds and Trusts. And if you’re using a broker, keep in mind that their Commission and broker fees can really take a bite out of your possible earnings. And last but not least make sure to diversify.

The market is a living thing, and if you see a trend of stocks and prices rising, consider it the market getting excited about something new. But keep in mind that something new soon becomes old and boring and thus loses its value. Me personally I will be looking into REITS, because they align the most with what I am interested in. What will you invest in?

Cashflow Quadrant by Robert T. Kiyosaki

Main lesson of the book: Know where you stand in the world of finance and how to move into a better position.

This entire book is based on the following concept:

This very simple concept encompasses the possible positions one can hold in life with regards to how they make their money. Cashflow Quadrant takes its time to slowly break down the benefits and risks of each side. Discusses the possible transition from one side to the other. The beautiful point this book makes is that each side and each position will come with its own source of valid information. So what works for an Employee will never work for an Investor and vice versa. This of course also applies to how they spend their money and how they will most likely view money.

I have been reading these books and have allowed them to alter my perception of money and how I view the world in general. This of course means that I am slowly trying to transfer from the Employee side of things to the Investor side of things and of course the Business owner side of things. As I am preparing my mind and trying to change my reality I find myself discussing these topics with those around me. It took me but two conversations to learn that it was not a good idea to do so. Because when dealing with peoples perception of money you are often directly offending their position in life and how they got there. And when you tell them that being an E (Employee) is not really a good thing and it comes with more risks and pitfalls than being an I (Investor) they get extremely defensive. Because not only am I telling them that how they are living their lives could be possibly wrong, I sound like an arrogant know it all who thinks he is superior because I read a few books.

These people will vehemently defend the concept of E as being a good thing. Because it offers security, it offers stability, it offers a chance at occasional vacations and heck it even offers the chance at saving your money to buy something they would like. What in the world could be “bad” about that? Yes, it took me but two conversations to learn that you cant give someone information they have no need for. Those who are content in their position within the quadrant will most likely never want anything else. And if you, the reader are going through this book, it means you’re one of the few who wants to move into the right side of the quadrant and gain financial freedom. That is what this book is all about.

It breaks down the myths that surround being an investor, the scary tales that people use to make sure those around them never take the first step towards financial freedom are revealed to be mere lies. An E will forever work for a boss. And there is nothing wrong with that, but please keep in mind that a boss’s responsibility is to pay you for the work you do and not to make you rich. I remember those good old days where I was an S (Self Employed). I struggled to sell my books, I would make my way to each stage I could find to perform my poems. Paying for my own transport to the venue and my own drinks once I got there, Poetry isn’t the most profitable of businesses one can find themselves in. But I learned a valuable lesson from my days as an S, and that is that no matter how much I work, it wont always translate into money. Talent and discipline will allow me to create an amazing product but that doesn’t mean a thing if I don’t have a system in place to sell it.

And that is what a B is all about. A Business owner has a System in place where others work for him and he delegates the tasks to make sure the work gets done. While an S will do all the work himself, because well … that is the only way to make sure it’s done right. I was without a doubt an S who frustrated with the lack of cashflow, so I did all I could to get more paying projects and more exposure. But through this book I learned that my mistake was, that I didn’t set up a system that could function even if I wasn’t present. That is what a business system is. Even if the owner isn’t present the business will still flourish and be profitable. And my business was solely dependent on me and after I left, it went away with me.

By reading all these books, my goal is to gain a Financial IQ that will allow me to gain financial freedom. My eyes have been set on Real Estate as the means with which I wish to do this. But Cashflow Quadrant showed me that even Real Estate should be used as the foundation for setting up a solid business system. To ensure that my cashflow will remain untouched by Taxes and other greedy hands that will want to lay their hands on my good fortune. Real Estate will still however be my first step into Investing. Since starting this journey I have started trading stocks to get a feel for it and learn the market. The fact that these stocks and bonds are based on perception and people’s opinion of them, makes them extremely risk filled in my eyes. Whereas real estate is a fact that I can rely on regardless of the fluctuations the market might experience or the crashes the economy might go through. But without a doubt, the book states, and as have several other books, that financial freedom is not to be found while remaining an E or S. The only way you or I can obtain wealth and experience a life where we don’t have to work but work because we want to work is if we step into the B or I side of the Cashflow Quadrant.

I am slowly making my way there, I hope to see each and everyone who reads this book there. Freedom starts from within never from outside. By reading these books, I am educating myself and by writing this book I hope to educate you.

The 48 Laws of Power by Robert Greene

Main lesson of the book: Power is game, and you can either play to win or choose to be powerless.

Now here is a book that seems to be in direct opposition of the methods and ideologies laid out in financial books. This book without a doubt ruined whatever innocence my inner child had stashed away in the hopes of once again flourishing. The 48 laws of power seems to be focused on making sure that the reader knows what can be done to excel in the game of power. Each law is given its own explanation and its own examples of people who either followed the law or betrayed it. These examples come from humanities own historic pages wherein man of valor, men of renown, men of extreme wickedness have their deeds and life examined and interpreted by Robert Greene. Each review of their actions feels like a story in which it becomes clear how he or she used said rule to their advantage or disadvantage.

But each story is ripe with manipulation, deceit, betrayal and at times even genocide. The 48 laws of power often refers back to the courtiers of old who were in service to the king and were the kings court and at times the kings advisor. Similar to the current politicians of our age. These courtiers had to make sure to gain a position of power that wouldn’t offend the king but would still show those around them that they are powerful. Like many of us who work for a boss, we have to make sure that we do a good job and are able to “manage” those beneath our position while making sure we don’t threaten our boss’s power. To get to this position and to make sure we don’t offend our boss we have to make sure to use our mind and act according to the laws of power laid out in the book.

With each chapter I analyzed my own past behavior and deeds and how I tend to weigh my words before sending them out. I found that I am already subconsciously following a lot of these laws without the intent of increasing my power. Or at least I believed it was never my intent. I was never hungry for power, but the book clarified for me the concept of power in that its not only in business that power exists but also in relationships with family members or lovers. By following these rules you will not only be able to control and manipulate those around you but they will love it and they will love you for making them feel special. Because power according to the book is all about understanding and manipulating the situation and those around you. And never once think that people aren’t doing the exact same thing to you. By using your power accordingly you can make those around you feel better, stronger, more confident and they will then in turn crave your presence thus increasing your power over them. Just think about this for awhile as you go back through your past romantic relationships. Isnt that the exact thing most of us wished we inspired from those who we loved or liked?

The 48 laws of power is an interesting read after my financial books because most of those books state that harmony and karma are at the base of becoming rich. And that one can only become rich by being sincere in their actions and making sure their actions are for the benefit of the people they sell to or they deal with. This book however calls those who behave and think that way naïve as they underestimate the poison of the world around them. And that was the exact reason I wanted to read this book It felt like a good answer to what I should do once I get into a position of power through my financial gain. Because it is very unlikely that I will get rich without the help of others. For that exact reason I would need to be aware of how to deal with the people around me and the unseen enemies that might lurk in the dark or even worse the enemies that hide in plain sight. This book is the perfect pillar upon which to rest your concept of power and how to deal with people as you strive for wealth. Because it will make sure that you recognize the snakes in the grass, recognize the scams and traps laid out for you by your so called friends. The book might be harsh in the way it portrays the world and that you can only get anywhere by using cunning and deceit but it does have a point.

We often times delude ourselves into thinking the world is a great place where if you do good you will get good back. Where if you help people they will of course be willing to help you back. Where a favor will mean the other party will happily return the favor. But how many times has the world shown you that your beautiful morals are often lonely at the heights at which they reside. This book brings you back to reality and shows you the dirty underbelly of motivation and greed. While I can’t follow every law within the book, most of them are extremely useful when it comes to dealing with a certain type of person. Some laws are just extremely logical but never occurred to me because I never gave it any thought. I without a doubt learned a lot about myself and why I tend to do what I do from this book.

My favorite chapter is Law 8: MAKE OTHER PEOPLE COME TO YOU – USE BAIT IF NECESSARY. This law is all about keeping your emotions in check and making your opponent lose control of his emotions and thus in a fit of rage abandoning all reason and plans he might have had. This is something I have been striving for, for a long time. Because to me, the only thing we can ever truly control is ourselves, our thoughts and deeds. By losing control of myself I will thus lose whatever possible control I may have had over my surroundings as well. Keeping my cool with allow me to keep the power. I learned this through various fights I had my own personal relationships, that my “devil may care” attitude and my so called poker face would infuriate my opponent. Because well, who wants to fight with someone who doesn’t even seem to care. They would then in turn reveal more of their cards and lose even more of their so called power as they didn’t think anymore, but lost themselves in the moment and their fit of rage. Not considering their words, the consequences of their actions or how I could possibly react. Because for them the moment was the most important, and the venting of their rage was their key priority. While for me, often it would be about the longevity of the relationship or possibly even the longevity of my position of power over them.

Always think a few steps ahead, never move out of anger and try to not take anything personal. Force your enemies hand, make them abandon their laid out plans and have them simply react to whatever you did. Never take direct actions but instead use a go between which could very possibly become your scapegoat should things go wrong. Consider the possible reactions and keep an air of mystery about you as you reinvent yourself and your position of power.

The 48 laws of power is without a doubt, a book worth reading. Just keep in mind, you will not look at the world the same way afterwards.

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