Dollars and Common Sense: Taking Charge of Your Investments in the Tumultuous 21st Century, by Peter Andresen looks at how to manage your money and invest it to build wealth.
Andresen, a financial advisor who founded Andresen and Associates, wrote this book mainly for anyone interested in making financial choices without “fear of investment fears, phobia, and mythology.” It does not dive into small business financials. But small business owners don’t have the luxury of receiving a paycheck and need financial planning more than most, and so should consider it a guide for growing their investment income.
Grandparents Had A Point About Saving Money…
The author’s fiscal approach is conservative, based on a self-described 10 commandments of Investing for Success. Early passages concern a very centralist view of finance – The first commandment is:
“Times of economic and physical hardship are an inevitable part of life. They pass.”
Then segue into more about the investor’s rational (“Manage your own irrational mind”). Andresen’s point is one where extremes distort us from our primary objectives.
This view makes Dollars and Common Sense stand out from many prominent guru books. Andresen writes on perfectionism, the idea that you avoid imagining how your portfolio can be in a downturn – and on preventing scam. The nice perspective he brings is placing the ego in check:
“The best investors lose money too. The difference between them and everybody else is how they deal with it.”
Andresen advocates budgeting, but takes that ethos beyond the topic of reducing debt into conservative suggestions regarding investment choices. Chapter 5 suggests investing only in mutual funds, followed with detailed chapters on differing mutual funds classes. I am not sure using the phrase “only” is a trump card for all investing, but given the amount of the exotic instruments unleashed on the American public, Andersen works to take you towards a manageable selection of investments.
… and Andresen makes a solid case for fiscal conservatism
Andresen is against the complexity that investment banks have wrought on the public. It’s the velocity of these instruments that have come into question, and Andersen does a good job explaining how that velocity came to be institutionalized:
“The core of 2008’s financial explosion was … constructed as early as 1970. There were those who spoke out. Nassim Nicholas Taleb wrote his books on the Black Swan, the effects of the unexpected. Robert Schiller wrote about Unbridled Exuberance. So we were warned, but their voices were drowned out in a sea of marketing disguised as advice…..as the entire mortgage-backed securities market came crashing down, the stock market, the oil market, the gold market, and the real estate market imploded as well. It was a perfect storm. There was nowhere to hide, except Treasury bonds… The bottom line is that the rules of the last 30 years don’t appear to have worked. How humbling to discover that the World War II generation was right after all!”
Supporting charts indicating economic performance over the past several generations; most of the data presented supports a conservative approach for one’s portfolio. A chapter on rebalancing your portfolio explains the definition and process, while another chapter notes the qualities a financial adviser should possess.
Furthermore, Andresen’s writing style is imaginative and light on jargon, while still covering some good technical details and the purposes behind those details. Read this quote for example:
“It’s important not to get diverted into researching for new funds right now. If you chase a magazine’s top-performing funds, you will wander off into a forest of mutual fund statistics and anxiety. Let it go. Right now all you need to do is rebalance to the best of your ability.”
Dollars and Common Sense offers a standard read on personal finance. You’ll certainly need to weigh the advice against your own set of investment risks. If your investment tastes lean towards more risk – investing in stocks or occasionally use calls and puts options — other books will suffice.
But Dollars and Common Sense will address readers who need a balanced approached of self-management yet still need advisory for fiscal management. For the busy small business owner, the brevity of text won’t overtake a business day in understanding the book’s personal finance messages.
Those messages will reward you with a good baseline for getting back to finance basics.