I’ve Paid For This Twice Already…

Wise Investing Made Simple Review Conclusion: The Big Rocks

For the past several weeks, I’ve been working my way through the book Wise Investing Made Simple by Larry Swedroe. The first review covers chapters 1-8, the second review is chapters 9-16, the third review is chapters 17-22, and this is the conclusion of the series.

So far, I’ve found Wise Investing Made Simple very informative. Most of what I’ve learned from it involves thinking critically about the assumptions I hold, and I’ve found that very valuable. Investing as a concept is so foreign to me that my brain accepts commonly spoken ideas as the truth a lot more readily than I would have thought. I’ve especially enjoyed some of the examples and stories used to illustrate points. I don’t think I will ever forget the idea about finding a $20 on the ground and then abandoning your job to search for $20 bills for the rest of your life. How silly would that be?

The end of the book basically asks you to examine what is important to you. It brings forth the “Big Rocks” theory, that I have heard several times before as many of you have I am sure, and talks about deciding what the Big Rocks are in your life. For those of you unfamiliar with the concept, if you imagine your life as a glass jar, you fill the jar with big rocks, then pour gravel into the spaces, then sand, and finally water. The idea is, if you don’t follow that order, you’ll never get the big rocks in the jar at all. The big rocks symbolize what is truly important to you – family, love, faith, your dreams, whatever you place the most value on in your life. The smaller stuff is progressively less important.

By adopting an active management strategy, you focus on the smaller rocks in life at the expense of the bigger rocks. Now, I don’t buy this 100%. There are select people, I think, that active management *is* a big rock for. But, I am not one of them. I have far too many other things in my life I would like to focus my time and energy on. The book then has examples of both how focusing on investing strategies takes time away from what is important (relationships, family) and then examples from Swedroe’s own life of how passive management has allowed him time to spend involved in his kids’ lives in a positive manner. So the take home lesson really is – what do you value most? Knowing that will help you decide how active a role you want to have to take in managing your investments.

The end of the book goes through examples (as far as asset allocation) of some “Big Rocks” portfolios and how to choose a financial advisor. There is a lot of emphasis on having a plan and a goal in investing, and that makes sense to me. The question the book asks is would you set off on a long trip without a map or directions, and I can say, I don’t. And along that line of thinking, I do have financial goals, but I’d never really thought about specific investment goals and I certainly do not have a roadmap to the future. But of course, I want to be able to retire and not starve, so it’d be more than prudent to start thinking about goals.

All in all, the book has convinced me I need to see some sort of financial planner. And, hopefully I can use the tips in the book to help choose one. I thought the book was a very easy read overall and contained a lot of useful “thinking” material. This isn’t a “how-to-do” book as much as a “how-to-challenge-assumptions” book, and I enjoy thinking.

Next week, I’m going to start figuring out what my plan is – or at least, see if the book I bought will help me. I used my Barnes and Noble store credit to buy “The Number” by Lee Eisenberg and theoretically, it should help me figure out how much I need to save for retirement. We’ll see, I haven’t quite started the book yet.