Book promises "Fast Profits in Hard Times"

The day I received the review copy of "Fast Profits in Hard Times" the Dow lost over 200 points. "Hard times" is certainly an apt description of our current economic state so it was with more than cursory interest that I cracked open the book. By the time I finished it a few days later the Dow had given away another 500 points--hard times indeed. So what does author Jordan Goodman suggest that we do? We'll get to that in a moment. First I want to state what role I believe that investment strategy books such as "Hard Times" should play in personal finance. I'll do it via an analogous situation I am having with my injured knee.

Something has happened to my knee and it is causing me a great deal of pain. I tried to self-diagnose and treat it but it was clear that it was beyond my capabilities. I needed a medical professional, a specialist on knee injuries. I found an expert and in a few minutes he knew what was wrong and a week later had an MRI confirming what he had already told me. In short, my doctor's years of schooling and experience were necessary for me to be on the road to recovery. But it didn't stop there, during the diagnosis he recommended that I buy his book on knees. Yes he could help me with my injury without it but he felt that it was worth my while to invest the $20 and the several hours to read it. That way I would better understand this aspect of my body and would be better off over the long run.

I feel the same way about personal finance as I do medicine. Just because we have (and require) the help of doctors doesn't mean that we don't benefit from reading and learning about health issues. Just because we have financial advisors, doesn't mean that we won't benefit from having books like "Hard Times." Furthermore, just as medicine is too sophisticated to do without the help of trained professions, in my opinion playing the financial markets is too sophisticated to do so without professional help.

Therefore my recommendation of Goodman's and other personal finance books comes with the caveat that readers should read these only to better understand what their advisors tell them and to challenge those advisors if something doesn't make sense. Experts can certainly get it wrong (e.g., tech stock bubble, housing bubble, etc.) but non-experts get it wrong far more often. When it comes to your personal financial security, especially in middle age, the risks are simply too high for most people to do the go-it-alone strategy.

Now for Goodman's suggestions. He has selected ten strategies for times like this. They are: 1) Tax liens and deeds; 2) Below-market value real estate; 3) Income trusts and master limited partnerships; 4) High-yield stocks; 5) Dividend reinvestment plans; 6) Bonds; 7) Options; 8) Foreign exchange; 9) Selling cashflow; and 10) Passive income strategies. The chapter on bonds is particularly relevant. It is rare to see a portfolio that doesn't have at least some combination of bonds and fixed income and even rarer that the person owning those bonds actually understand them.

Each chapter describes an overall strategy and then gives specific "how to" advice. He also includes web site addresses and points the reader to other resources. These "other resources" are key because despite what he implies in the beginning of the book most of these strategies are extremely sophisticated and difficult to successfully implement. Goodman repeatedly acknowledges this sophistication with comments like "Do your homework! Investigate the fundamentals of any company offering high dividends before you invest." Unfortunately most people reading this book will not be in much of a position to understand a company's financials to the degree necessary to out preform those that do--which is the goal of all financial books.

One gapping whole in the book is the concept of "asset allocation." This is a strategy of having money allocated to different kinds of non-correlated assets with the goal of providing a target return while minimizing risk. Unfortunately this type of advice, while sound, isn't nearly as sexy as "10 Secret Strategies to Make You Rich" so don't expect to see on the covers of top selling books. However it is exactly the type of advice that most financial advisors provide which gets me back to my point of involving experts when making major personal financial decisions.

Amazon Link: Fast Profits in Hard Times: 10 Secret Strategies to Make You Rich in an Up or Down Economy