Book Review: Think, Act, and Invest Like Warren Buffett

This book, by Larry Swedroe, is a must read for individual investors that are looking for the answer to the age-old question – How should I invest?

Warren Buffett certainly makes any list of “best investment minds” of our era, no matter who you are.  Author Larry Swedroe would likely make any such list as well, given his many books that he has written on the subject, such as “The Only Guide to a Winning Investment Strategy You’ll Ever Need”, “Investment Mistakes Even Smart Investors Make”, and just as well, the subject of this review.

Mr. Swedroe starts out with the basics of Mr. Buffett’s advice, with the sage’s commentary backed by the facts behind them.  For example, regarding market timing: “Our favorite holding period is forever.”  Swedroe follows this advice with evidence of why it pays off for the individual investor in the long run, due to the fact that the only time most individual investors want to sell is at exactly the wrong time, when markets are tanking.  After developing a sound investment strategy, using low-cost index mutual funds as the foundation, it’s best to stick to your strategy through thick and thin.

Another example is offered in these words of wisdom from Buffett:  “The most important quality for an investor is temperament, not intellect.”  This comment is particularly useful when considering whether or not you should pay attention to the likes of CNBC, Investor’s Business Daily, or other “noise” going on in the media.  Instead, having a sound investment policy that you stick to, maintaining your temperament (don’t let your emotions drive your decisions, in other words), is the way to success in investing.

Throughout the book, Mr. Swedroe provides additional tools and insights that can easily be put into play immediately.  There is an example of a personal Investment Policy Statement (the guide you’ll need to help you through the “tough times”), as well as a basic strategy for developing an investment allocation plan that is diversified, low-cost, and will provide you with stable investment returns throughout your life.  In addition, Mr. Swedroe covers the topic of how and why you might choose to hire a financial advisor, along with advice on the type of advisor you should choose (and here’s a clue, Dave Ramsey fans: it’s not commissioned advisors, it’s fee-only advisors) because it’s not always about finding the lowest up-front cost, it’s more about finding someone who will work in your best interests.

In addition to investing, Mr. Swedroe takes time to point out that the “activity” of investing should not be a focus for the individual investor – that the time spent on researching, managing, and monitoring any type of investment aside from the index-type of investments that he recommends, is lost time.  Think about it: if you spent two hours a day on these investment activities (which is nowhere near enough time, in my opinion) in addition to your “regular” job, that’s 730 hours a year that you could be coaching your kid’s soccer team, re-connecting with your spouse, or spending time with your aging parents.  Implementing the simple strategies in this book will cut down your time involved in investing activities to something like an hour a quarter – yes, only four hours a year!

The last section of the book provides Mr. Swedroe’s “30 Rules of Prudent Investing” – which, on its own provides a fantastic foundation of insight for the individual investor to follow for success.  I highly recommend this book for anyone who has searched high and low for the “silver bullet” to investing success.  As you may know, there’s no such thing as a real “get rich quick” scheme in the investing world – the real “silver bullet” is this simple, boring, use of index funds and dogged sticktoitiveness.  Do yourself a favor and read this book, shut off CNBC, and get back to enjoying life.  You’ll do wonders for yourself and your life.

The above book review is part of a series of reviews that I am doing in an arrangement with McGraw-Hill Professional Publishing, where MH sends me books with the only requirement being that I read the book and write a review – like it or not.  If you find the information in this review useful, let me (and McGraw-Hill) know!