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Most workers get it wrong: instead of saving for retirement, they should focus on investing for financial independence. Retirement, Robert Sheard argues, is an outmoded concept left over from the days when you worked for a company from your 20s to your mid-60s, retired with a gold watch and a pension, and then died a few years later. Today, the average worker will switch careers three times (something Sheard, now an investment adviser, notes he accomplished before the age of 40). And, of course, that worker will probably live far longer than pensioners of past generations. What that worker wants is the ability to do something he or she loves, no matter if it brings in revenue. In other words, an investment plan that will support his or her living expenses indefinitely.
Money for Life offers a way to do just that. The cornerstone of Sheard's plan is what he calls his "20 Factor Formula." You figure out your projected living expenses if you retired today (he offers tips to help you include everything), multiply by 20, and that's what you need in your portfolio to achieve financial independence. To amass that portfolio, Sheard offers an equally simple solution: forget diversification. He argues convincingly that investing in an array of stock and bond funds is a loser's game; your returns will always trail those of the S&P 500. You could just put all your money in an S&P 500 index fund, but Sheard shows a scenario in which a hypothetical investor did just that in 1960, and by 1983 his portfolio was busted, a victim of inflation and a couple of devastating bear markets. Instead, Sheard recommends the Dogs of the Dow approach, in which the lowliest of the Dow's 30 stocks are bought each year. As he showed in his previous book, The Unemotional Investor, this strategy has gained 2.5 percent more per year than simple index investing. Index investing is a complete no-brainer, but the Dogs of the Dow isn't much more difficult. Sheard says it takes about 30 minutes a year to pull it off. He balances the book with lots of other financial advice--of particular interest are his contrarian opinions on 401(k) investing--and maintains a nice levity throughout. It's genuinely fun to read, and by the book's end, you feel as if you've gained a lifetime's worth of investment advice with just a few leisurely afternoons of reading. --Lou Schuler
From Publishers Weekly
An investment adviser and author of The Unemotional Investor, Sheard believes that most people erroneously look toward retirement as a financial goal. Instead, he says, everyone should strive for financial independence, the point at which one has accumulated enough money that one no longer has to work. Obviously, this amount will vary by age, lifestyle and other considerations, but Sheard offers a foolproof formula that works for everyone: "Financial independence = annual income requirement x 20." To determine the annual income requirement, readers must determine what they currently spend on housing, income taxes, healthcare, transportation, etc., as well as any potential sources of future income (such as pensions). Sheard's strategy is straightforward and easy to understand. Yet, while financial independence is certainly a goal that people should work toward, many readers will need more help applying this formula to their own finances. The second half of the book offers advice on working with financial advisors, using index funds and selecting brokers, but some of this advice may confuse inexperienced investors. And Sheard touts the benefits of buying stocks on margin; a tactic that is too risky for most people. For readers already well versed in handling their investments, this book offers a fresh approach to long-term financial planning; beginners should look elsewhere. (Sept.) Copyright 2000 Reed Business Information, Inc.
From Booklist
Now an independent investment advisor, Sheard was a member of David and Tom Gardner's Motley Fool crew and is the author of The Unemotional Investor: Simple Systems for Beating the Market (1998). There he presented several formulas for investors to use depending on individual investment goals. Now he provides another formula for those hoping to ensure financially secure futures. Sheard suggests that it is a mistake to think of retirement in terms of age. One's goal should be financial independence, and decisions to retire should be based on personal lifestyle choices. His formula itself is quite simple. To achieve financial independence, one should calculate his or her annual income requirement and multiply by 20! That figure is the size of the stock portfolio one must build in order to live solely on investment income. Sheard explains in detail how he devised the formula and why it works. He then recommends strategies for building such a portfolio, disdaining both diversification and mutual funds and arguing that the "only long-term investment is common stock." David Rouse
Copyright © American Library Association. All rights reserved
Book Description
Sheard redefines the concept of "retirement" as an issue of financial independence that can be achieved at any age. He spells out clearly, as no book has before, exactly how to set up and reach personal financial and lifestyle goals through savvy investing. Designed for boomers now in their peak earning years, the book cuts through the complicated formulas and actuarial tables to show readers how to figure out exactly how to plan for and achieve financial independence.Eschewing the traditional approach to retirement at 65, the book acknowledges that boomers are in a hurry. They want to get on with their lives, change careers, take sabbaticals -- in short, to pursue their dreams. By abandoning the age criteria and formulating a new approach to retirement, Sheard makes this possible. Using the techniques he made famous while with the Motley Fools, Sheard develops a framework that treats individuals as self-sustaining "foundations," living off a well-invested nest egg. He clearly shows the reader what steps to take in order to make financial independence possible.Mr. Sheard gained a broad following at The Motley Fool. His audience will undoubtedly be interested in Money For Life. He is now an investor columnist with the Microsoft Network.
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