The Principles

Occasionally –often actually – a reader will ask me to divide my posts into two groups: those that explain general principles of investing and those on specific issues of the day.  Of course, the requests are all phrased differently, but this how I read them.  I can see the impulse behind such requests.  The former can guide investment decision making fundamentally, while the specific posts apply the basic principles to particular situations.  For a while, I considered a kind of rating system to alert readers what sort each post is.  But I got a question from an unusual source, and it changed my thinking on this question.  A friend asked me for investment advice – on Bitcoin actually.  My response, apart from specifics, prompted me to write down for myself the general principles of how I invest.  That effort turned into a book. 

It is short as books go.  Its preface tells the story that prompted it.  Because I associate it with this blog, I named it Bite-Sized Investing.  For those interested, and I hope that there are many of you, I have provided a link on this site for you to buy it for yourselves and, hopefully, for many of your friends and relatives, too.  

Bite-Sized Investing starts with those general principles that should guide all investment decisions.  There are six of them.  The book then goes back to the beginning  – how to save and how to lay out a personalized savings and investment plan.  It builds from there, giving advice on how to select a bank.  (You do not need a lot of money.)  It goes into what kinds of accounts are available and how to consider alternatives.  It explains the basics of stocks and bonds, how they are valued, and why their prices fluctuate.  It tells you how to construct an investment portfolio and offers a brief review of important tax considerations as well as how pension funds, IRAs and similar instruments work.  The book introduces the reader to foreign investing and takes first steps in explaining more exotic sorts of investments, such as options and futures.  It ends with four short appendices.  The first teaches how to spot common investment scams and frauds.  Another reviews the financial crisis of 2008-09, explaining how it would have been much less severe had people followed the basic principles with which the book begins.  There are also brief discussions of passive versus active investing and advice on how to digest financial news, including a rating of sources. 

This little book is easy to read, clear, and, like these posts, jargon free.  A practiced reader could get through it in a single sitting.  It is designed, however, as a reference to which people can return when a new or seemingly new investment question arises.  It had its beginnings in an effort to help a friend with a difficult decision.  The answer I gave, I am happy to tell you, saved him a lot of money.  It is my sincere hope that the book that grew out of his need will meet the needs of others as well.     

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