The best financial advice from these investment professionals has nothing to do with stocks.

Opinion: The best financial advice from these investment professionals has nothing to do with stocks

Everett Collection / Everett Collection

Do money managers and financial advisers put their money where their mouths are? If not, how do they invest?

That’s the premise of a new book edited by Joshua Brown and Brian Portnoy. “How I Invest My Money,” released Tuesday, already ranks second on Amazon’s best-selling list for investment, behind only Robert Kiyosaki’s “Rich Dad, Poor Dad,” and ahead of “The Smart Investor. “by Ben Graham.

Unfortunately, readers are buying the idea, not the execution. The book is a hodgepodge of blog posts from 25 financial advisers and money managers, some of them well known, such as the authors, Christine Benz of Morningstar and Howard Lindzon of StockTwits, but the rest is pretty obscure, mixing specific advice on investment with personal stories (some of them quite moving, by the way).

It’s a slim pocketbook, under 200 pages, packed with padding, offering conflicting ideas, and not providing a coherent roadmap for investors. And some of the tips are irrelevant or even, in my opinion, just plain wrong,

But first you should know some of my own biases. I like to invest in books with consistent themes that give readers clear conclusions, such as “The Smart Investor” or “A Random Walk Down Wall Street” by Burton Malkiel or “Against the Gods” by Peter Bernstein. Brown and Portnoy might rightly say, hey, we’re offering something for everyone, but they made little effort, except for a sloppy conclusion, to draw out common themes. Maybe because there weren’t many.

Second, I think the debate between passive and active investing ended a long time ago, and indexing definitely won out. So for multiple contributors to keep pushing individual stocks or worse, actively managed mutual funds, is … well, what can I say?

Some of them, like Brown, say they buy these things just because they like it, and one manager, Jenny Harrington, only buys dividend-paying stocks on her portfolios, which is more defensible. But for the vast majority of people, low-cost indexing is the only way to go: “Almost all of us, most of the time, should own beta index funds (or ETFs) of stocks and bonds … and then get on with our life. ” Portnoy writes.

And in fact, that’s what most of these advisers do, mostly through Vanguard, it seems. More importantly, and here I think there was some consistency throughout, they emphasize human capital: investing in yourself and your career. This is especially relevant for business owners, who invest a large portion of their cash flow in their own businesses in the belief that it will pay off later.

But it also applies to employees and independent contractors: Your career will help you build wealth far more than your investments will, and spending time and money to improve your skills will make you more marketable and translate into financial security in the long run. term. Many taxpayers also recommend the creation of deep emergency funds, particularly timely advice in the era of COVID.

The book is best when it presents the narratives of people who seem to be privileged but had a childhood marked by instability, even poverty. It is no wonder that many of them seek financial security and see money as the path to independence. I especially congratulate Brown and Portnoy for including the stories of black financial professionals, which I found particularly poignant. (They also have several women). I came out with more respect and understanding for many of the collaborators who seem like good people who want to help their clients and themselves.

But I was surprised to see some of them say that they bought their houses with cash instead of with a mortgage. Nice job if you can afford it, but with rates this low, buying a home with a mortgage is a no-brainer these days because the lender takes most of the risk and your small down payment frees up the rest of your assets to invest in retirement plans. or college savings accounts for your children. And you can always add more each month to pay off your mortgage faster.

Brian Portnoy, left, and Joshua Brown. Harriman House

Some of the investments mentioned by senior advisers – hedge funds, private real estate companies, early stage venture capital – are simply out of reach for most people. One even recommended buying art at auction because “it consistently maintains its value over time and under all economic conditions.”

But when was the last time you bought art as an investment? For me it was during the Golden Age, when in a previous life as Henry Clay Frick I bought jars full of Rembrandts and Vermeers to decorate my Fifth Avenue mansion.

It’s a joke, of course, but it illustrates the book’s main problem: the good and practical suggestions are scattered between repetitive recipes (pay yourself first, don’t spend too much) and ultra-elite niche advice that seems particularly jarring now. Therefore, readers have to do most of the work to find what is significant. In “How I Invest My Money” the signal is too often drowned out by noise.

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Howard R. Gold is a MarketWatch columnist. Follow him on Twitter @ howardrgold1.