I love words, language, and reading – and most of all, books. New or old, I love them all.
But when it comes to books spouting financial advice, it pays to check the publishing date, just like it pays to check the manufacture and use-by dates on packaged foods.
So how are financial books like cases of wine with sour milk?
In addition to your own changing circumstances, the equity and property markets, the economy more generally, taxation and company law, interest rates and foreign exchange rates are constantly changing, making specific advice less relevant by the minute. It generally takes well over a year for a book to go through the publishing process, and you can usually count on it being at least two years between the author first putting pen to paper, and the resultant book hitting the shelves.
A lot can change in two years. One of my favourite books, Your Mortgage: And How to Pay it Off in Five Years was re-released in an updated edition called Your Mortgage: The Savings Edition. Aside from a considerable expansion, part of the update was the increase in interest rates. But as it turned out, thanks to the Global Financial Crisis, interest rates lowered again, making the older edition, surprisingly, more relevant to today’s market in many ways.
When I go to the supermarket, in addition to the nutritional information label, I generally check the date and place of manufacture, looking for locally produced foods, and (after buying a few too many mouldy falafel from the corner store!) ensuring that the produce is still within it’s best-before date.
Some more of my favourite books are Cashing in on the American Dream, Early Retirement Extreme, Your Money or Your Life, and How to Retire the Cheapskate Way.
But there are two major drawbacks to this list: Firstly, they are all written by American authors, for an American audience. (Not that I have anything against Americans – it’s just that, despite all of the overlap that exists, there are still many foreign concepts and inapplicable things for non-US readers).
Secondly, while all are excellent in terms of philosophy, they tend to be woefully outdated (recommending investing in bonds for a passive income, which is virtually impossible to do at current rates), or even ignore entirely, the investment aspect. It’s hard to think of a book that covers both philosophy and investment well.
I think there’s a reason for this.
Ignoring the concept of investment may actually be preferable to addressing it in some ways. Philosophy about how to live your life, and very general principles of money apply pretty much anywhere in the world, but the specifics of investment advice tend not to stand up to the test of time, or cross borders very well.
Cashing in on the American Dream, for example, which has been out of print since the 1980s, might have made a better book today had the author left out the chapter on investing, reducing it to 10 instead of 11 chapters. This doesn’t make it a poor book by any means – I paid rather handsomely for a secondhand copy of this book online and shipping from the US, and it was worth every penny (and to be fair, the author, Paul Terhorst, probably didn’t anticipate, back in 1988, that nearly 30 years on, someone in Australia would order the book ‘online’!) It just means that the reader should regard the advice given with a healthy dose of skepticism – much as one would sniff milk that is passed its use-by date, or bin last week’s TV guide from the paper.
Stretching my metaphor about old milk to breaking point, some books, like The Intelligent Investor, are relatively timeless. The companies they analyse sound quaint today (railroads feature prominently), but the principles remain the same. This is the wine of finance books – not only can you still drink it, even if the label looks a little old-fashioned and it’s gathered some dust, but sometimes it is better as it ages (or so I am given to understand). In the latest edition (a cherished Christmas present!) one can check The Intelligent Investor‘s claims out, reading commentary that adds to it.
Books like Cashing in on the American Dream are somewhat like a case of wine where one of the bottles of wine has been replaced by a bottle of milk. The milk (chapter 4 on investing) was absolutely fine and fit to drink during its day. Bonds were an appropriate and low-risk recommendation in their day, not anymore. But just because that one chapter has passed its use-by date does not mean you should refrain from drinking the beautifully aged wine in the surrounding chapters.
What is your favourite finance book?
Today’s featured image is the best before date on a packet of Tymo biscuits… think coconut TimTams. But even better!