How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn, By Allan Roth
(Full title was too long for the SN subject line)
I've been hitting a bunch of books on the history of finance and money (reviews to come), and saw this in my library and picked it up on a whim. I remembered when it came out, and figured it was a typical airport bookstore "get rich quick" book.
It's not.
It's actually really good, both in terms of writing, and in understanding markets. Obviously, as something written in 2006-2008 and published in 2009, it's pre-bitcoin, but for folks who follow traditional markets, the advice here is solid, clear, and just as relevant today.
The conceit is that Allan explains some basic market ideas to his son, and with some Socratic questioning and basic common sense, his son Kevin makes better decisions than typical Wall Street advisors. Of course, Allan's the one who actually does the market research (or just knows the funds already) and buys the portfolio, but that's fine, since the point of the book is to use the brief discussions with his kid as launching points for the actual advice.
And it's generally solid advice, Jack Bogle-adjacent stuff. He's not pushing advice for people who want to get rich quick, but for people who want steady increases that put them in a good retirement position, and if the world wasn't falling apart and there weren't a good non-fiat thing like btc, it would be solid today.
He uses actual math to demonstrate how index funds work, how Roth IRAs and 401Ks are set up, how tax harvesting can be useful, etc. He's also open about his own past mistakes, and admits that he scratches the itch by setting up a small "gambling" fund for individual stocks, but that he also treats it like gambling -- it's an entertainment expense, and he expects to lose plenty there.
He also does a great job showing the ways that a lot of paid financial advisors take way more than they're worth, and all the various schemes (like "whole life insurance") that are easy to get into, but both not worth it and tough to get out of once you're in.
Honestly, this is probably about as good an "Investing 101" or "Investing for Dummies" book as you could hope to find, and even if you're not in the stock market (including indirectly if you've got an employer-based retirement account), it's still chock full of good info.
Was it “Stick it in an index fund” advice?
Essentially, but he also delves into a bunch of other topics (like CDs, taxable vs tax-advantaged accounts, bonds, etc).
Thanks for the review. My son is a first grader, so the title of the book pulled me in.
How did Allan manage to explain advanced investing concepts to his son though? Mine is already having trouble subtracting 1-10 haha
He did it mainly with short lessons that were probably a bit surface level, things like explaining compounding, not so that the kid necessarily understood the math, but so that he at least understood the result. In the end, I suspect that the Kevin who wrote the afterword, now in the fifth grader, probably had a decent understanding, but that's the result of three years and getting older.
thanks for getting back to me.
my boy is attending a financial literacy workshop next week. l’ll make sure to build on whatever he learns
Thanks for the review. I'm curious to read it just because of the publication date. Writing in 2006-08 and publishing in 2009 is a tough time, I imagine. I'm also interested to see how dated such advice feels. Intrigued that you found it still largely relevant (save for being pre-bitcoin).
It's surprisingly still pretty on-point and doesn't feel too dated to me. Most of the dating is just in the sense of not talking about the rise in easy online tools like Robin Hood and fractional shares.