GOLDIE CFA - The investment answer: learn to manage your money & protect your financial future

LEARN TO MANAGE YOUR MONEY &

PROTECT YOUR FINANCIAL FUTURE

DANIEL C. GOLDIE, CFA, CFP

& GORDON S. MURRAY

NEW YORK BOSTON

This publication is designed to provide competent and reliable information regarding the subject matter covered. However, it is sold with the understanding that the authors and publisher are not engaged in rendering legal, financial, or other professional advice. Laws and practices often vary from state to state and if legal or other expert assistance is required, the services of a professional should be sought. The authors and publisher specifically disclaim any liability that is incurred from the use or application of the contents of this book.

Copyright 2011 by Daniel C. Goldie and Gordon S. Murray

All rights reserved. Except as permitted under the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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First eBook Edition: February 2011

ISBN: 978-1-455-50329-2

Gordon Murray and Dan Goldie have written a book that every American should read. Its clarity de-mystifies the investment process and its insights can make anyone who reads it a better investor.

Bill Bradley, former United States Senator

An excellent primer for the investor who is not a finance specialist.

Eugene F. Fama, Robert R. McCormick Distinguished Service Professor of Finance, Chicago Booth School of Business, widely recognized as the father of modern finance

Murray and Goldie use simple yet compelling logic to explain the fundamental principles of investing. Their clear advice will improve your investment experience.

Kenneth R. French, Heidt Professor of Finance, Dartmouth College, Tuck School of Business

Im glad to see Gordon and Dan collect these insights into a handy, easy-to-use primer so Gordon can stop explaining these principles at Sunday brunch and family birthdays. Full disclosure: Gordons my brother-in-law. That said, I found this slim volume incredibly helpful in explaining how to think about investing. Its reassuring to know there are some simple principles anyone can keep in mind to make decent decisions and banish the vague anxiety most of us have about where weve put our money.

Ira Glass, Edward R. Murrow Award winner, Host of NPRs This American Life

Gordon Murray and Dan Goldie share secrets that Wall Street would rather you not know. You can implement a few simple strategies at a very low cost that will outperform most of the stock picking and complicated advice hawked by high-priced brokers. Read this book and prosper.

Joseph A. Grundfest, former SEC Commissioner, co-founder of Financial Engines, and Professor of Law and Business at Stanford Law School

Goldie and Murray have distilled the essence of the matter, and explain in clear English, the advantages of using a fee-only financial advisor, how to select such, and how to work with one in the short and long run. This is sound advice, which you will rarely if ever get from a daily financial newscast.

Harry M. Markowitz, PH.D., Nobel Laureate in Economics, 1990, Father of Modern Portfolio Theory

Wow! Goldie and Murray have just hit a home run. If I could give only one book on investing to my friends and family, this one would be it.

Bob Waterman, co-author, In Search of Excellence, former director of McKinsey & Company

Wall Street brokers and active money managers use your relative lack of investment expertise to their benefit not yours.

The financial press uses your inclination to be afraid during falling markets and confident during rising markets, to its benefit not yours.

The record shows that our elected representatives, once-trusted ratings agencies, and government regulators have placed their own interests first not yours.

None of these parties has demonstrated an understanding of what you are about to read in this book. Its time for you to put yourself first and take charge of your investment future. It will be much simpler than you think.

We hear stories like these too often:

Ron and Judy work with a broker who invested their money in some of the brokerage firms popular investment products (a hedge fund-of-funds, a managed futures account, two separately managed stock accounts, and several municipal bonds). They have no idea what they are paying in fees, or whether their investment results have been good or bad. Their broker has not developed a long-term investment plan for them, so they dont know whether they are on track to achieve their goals. In fact, they are not even sure what their investment goals are! Their broker is now recommending a gold fund, because his firm is forecasting a rise in inflation. Ron and Judy dont know what to do.

Betty has never trusted the stock market. She and her late husband always invested their savings in bank CDs and money market funds. She now realizes that her savings have not grown enough for her to maintain her current lifestyle, and she will be largely dependent on social security income for the rest of her life. She is not sure where to turn next.

Steve manages his money through an online brokerage account, buying individual stocks. He has made a few good picks, but for the most part his portfolio has done poorly. He selects his stocks after researching companies online, watching CNBC, and reviewing financial periodicals, but feels uncertain about this approach. He is spending a lot of time on this, yet he knows that hes not really getting anywhere. He wonders whether the time he spends on his portfolio would be better spent building his career.

Amy has been contributing regularly to her companys 401(k) plan, and has also purchased some stock mutual funds with additional savings. After the stock market dropped in 2008, she sold everything in a panic and has been sitting in cash ever since. She has heard that stocks have a good long-term record, but her personal experience has not been good. She wonders if she is just not cut out to be an investor.

We want to change the way you think about investing. Clearly, the traditional financial services industry is failing to serve investors properly. Our hope is that this book will influence the way you select financial advisors, invest your money, and assess your results.

We have a common belief about how markets work and how individuals should approach long-term investing. We came to this shared view from different places: Gordon from a successful 25-year Wall Street career interfacing with the most sophisticated institutional investors in the world, and Dan from nearly two decades of working with individual investors as an independent financial advisor. The fact that