Paul B. Farrell - The Lazy Persons Guide to Investing

Copyright 2004 by Paul B. Farrell

All rights reserved.

Hachette Book Group

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New York, NY 10017

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ISBN: 978-0-7595-0989-4

First eBook Edition: January 2004

To

Dorothy,

the love of my life.

The best is yet to come!

Acknowledgments

WHEN YOU LOVE WRITING AS MUCH AS I DO AND YOU HAVE A COUple of guys like Gene Brissie, my literary agent, and Rick Wolff, my editor at Warner Books, who believe in you and encourage you as much as they do, you know deep in your heart theres a God in heaven and a whole bunch of his angels down here guiding every line you write. I can never thank you two guys enough: May the road rise to meet you. May the wind be always at your back. May the sun shine warm upon your face. May the rains fall gently upon your fields. And may you always enjoy a life filled with love and grace and prosperity. All blessings to you and the incredible Warner staff, especially Penina Sacks and Dan Ambrosio, who helped make this work soar.

Also, a warm round of thanks to each and every one of the wonderfully creative men and women at CBS MarketWatch who have been my family for many years, giving me endless opportunities to stretch my wings as a journalist, especially: David Callaway, Thom Calandra, Chris Pummer, Alec Davis, Anne Stanley, Tom Bemis, Barb Kollmeyer, Deborah Adamson, Barbara Costanza, Jeanne Stewart, Craig Tolliver, Chuck Jaffe, Jonathan Burton, Paul Merriman, Paul Erdman, Marshall Loeb, Irwin Kellner, and, of course, Larry Kramer, whose vision and leadership turned our little on-line financial news service into a broad-based media powerhouse. Thanks for the memories!

And as always, a special thanks to five incredible mentors who encouraged me to take the road less traveled: Joseph Campbell, an extraordinary man who taught me about The Hero of a Thousand Faces and the Power of Myth; Carl G. Jung, the mystical grandfather who spoke to me across time in his Memories, Dreams, Reflections; Bill Wilson, who taught so many of us in The Program how to live the impossible dream one day at a time; my dear friend Calvin Holt, whose serendipity was so much more than a classy restaurant in Manhattan and a magical dance meditation class in Soho; and most of all, my wonderful wife, Dorothy Boyce, a brilliant psychotherapist, who is my best friend, soul mate, companion, confidante, teacher, and cheerleadernothing would be possible without her love.

AMERICAS
LAZIEST PORTFOLIOS

__________________________________________________________________

For People Who Have More
Important Things to Do Today Than Worry About Their Investments

Investing should be dull. It shouldnt be exciting.

Investing should be more like

watching paint dry or watching grass grow.

If you want excitement, take $800 and go to

Las Vegas... it is not easy to

get rich in Las Vegas, at Churchill Downs,

or at the local Merrill Lynch office.

Paul A. Samuelson,

Nobel economist

R elax. Sit back in your chair. Enjoy a cup of your favorite coffee and a bagel. Maybe tea and a muffin. And I hope you can occasionally glance out a window at some quiet trees, birds flying overhead. Get comfortable, and take a deep breath.

Im going to tell everything youll ever need to know about successful investing. Simple, no-hassle, low-stress, time-saving stuff about Americas laziest portfolios.

Why lazy? I started calling them lazy because that seemed like the best way to describe the kind of low-maintenance portfolios most Main Street investors really want. It took me a while to get the simplicity of this message, and now Id like to pass it along.

This book came about in an interesting way. My wifea family therapist whose eyes usually glaze over when I start talking about investingconvinced me to write it. Seriously, I remember showing her one of my columns on the Laziest Portfolio Oscar Contest a while back, a summary of three simple, successful, long-term winners.

I felt rather complimented when she actually read it. I was hoping the piece might at least amuse herI discovered long ago that investing, especially with mutual funds, is incredibly boring to most people, including my wife, so I try to write in an engaging, lighthearted style to keep people from falling asleep or quickly turning to the sports pages or comics.

When she finished reading the article about lazy portfolios, she became uncharacteristically animated: Now, thats a book! Anyone could read it! Simple, easy-to-read stuff anyone can understandstuff thatll make their lives work better. That was all I neededthe spark! I had my first lazy investor! She was absolutely right. So thats been my goal: simple lazy portfolios thatll work for anyone and are easy to understand.

Most people really do want a portfolio thats like a lazy day in the sun, stuff to reduce anxiety, increase peace of mind, and help you feel confident about the future so you can live like a millionaire today, whether you have your million already or are slowly inching your way toward it.

You want a lazy portfolio that works in the background, so to speak, while you go about your daily life doing whats really important to youholding hands with someone you love, playing with your kids, cheering at a ball game, running on the beach, hiking the trails, working at your favorite hobby, finishing a project around the house, or going to a job that you enjoy, that even has you feeling like youre making the world a better place.

Lets face it, there really are so many more important things in life than worrying about your investments every day. So you need a lazy portfolio that works on autopilotso you can get on with living your daily life!

So first, forget everything youve ever read about how darn complicated investing is. About why you should leave all your investing up to some so-called experts, gurus, and pundits who are telling you that they know tons more than you knowin fact, far more than anybody on Main Street America.

Unfortunately, they dont. Wall Streets financial geniuses also lost huge sums during the recent bear market, a lot more than you. And just like you, they watched helplessly, unable to do much about the collapse. Youd never know it from their advertising hype, however, because they continue talking as if they know what theyre doingeven though theyre faking it.

Wall Streets $15-billion-a-year Hype Machine, as BusinessWeek calls it, is a relentless machine created to make you believe Wall Street has some kind of mystical pipeline to the Gods of Money, a secret connection you will never havein other words, they know something about successful investing that you can never know. So you need them. You cant possibly do it yourself.

That message comes through all their newspaper ads. They blast it at you in every financial periodical. Columns. Newsletters. Brokers tips. Planners recommendations. Financial calculators. A steady stream of how-to-get-rich-quick books. And the endless talking heads on cable news channels, loaded with Wall Street gurus pontificating, predicting, and pitching their message.

Somewhere in your gut all this hype is calculated to make you feel inadequate; to convince you they really do have some inside information from the Money Gods that youll never grasp. They want you to feel embarrassed and insecure, questioning your abilities and judgment as an investor, even agreeing with them, afraid that maybe you cant go it alone.