Citywire, Recipes for Wealth book

SRD

Review of recipes for wealth – third edition.

This review represents the personal opinion of a keen money saver and an investor with some 9 years experience of the property and stock markets.

The authors stated target audience is “people with spare money who want to know how to save”. I would agree with this statement in that the book provides a useful introduction to the world of property and stock market investment, but is not particularly useful to an experienced investor who is already aware of issues such as balancing a portfolio over a variety of asset classes (property, shares, cash, bonds, etc) and adjusting the balance of their portfolio towards lower risk assets as they approach retirement.

The book has two key sections; “property and investments”. This is the first time that the authors have chosen to address property, in this their third edition. The inclusion is commendable given that many people see property investment as an alternative to investment in the stock market.

The opening calculation of the authors comparing buying your own house to renting is too simplistic. In comparing the benefits of buying to renting the authors fail to consider the cost of the transaction (stamp, duty, legal fees, selling fees), the money required to maintain the house and even the interest paid on the mortgage. It is not surprising then that owning is shown to be more lucrative than renting. To be fair, the full costs of owning are detailed later in the book, however I would strongly encourage new entrants to the property market to do their own calculations regarding the benefits of renting versus owning; taking into account the full costs of owning, a possible decline in the value of their home and the possibility they may have to sell in 3 years due to for instance job or family commitments.

Following a poor introduction, the rest of the property section provides new entrants to property with a good overview of the key factors to consider; whether it be as a home, 2nd home, buy to let, or rent a room. Each subject is however typically an introduction to a topic, and readers would have to undertake further research based on their own circumstances.

The second section of the book deals with “investment”. The opening statement is that property is the foundation of your wealth and it is then time to build upon it by investing in the stockmarket. As a general statement I agree with this approach. However, whilst the authors emphasize the merits of balancing a portfolio they fail to see the bigger picture. The question that begs to be answered is how should an individual balance their direct investments in property with their investments in the stock market. In fact this is a question that I have never found even a suggested answer to in many years of reading about personal finance. I would recommend to anybody considering an investment in the property or stock market that they think about the balance of their investments in these two areas, and remember that with the stock market that you can only loose what you have invested (as long as you stay with traditional assets rather than futures and options etc), but with property there is always the potential for negative equity.

The structure of the section on investment is helpful – suggesting typical assets allocations for particular ages. I also commend the approach of being careful in selecting a good manager to look after your stock market investments, rather than investing directly in the market. However, the managers and funds recommended are biased, with only unit trusts being promoted, possibly because of the high initial and trailing commissions that financial advisors can make from selling unit trusts. Good money savers choosing unit trusts will look to low commission brokers as discussed in the savings chat forums on MSE. “Advanced” savers will look to investment trusts as a preferable asset class to unit truts.

To summarise, this book is a good introduction for new savers who want to get an overview of investment in property or the stockmarket. New investors should do further research and analysis before making any investments.

If Martin would like to choose another person who was interested in the book then i will forward it on to them.

zzzLazyDaisy

Thanks for this review SRD - I have printed it off and placed it in my copy of the book, to refer to.

I guess I am about halfway on the spectrum - not a newbie, but definitely nowhere near as experienced as SRD! I have bought and sold houses several times and now own my house, mortgage free. I also have some stocks and shares ISAs that I bought in the nineties (before the crash, and they have never really recovered.....). I also have a lump sum to invest from compensation following a car accident that put me out of work - hence my interest in the book.

BTW I haven't forgotten the review - I am still feeling ropey atm and haven't had chance to have a proper read of the book, but I will come back soon and do a review from the point of view of a 'reasonably intelligent but not expert' investor!!

But in the meantime.... where are the other reviews? Surely everyone else must have received their book by now? You do know that you need to pm your address so they can send it out? Might be worth checking if you are a lucky winner?