• Self-discipline, not income level, determines one's ability to save money.

• If your "safe" investments do not outpace inflation, they cannot be considered safe.

• Do not try to time the market; those who do usually fail.

• Investments should be part of an overall strategy designed to achieve specific financial objectives.

• Substantial growth of assets over the long term requires some equity investments. These investments may be volatile and the percentage of their inclusion in the portfolio should be compatible with the individual's risk tolerance.

• The most efficient portfolios are properly diversified both within and among the basic asset categories.

• "The Safety Trap" - This concept deals with the analysis of the ravages of income tax and inflation on what are traditionally considered guaranteed, safe investments (CDs and savings accounts, etc.) and the resulting impact on overall investment results --  namely, the substantial long term loss of purchasing power. Investors often overlook this aspect of risk. They fail to realize an investment that remains steady while inflation pushes prices up 50 percent is equally as devastating to their portfolio as an investment that loses 50 percent of it's value. The illusion of the former lies in the fact that there appears to be no loss since the principal amount has remained the same.

• Diversification - Emphasis is placed on optimization of the client's risk-reward ratio through careful selection of multiple assets to include in the client's investment portfolio. While any individual asset may perform poorly, the probability that this fate will strike multiple holdings belonging to the investor becomes more unlikely as the number of individual assets held increases.

• Asset Allocation - Equally important as diversification is the concept of asset allocation. If diversification can be explained as "not having all your eggs in one basket" then asset allocation is the equivalent of not limiting the contents of the baskets to just eggs! Since independent asset classes will perform differently during changing phases of the economic cycle, asset allocation can smooth the investor's otherwise bumpy ride. The authors identify six asset classes: common stock (large cap and small cap), fixed income, international, precious metals, real estate and energy. Three factors -- the reader's unique financial goals, risk tolerance and time frame -- drive the actual composition of asset classes selected for inclusion in the portfolio.

• The characteristics of investment vehicles are explored. The authors primarily recommend the use of mutual funds. They proceed to define mutual funds as "…investment pools managed by professionals." The reader is then introduced to the following benefits of investing in mutual funds:

  • Professional Management - Professionals skilled in handling the analysis and purchase of securities make the investment decisions affecting the fund.

  • Liquidity - The funds are obligated to redeem shares in a timely manner.

  • Timely Distribution - Dividends and interest are generally distributed monthly while capital gains are recognized annually.

  • Flexibility - Generally, investments can be transferred from one fund to another within the same family of funds, usually without additional cost to the investor

• Different types of mutual funds are explained and introduced to the reader including the following:

  • Fixed Income Funds - Pools of U.S. Government obligations, municipal obligations or corporate bonds.

  • Equity Funds - Pools of corporate common stock.

  • Balanced Funds - A hybrid of a fixed-income and equity fund.

  • Specialty Funds - These funds concentrate on investing in a market niche, most commonly a particular industry such as technology or pharmaceuticals, etc.

  • Unit Investment Trusts (UITs) - Similar to mutual funds, the primary difference being that these pooled investments do not have the benefit of professional management. Securities are selected when the trust is initiated and then left unmanaged.

• The reader is taught how to analyze and compare taxable and nontaxable rates of return.

• Tips are given on optimizing the choice of a financial professional (the authors prefer the use of tax professionals).

• Estate planning - The authors explain the federal estate tax, importance of wills, probate (and how to avoid it), gifting and trust strategies.

• The lifecycle of the investor - Financial planning priorities are enumerated which the authors feel should be triggered by the specific age of the investor.

• The importance of life and disability insurance within the overall scope of the financial plan are discussed.

Who Can Use This Book
This book makes a great refresher for the financial professional and an excellent primer for the novice investor. A client with a fundamental knowledge of the concepts outlined in this book will be able to "partner" with a finance professional and formulate and implement a plan that makes sense for his or her unique situation. Even readers interested in taking a more passive role in the financial planning process, choosing to rely heavily on the expertise of their selected finance professional, should come away with a basic understanding of the planning principles being implemented on their behalf.