Praise for Money for the Rest of Us “One of the biggest pitfalls in any decision we make is thinking we know more than we do. In Money for the Rest of Us, David Stein provides inves- tors a framework that focuses attention on what we don’t know, reduces overconfidence, and highlights the value of considering where things might go wrong. This is a high-impact framework for making any deci- sion, not just investing.” — ANNIE DUKE, decision strategist and bestselling author of Thinking in Bets “David provides a clear road map for investors, brought to life through a series of personal anecdotes. He recognizes that past is not prologue, that the successful strategies of recent years may not fare as well in the years ahead.” —ROB ARNOTT, Chairman, Research Affiliates “You don’t need to be a math whiz or financial expert to be a successful investor. Instead, you need a disciplined investment process, a framework that you can use to provide peace of mind when others are freaking out. The most honest and successful investors have no more idea about what is going to happen in the future than you or I do. What makes them dif- ferent? They have an investment philosophy and decision-making process that directs their investment choices. Stein gives us the best framework I’ve seen for easily evaluating the most important aspects of any invest- ment so you can accomplish your personal finance goals.” — MICHAEL PORT, New York Times and Wall Street Journal bestselling author of seven books including Steal the Show and Book Yourself Solid “They say you should write the book you want to read; with Money for the Rest of Us, David has gone one better. He’s written the book he knows his audience wants to read because he’s spent years understanding their needs and addressing their unanswered questions. David doesn’t want to tell people how to invest—he wants to help people to have the confidence to make smart investment decisions for themselves. If you are one of those people, then this book is for you.” — BERNADETTE JIWA, bestselling author, Australian top business thinker “We all have 50 questions about investing. David Stein proves what a great teacher he is by distilling the list to the 10 you really need to know. Whether you’re investing to grow your nest egg or to protect it, there’s something here for everyone. A must read.” — JOE SAUL-SEHY, creator and cohost of Stacking Benjamins podcast “If you want to be a successful investor, Money for the Rest of Us should be a marked-up resource sitting on your desk. David Stein presents a valu- able outline for making better investing decisions.” — ROGER P. WHITNEY, CFP®, CIMA®, CPWA®, RMA®, AIF, and Retirement Answer Man “David Stein’s Money for the Rest of Us is a superb and accessible guide to investing. He gets right to the point and provides the reader with answers to the most pertinent questions we all have when trying to navigate the investment landscape. This book is a valuable addition to anyone’s library.” — CULLEN ROCHE, founder of Orcam Financial Group and author of Pragmatic Capitalism MONEY FOR THE REST OF US This page intentionally left blank MONEY FOR THE REST OF US 10 Questions to Master Successful Investing J. DAVID STEIN New York Chicago San Francisco Athens London Madrid Mexico City Milan New Delhi Singapore Sydney Toronto Copyright © 2020 by McGraw-Hill Education. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. ISBN: 978-1-26-045387-4 MHID: 1-26-045387-1 The material in this eBook also appears in the print version of this title: ISBN: 978-1-26-045386-7, MHID: 1-26-045386-3. eBook conversion by codeMantra Version 1.0 All trademarks are trademarks of their respective owners. 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For LaPriel This page intentionally left blank Contents ACKNOWLEDGMENTS ..............................xi INTRODUCTION ...................................1 Making Investment Mistakes Is Normal.....................2 You Are a Portfolio Manager..............................4 A Different Kind of Investing Book ........................4 What You Will Learn ..................................5 1 WHAT IS IT? ........................................7 If We Can’t Explain an Investment, Then We Shouldn’t Invest The Primary Reason to Buy an Individual Stock..............10 If You Can’t Explain It, Don’t Invest.......................10 Who Is Selling It?.....................................11 We May Not Know as Much as We Think ..................12 Dealing with Unknowns................................13 Complex Adaptive Systems..............................14 Reacting to Available Information ........................15 Why Accurately Predicting the Future Is So Difficult..........16 Investing on the Leading Edge of the Present................17 The Math and Emotion of Investing.......................17 vii