Book Review > Understanding Investments 4th Edition

One suspects a profiling of AIA membership could reveal a higher incidence than population average of
· the belief that no-one will look after your own money better than you yourself,
· a determination not to abdicate control of investment asset allocation,
· a preference to determine one's own risk tolerance profile,
· a preparedness to build up investment experience and take personal responsibility for the investment outcomes, and
· reduced herding instincts, as indicated by capacity to look beyond convention wisdoms and whims mascerading as the investment holy grail.
This is not to say that the AIA population sub-set should be judged more enlightened, nor necessarily incurably contrarian, possibly just in possession of personality traits that afford a greater degree of self-reliance if hopefully not of capacity for self-delusion and self-righteousness.

"Understanding Investments" (Charles Beelaerts & Kevin Forde 2003) hits the mark as a current and locally relevant introduction to the fundamentals for potential true believers aspiring to develop the above positive personality traits. Refreshingly, this is a Australian text by authors without obvious barrows to push, encouragingly written and relatively easy reading, being more descriptive rather than prescriptive, notwithstanding a style more objectively academic than populist. The appeal is that the text is not unnecessarily opinionated, with no fronting of strategy opinion as investment truisms, no disguised agendas or exhortations to abdicate decision making, no berating of self-management practitioners, an inference to refrain from judgement on fund managers and financial planners until respect is individually earned, and an underlying encouragement from sound consistent advice on "how to" (have a go yourself within your own limitations). Maybe developing one's own experience base is more the call than just "having a go".

With a scope of this revamped 2003 edition reflected in its subtitle "An Australian Investor's Guide to Stock Market, Property and Cash-Based Invests", Beelaerts & Forde nonetheless is more the entrée text than the definitive treatise. As such it is more highly recommendable for the aspirant than the seasoned practitioner, though any level of investor is likely to pick up some valuable insights from an impartial text of this nature. The subject coverage should be noted for its breadth rather than its depth, but content does include salutary backgroundings to hybrid securities, derivatives markets, hedge fund strategies, and master trust structures and wrap platforms with their not-always-transparent fee layers. The same authors have earlier published on narrower fields at more depth, including currently available books on international exposure opportunities for Australian investors, and on hedge funds, as well as on Australian share buying.

The purpose of a book review in Investors' Voice should be to offer critique concerning a book's relevance to AIA members. Within the broader AIA membership there is likely to a realisation of the need to take a degree of interest in and to cultivate defensive positions in relation to the underlying forces beyond personal control shaping the economies of the future, issues which could for example include
· trends in terms of trade and the long-term vulnerability of the minnow Australian dollar in the global currency marketplace,
· interest rate impacts and the domestic interest rate environment in the medium-term, and
· the sustainability of recent rapid appreciation in real estate values and capacity for medium term correction or possible underperformance of real property as an asset class.
The limitation of this book is that it will not make contribution to AIA members' development of positions in these regards. Coverage of macroeconomic issues, in-depth investment fundamentals and valuation analyses, and even reasonable coverage of investment property matters should be sought elsewhere, as should a review of shareholder expectations in corporate governance. The property sections of this book would be considered sketchy by experienced property investors, but at 323 pages already there are limitations to what should be expected in what in effect is a DIY starters kit.

Publications by higher profile media-savvy entrepreneurs covering the personal finances / money management areas are not in short supply. So one should consider if Understanding Investments is in that same crowded market, or adequately differentiated as a "how to" investors book, or value for $29.95 (less 10% to AIA members at The Educated Investor Bookshop in Melbourne, or at McGills bookstores). This reviewer would suggest yes in relation to differentiation and competitive pricing, with Beelaerts & Forde's current edition now filling a niche in the definitive way that Richard FitzHerbert's BluePrint for Investment - A Long Term Contrarian Approach did so admirably in a bygone millennium when its last edition was released (1998).

As with Lonely Planet guidebooks, it's inevitable that case study examples and context become quickly dated, likewise details of Australian information sources, brokers, website addresses, etc., but Beelaerts & Forde 4th Edition is quite satisfactorily current to mid 2003 in these regards. Of the local competition, the highly regarded Motivated Money (by Peter Thornhill 2nd Edition 2002, publisher John Wiley) might be judged a more entertaining and philosophical read than Beelaerts & Forde. For aspects of serious investing in more depth, Fortune Strategy - Investment Planning for the Information Age (by Higgins & Abey 2002, publisher Allen & Unwin) remains a popular intermediate level text.

In conclusion, AIA members should have confidence in Understanding Investments as ideal for early stage DIY investors in Australia, and the book certainly would be a well targeted gift of encouragement from one generation of self-learners to the next.

The reviewer, an AIA member, is a private company secretary involved in asset management,
and is a director of a Melbourne-based community Credit Union.