Book Review > Creating Real Wealth

This is not a handbook for investors or a blueprint for those wishing to get rich by investing in the stockmarket. Instead, it deals with the principles that anyone who wishes to become a successful investor must learn, before he or she attempts to accumulate sufficient resources to enable them to live comfortably in retirement.

What is meant by real wealth? The author rejects the idea that one needs to go on growing one’s assets ad infinitum, and describes a personalised definition of wealth as “sufficient passive income so that the need for money doesn’t define how I spend my day.” Such an approach allows the investor to set a specific goal that, in due course, will allow him to pursue his aims with income from his investments without having to rely on the proceeds of work. The latter becomes an option to be pursued for interest or enjoyment, rather than an economic necessity.

The book is divided into four sections:

• Part I: Making Money
• Part II: Saving Money
• Part III: Investing Money
• Part IV: Enjoying Money

Each section takes a philosophical approach to its subject, pointing out that investing is not purely an intellectual or logical pursuit, but that decisions to buy or sell a stock are often overlaid by emotional and sometimes irrational reactions. The boom and bust nature of stockmarkets shows that we do not learn from history. In Kemp’s words “our response to any situation is little different to the response shown by our predecessors, and that we fail to learn from their experiences is true in most areas of human endeavour, and no less so than in the area of financial markets.”

There are many examples of the vagaries of human behaviour and their influence on successful investing throughout the book. In this review I will mention one more - crowd behaviour. Kemp deals with the differences between investors and speculators, and warns against the dangers that going-with-the-crowd can engender. This is illustrated by such well-known examples as Tulipomania in the 17th century or Poseidon Nickel and the Dotcom bubble in our own time. To quote Ben Graham “….the market is a voting machine, whereupon countless individuals register choices which are the product partly of reason and partly of emotion.”

The one minor criticism that I have of this book is that the author repeats his messages, often in the same chapter if in different word format.

Peter Schiff is a member of the AIA.