Book Review > High Income Investing: how to be relaxed and comfortable

Scott Francis is a financial planner with not only a strong desire to write about matters financial, but also exemplary competence to do so. He is a regular contributor to Allan Kohler’s Eureka Report and has now completed his first book High Income Investing. Scott is very well qualified with Masters degrees in Commerce, Business Administration and Financial Planning.

One of Scott’s starting points is the Westpoint/Fincorp/ACR debacle of earlier last year, whose repercussions are still working their way through the courts and the Financial Industry Complaints Service. Scott shows what went wrong and what we should keep a watch for in the future. This is an introduction to a book about investing with a particular focus on obtaining an income from your investments.

Section 1 starts as I indicated above with the Westpoint story and then moves on to the question of obtaining income from investments and the risks associated with this. This is important and Westpoint provides a salutary lesson.

Section 2 examines in some detail the traditional fixed interest investments (cash and bonds) noting the significance of inflation risk in this case.

Section 3 considers some less traditional fixed interest investments including mortgage trusts, collateralized debt obligations (CDOs), as well as various listed and unlisted, rated and unrated securities. Regrettably this book was published before the full extent of the sub-prime meltdown was widely known (and it probably isn’t yet as I write this). There is some really useful information in these chapters – things we don’t realize about mortgage trusts for example, and the way these securities are rated by Standard & Poors and others.

Section 4 focusses on growth investments: Australian shares and listed property trusts, international shares and property, private equity and hedge funds, and finally with direct residential property, and the income derivable from them. There is a wealth of information here, even for the more experienced of investors.

The final section addresses the question of fees and the persistence of high performance among managed investments. The final chapter brings much of this together as it discusses asset allocation and designing a portfolio to generate the income that you would like (presuming that you have sufficient capital to start with!).

High Income Investing is a welcome addition to the suite of books that less experienced investors need to get started properly with their portfolios, and is valuable to the rest of us in reviewing the portfolios we already have and the investment decisions we have already made. Most of us are ongoing learners about investment and there’s always a bit more for us to learn. That’s why we are members of AIA.

Scott McKenzie is a Councillor of the AIA.