Book Review: The Lazy Investor

After my interview with Derek Foster I was very curious about reading his new book. The book is divided into three parts: part I deals with his investment strategy, part II with investing for kids and the appendix is an update on his life from the last book.

In part I Derek goes through an introduction to DRIP’s and SPP. I’ve come to understand after reading the book the usefulness of these plans for small time investors. You have a lot more effort involved to get everything setup (don’t worry Derek gives you a step by step guide), but you’re costs can be rock bottom which is hugely important when your just starting out. Perhaps the most useful thing I learned was the difference between a real DRIP which allows fractional shares and a synthetic DRIP that you get in most self directed accounts which only provide full shares. I know it doesn’t appear to be a big difference, but it is. I’ll write a post on that next week.

In part II Derek goes into how to invest in your children’s name. He does comment a few times you have to be careful here as tax liability can be a bit of mind field and you would be hard pressed to sell a share that is registered directly in your child’s name. Despite this I like the idea. Why? RESP are limited to be used for your child’s education while a stock portfolio can be used for anything they like. They can keep the portfolio through school and just use the dividends to help pay for their education. This could potential setup them onto their own path for financial freedom decades earlier than most. Or they could sell the entire portfolio and use it for a house down payment. Really the choice becomes theirs (besides at 18 then now control the entire portfolio and can do anything they want with it).

Yet on the other hand I like RESP’s because I currently take the Child Tax Benefit I receive and deposit it into a RESP account which then the government gives me another 20% free.  So you see our RESP account is totally government funded.  I don’t need the Benefit to raise my child, so I will just gladly take free money and use it to fund his education.

In the last section of the book we get a few answers that everyone is dying to know.  How is Derek really doing three years into his retirement?  First off, yes, he admits he is doing some ‘work’ with publishing and writing two books.  Yet I don’t feel that’s a problem.  Retirement is about doing what you want, so if it involves a bit of work so be it.  Second his portfolio is doing fine and the dividend increases are largely out pacing inflation so far.  He also talks about a few sales from his portfolio such as Rothmans and a few new purchases such as Royal Bank of Canada.

Overall I liked the book, it provides a nice way to start out a non registered portfolio with small amounts of cash which is an often overlooked topic in the most investing books.  Yet I do have a few general issues with the book.  First off the entire book is only 177 pages which is a bit light in my mind given the $19.95 price tag.  My second complaint is the paper in this print run was a bit thin.  You can faintly make out the text on the other side of the page while reading it.  This drives me nuts.  So Derek, next print run please upgrade paper weights if you can.  My last comment was the graphic design on the cover is a bit pixelated which makes the entire book look a bit cheap.  So overall I like the content, but I have a few bones to pick with the publisher.

Now onto the contest.  I’m giving away one free copy of The Lazy Investor to one lucky reader.  Here are the rules.  To enter you must leave a comment on this post with a valid email address so I can contact you if you win.  One entry per person and you must have a Canadian mailing address.  I’ll accept entires until 8pm (Central Time) on Sept 10, 2007.  After which I’ll pick the winner with a random number generator.  I’ll only use your email address to contact you if you win to obtain your mailing address.

Best of luck to everyone and have a good weekend.

44 thoughts on “Book Review: The Lazy Investor”

  1. As a fan of his first book, I’m glad to see your blog, as I had no idea Derek was writing another one! As another blogger has said…’pick me! pick me! ‘

  2. Thanks for the review CD! I like the “everyman” approach. Working through “A Random Walk…” and “The Investment Zoo” has been a little trying.

  3. Thank you for taking the time to review books. I’d like to hear your opinion not only about the book itself, but about his retirement strategy. He make 33K/yr, but managing the protfolio looks like a full time job to me.

  4. Luc,

    I don’t think so, he uses a pretty passive strategy (not a lot of trading). Writing the books and raising FOUR kids probably take a lot more of his time then managing his portfolio…

  5. Luc,

    I believe Mr. Cheap covered the bit about Derek not managing his portfolio all that much. After all in three years he has only sold 4 stocks and bought 4 different ones. That’s not much turnover.

    As to Derek’s strategy about retirement. Well it works very well if your lower income and have a decant time frame to invest in. Otherwise there are a few issues. First off if your tax rate is over 40%, you need to seriously look at RRSP’s.

    Being able to invest money at your 40% tax rate and then get a return is very attractive, even if you pay around 26% tax at the other end. That’s like a 15% return just in the different tax rates, not to mention being able to make a rate of return on that money while waiting to pay you taxes in your retirement years.

    That being said dividends are great for a taxable account. They get great tax treatment even in the higher tax brackets. Yet you can’t beat it if one of you is lower income. For example, my wife has a negative tax rate for dividend income (ie: her tax credits are more than the tax she would pay). So we intend for her to pick up more dividend paying stocks in the future.

    In the end I’ll use some of the lessons from Derek, but not all of them since they don’t all apply to my situation. This is the great thing of the PF blogsphere. You get to sample ideas from many different people and decide what you want to do.


  6. Great review. I’m looking forward to reading it.

    Not taking anything away from dividend investing or Derek Foster, but $19.95 for 177 pages is a bit steep compared to what’s in my library. (e.g. Random Walk) Sorry Derek! I’ll cheat and read it at Chapters. As a whole, it evens out over the long-term for everyone, since I must’ve contributed over 1,000 pages of posts and articles for free.

    If anyone is interested, there’s a lenghthy Derek Foster thread over at Dont’ worry, it’s free.

  7. Thanks for the insightful review. It sounds like a very interesting book and I would greatly appreciate the opportunity to win it!

  8. The book sounds interesting and can provide greater insight into investing. I would like to win the book too please.

  9. Whether you like RESPs or not, you have to agree that a guaranteed 20% return (via the CESG) is probably the best investment that you can make. For that reason alone I’ll invest in RESPs.

    Hopefully I will have been able to teach my kids the value of money and responsibility by the time that they are 18. However, the problem with investing in their name (or trusts, etc) is that they money truly does become theirs at 18. I’m worried that there might just be too much temptation to buy a new car with their 18th birthday present.

    So for me, I’ll invest in the RESPs… unless Derek Foster can convince me otherwise with his new book.

  10. His first book wasn’t a bargain either and it clocked in at only 180 pages. That’s the only down-side of a small publisher- noticed that the Toronto Public Library hasn’t picked it up either. Hope they do soon.

  11. I am massively passionate about Dividend Reinvesting… it would be great to see Derek’s take on things. Thanks so much for bringing his latest book to my attention!!!!

    But please don’t give your copy to me…. the Ottawa Public Library has multiple copies, one of which will come to me eventually.

  12. I hope this comment isn’t too old, but I recently read that the child tax benefit is one of the few sources of income that the CRA allows to be held in the name of your child’s name for the purposes of investing.

    Because of attribution rules if you give money to your child to invest with, it should be claimed on your taxes and capital gains / interest should be paid at your marginal tax rate.

    Of course there is no taxation on an RESP account, so aren’t you losing that benefit by depositing your child’s CTB in there instead of putting your own money into the RESP and putting their CTB into their own separate investing account?

    You could even file taxes for your child on any returns they make so that they build up some RRSP contribution room for the future.

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