Introduction

The Dick Davis Dividend: Straight Talk on Making Money from 40 Years on Wall Street, John Wiley & Sons, Inc. Publishing, 2008. Available at amazon.ca.

“During that time, I cannot remember ever personally recommending a stock, either via my radio and TV reports, my newspaper column, my newsletter, or my speeches…(because) I don’t know” (p.35).

Dick Davis confirms what we at IndependentInvestor.info holds as being the primary strategy in investment for retail investors: passive investing. From all the investment books out there and considering the amount of excellent books proponing passive investing, what makes this book an additional must-read is the author’s capacity to engage the reader with a clear and what could be the most straightforward talk, entertaining, and informal investment book available. This book is highly recommended for new and current investors.

What the author hopes you will learn from this book:

• What you need before investing (Luck, Longevity, and Deep Pockets) • Six universally valid, certain and unequivocal truth on investing
• Dick Davis’ seven core convictions: How to put the odds in your favor
• Thirty-five “nuggets” - insights that investors have to face every day
• 80-20 rule: Why passive investing is better than active but why you might consider active investing for a small portion for your portfolio.

Hybrid Investing?

First, let me review the last part of the book. Dick Davis does not only recommend passive (80% in passive) investing but also active investing with 20% of your portfolio IF AND ONLY IF your risk tolerance and age permits it otherwise you should stick to passive. He says that the odds of success in any form of active investing are less than in indexing but a portion in active investment can represent an additional form of diversification but mostly a social and emotional fulfillment. Still, a 100% in an indexed portfolio is fine! The author suggests investors to actively invest in ETF’s or mutual funds. He has nothing against buying individual shares but the time it takes to do research for a regular investor is long and difficult.

At IndependentInvestor.info, we have suggested that investors who wish to invest actively to allocate not more than 5% to 10% oftheits portfolio. We call this “Pocket Money ” investing.

28 Model Index Fund Portfolios

What attracted me to this book was the twenty-eight model index fund portfolio that Dick Davis gathered from various financial columnist, professionals, and academics. Each model portfolio is spread from three to more than ten index classes. For some, the twenty-eight model portfolios in the book may lack detailed information like what type of model is appropriate for which type of investor (though you may find more details on each portfolio on the web). It might render confusion for new passive investors but each model portfolio will meet various investors’ risk appetite and style. The author also devotes two chapters on active investing on where you can gather some key information on your future stock and mutual fund purchases but also all the pitfalls of active investment such as management fees, potential speculation, and how hard (or impossible on the long-run) it is to beat the market.

See Portfolio Management 4 – examples of easy portfolios on our site for simple portfolios and on the MarketWatch website for additional portfolio index fund models proposed by Peter Farrell (also mentioned by Dick Davis).