Review of Yes, You Can Become a Successful Income Investor! Reaching for Yield in Today's Market (Hardcover)

Ben Stein and Phil DeMuth are very dedicated to helping people get serious in preparing for retirement.They bring several strong virtues to this task.First, they not only reject investment fads, they believe in and focus on solid investment basics.Second, they believe that you have the final responsibility for your money, so if an investment or financial program is too complicated for you to understand in every detail, they advise you to stay away from it.Third, they understand and preach diversification.Simply, diversification aids the investor by removing the risk associated with investing in just one firm or one market sector and therefore stabilizes earnings.

The idea behind this book is quite good.For the past two or three decades, all the talk around investing has been about growth stocks where you make your money by realizing capital gains.Before the age of double dividend taxation, people invested for the income provided by dividends.The present market for stocks is priced high in historical terms (see Stein and DeMuth's excellent "Yes, You Can Time the Market" to understand why this is true) and it is all too likely that a correction could provide losses instead of gains.In this book, the authors provide an approach to investing that provides a return by gaining dividend income from stocks and interest income from bonds while avoiding the risk of capital losses as much as possible.

Stein and DeMuth begin by talking about bonds.They provide an excellent primer and then talk about the various types of bonds, their risks, and their returns.Their discussion will help the reader understand that a higher return comes with increased risks.In effect, the higher return is a compensation for taking on that higher risk.The authors help the reader understand that there are some bonds whose increased risk is worth taking and many whose higher return is not sufficient compensation for someone counting on the income for their daily bread.

The discussion then turns to developing a stock portfolio that is designed for income rather than capital gains.This is an excellent and important discussion because it runs counter to most of the stock talk of the past generation.Just as with bonds, they show the effects of various portfolio constructions.They are very good on what matters to the income investor and what is dangerous to your financial health.They have a short chapter on preferred stock that is interesting and gives adequate warning to stay away from complicated investments that you don't understand.

The section on REITs is terrific and will help the average investor understand them.They can be an excellent part of a portfolio and are an excellent way to participate in real estate without having to own and maintain your own properties.Remember, in retirement you want to be enjoying yourself, not going through the hassle of being a real estate manager.

They also talk about annuities in a sensible and helpful way.Stein recounts how annuities helped his parents have a terrific retirement. The authors also balance that with cautions about the balance between fixed and variable annuities and offer solid advice about their complications.They note that most of the people who sell annuities don't really understand what they are selling and to stay away from those you don't understand completely.

The heart of the book is the section on how to combine all of these investments into a portfolio that balances your ability to take risk versus return.They provide various example portfolios while always encouraging you to do your own research.They want you to use the examples as models of what to do rather than as investment recommendations.

Stein and DeMuth also provide a very good website that provides current information and links as well as errata for the book (you know the small typos that creep into any book).

This is an excellent handbook for anyone who wants to take responsibility for his or her retirement and is serious about understanding what is involved.There are too many sad stories of people who work their whole lives to save some cash and then have it evaporate in some inappropriate investment that promised them gold falling from the sky.Stein and DeMuth have provided an excellent guide to understanding what is real and what is fluff.You could not spend $23.95 better than to buy this book and then study it carefully.If you do, you will be a much better investor and steward of your financial future.



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