This is the third of the four books that I wanted to read to complete my 2015 personal finance goals. I actually didn’t actively seek this book but I found it on a Red Flag Deals forum for free and downloaded it onto my Kobo. Initially when I downloaded it I saw that the Moneysense John Chevreau talked about this book as being a must read (on a recommendation by Wes Moss, a 38 year old retirement guru) on 5 Money Secrets to a Happy Retirement.
The Single Best Investment: Creating Wealth and Dividend Growth was written in 2006 by Lowell Miller, the President of Miller/Howard investments. He manages over $7 billion in his company’s firm. He is a top-rated portfolio manager and an award-winning author.
The Single Best Investment in a Nutshell
Lowell Miller writes that people should not be investing in equities, and that you don’t need more than 30 different equities in a portfolio of stocks to create wealth and investment growth. He also advocates for those 30 stocks to be of equal weight with each other. The major kicker for me was that he advocates for not investing in bonds and investing only in high quality dividend paying companies instead.
Lowell Miller explains the power and magic of compounding (which is a beautiful thing, might I add) and how anyone can create investment growth. He tells us not to underestimate the power of reinvested dividends and of dividend payments, as these will continue to grow with inflation and with time. Shareholders will continue to benefit from increased dividend payments.
He also spends a few chapters talking about how there is a lot of noise in our society now where people talk about their latest investments and why you should invest in company XYZ too. He explains that staples such as utilities, REITs, and banks are safe bets for investment (e.g. avoid the Twitter or Facebook IPO if you can).
Single Best Investment Pros
What I really liked about the book was that at the end of every chapter, there is a key point summary and take-home message from the chapter. For example, in a few of the chapters, he lists a few things to keep in mind when you are researching investments to add to your portfolio such as:
- Annual earnings growth should be consistent
- The closer the share price is to book value the better
- Cash flow should be 3:1 of interest
- Debt to equity capitalization ratio should not be more than 50%
- When reviewing annual reports and companies, look for integrity and honesty in management
- Watch the dividends- if they are not paying out dividends or are cutting dividends, or are not increasing dividends, beware
Another thing that I liked was his ability to explain and get the reader excited about investing and creating the income-producing retirement machine. I also liked how he validated that we hear a lot of NOISE (you know, your coworker telling you the latest hot stock tip and how he is has made over 40% return on his investment) and we need to tune that noise out or else we will be at risk for following the crowds and reacting to the investments instead of plodding along and carrying on.
Single Best Investment Cons
I wasn’t a big fan of the notion that equal weight of 30 dividend paying stocks will be enough, nor was I a fan of not having any bonds in the portfolio. However, it did open up my mind that this could be a possibility. I do have a low portion of bonds in my portfolio but I do have a bit of cash in my total portfolio that isn’t keeping up to inflation. Other than that, I didn’t have any negative thoughts of the book.
Single Best Investment Conclusion
All in all, I really enjoyed this book. It kind of felt like I was reading The Intelligent Investor but in a more simplified and easy to read format. He also wrote in a way that was very ‘matter of fact’ yet very humorous, kind of reminded me a little like Kevin O’ Leary’s book The Cold Hard Truth on Men, Women, and Money but less direct and harsh.
Readers, have you read The Single Best Investment by Lowell Miller? What did you think of it?