Comfort Zone Investing

Gillette Edmunds

1 worth its weight in gold
Useful as Gillette Edmunds' other book ("How to Retire Early and Live Well") is, I wished it had been possible to read this one first! For anyone who's been duped into believing stock funds are the only viable long-term hedge against inflation, who's been sold a "conservative" asset allocation and then watched it lose 25% of its value, this book is a lifesaver.

Simply by working through the steps here and understanding what mixture of "saver," "investor," and "speculator" you are will result in greatly increased clarity and vastly lower stress. Belongs at the top of the list of books the typical financial advisor would prefer you not know about!

2 I can't take this book seriously
I bought this book on the strength of his previous book Retire Early and Live Well, which I thoroughly enjoyed, though I did wonder about his sources and conclusions.

This book, on the other hand, I don't trust at all. I'm contemplating returning it for a refund.

In the first section he tells you that the goal of this book is to match the reader with their investment type - saver, investor, speculator. Are you the cash & bonds type, or are you the type to invest in IPO's?

The problem is he repeats himself worse than a Victorian novel. Why does he need to repeatedly tell you what he's going to tell you? Why not just get to the meat of the book already?

The second part of this book is a breakdown of the different investment types and various investments that make up each of the three types. He focuses heavily on the negatives of each investment type.

"Marketed as simple and easy to own, stocks are actually the most complex and emotionally challenging of all asset classes. Powerlessness, unmanageability, regrets, fear, social pressures, herd behavior, and complexities galore are the norm."

"The purchase of CDs and money market funds can lead to confusion and complexity. CDs have different interest rates and different maturities. Unpredictable forces including the Federal Reserve, the economy, and inflation undermine the interest rate on CDs, money market funds, and savings accounts."

"Unmanagability is a big issue with municipal bonds."

In fact, nearly every investment type is portrayed in this light with the exception of Real Estate and Real Estate Investment Trusts.

In fact, the Real Estate section starts with "Many groups and individuals have a vested interest in keeping you in stocks, including financial journalists." He goes on to say "A sense of powerlessness, unmanagability, and helplessness are infrequent with real estate. Stock prices move quickly. An individual stock can lose half or more of its value in minutes. Real estate prices change slowly."

And for Real Estate Investment Trusts (REITs) it's the same: "REIT investors experience less powerlessness than stock investors. REIT returns are less volatile than stock returns. The worst year for REITS since 1970 was negative 17 percent. The worst year for U.S. stocks was negative 26 percent. " Etcetera.

And here comes, what I believe is the crux of this book: "My REIT report, REITs for the New Decade, explains everything you need to know about REITs in less than 100 pages." There it is, the book is an ad for his REIT report.

I actually had to chuckle at the transition from REITs to Corporate Bonds.

"The biggest emotional hurdle with REITs is a sense of bein out of sync with your fellow investors.... You must have the self esteem to run outside the herd to be happy with REITs. Those who need the herd to push them along will not stay in REITs very long.... Corporate Bonds... Unmanagability is the main issue here."

The change was so abrupt and obvious from his sheer praise of REITs (oh and by the way, buy my report) to more doom and gloom for anything that wasn't REITs.

The third section is a series of questions that "any serious investor should answer" along with several sample responses, which, by the way, show people who went from bad investments to - you guessed it - real estate.

Todd: "He had great success with real estate, and no success with any investment that was trendy or could be purchased on a whim."

Dillon: "Twelve years ago, I had about 75 percent of my money in stocks and 25 percent in real estate, REITs and oil and gas. Today my ratio is opposite."

While this is one of the few books to address investing as an emotional and potentially addictive (read: 12 steps) activity, it's heavy handed scare tactics are unwelcome. Since we'll all be living off of our investments one day (when we retire), it's important that you understand the process and risks of investing and your emotions regarding investing. I just don't think this is the book to help you with it.

Much more well rounded are The Only Investment Guide You'll Ever Need (Andrew Tobias) or The Millioniare Next Door (Thomas Stanley).

3 Comfort Zone Investing another useful guide
Gillette's latest, Comfort Zone Investing, provides a sound, practical guide for removing the inherent "flip the coin" jitters that many lay investors I and my clients (I'm a CPA) both experience as we save for retirement or other major life events (college funds, weddings, etc.). I particularly liked his grouping of investment vehicles into "savings", "investment" or "speculation" and his down to earth analysis of each. I would highly recommend this book for first time out investors as well as those who have alrady built a sizeable portfolio.

4 This may be the best book ever written on investing
In my investments, I have made many more emotional mistakes than I have intellectual. Finally there is a book out that says this is true for most people. This may be the best book ever written on investing. It is the first book any beginner should read. It will save you a lot of trouble. Just knowing whether you are a saver, investor, or speculator will save thousands of dollars and many nights of lost sleep. Savers like myself should have never been fooling around in the stock market.
This book debunks the myth that stocks are the best investment for the long-run. Stock returns may or may not be high, but most investors are incompatible with the volatility and games that go on in the stock market. They end up getting caught up in all the hype and buying at the top of the bubbles and then their grandiosity drops into depression as the market crumbles and they selling at the bottom. I know, I did it with two tech funds. Since most of us do not have the personality to ride out the ups and downs of the stock market, stocks are not the best investment for us, whether they do well in the future or not, because we need to face up to the fact that we won't get those returns. Plus I am tired of fighting with my wife over where I invest our retirement money.

The best thing about this book is the depth of information on many different investments. It tells you what sort of person will do well and who will do poorly with stocks, bonds, real estate, mutual funds, Ginnie Mae funds, tax lien certificates, CDs, money market funds, REITs, index funds, stamp collections, and many more types of investments.

Buy this book. You will save far more than the cover price immediately and you will start getting a good nights sleep regardless of what the market does.

5 An excellent resource for any investor
I've read both of Gillette Edmunds' investing books, and Comfort Zone Investing is even better than his first. It's a great book for our current uncertain climate, but I think it would make a good read regardless of what the market is doing. I have made many of the mistakes he discusses, especially in becoming over-attached to my stocks on an emotional basis. I wish I had read this book two years ago!