Quick book review: ‘The Lazy Investor’ and ‘Stop Working’

January 21, 2008

I was given Derek Foster’s ‘The Lazy Investor’ and also his first book ‘Stop Working’. I found the books to be so similiar to each other that he should have just released a 2nd edition of ‘Stop Working’ rather than a whole new book.

The books touched on a few things I found interesting, mainly how to buy shares outside broker (thus saving costs) and also how to setup DRIPs (“dividend reinvestment plans”) and SPPs (“stock purchasing plans”). Outside of that, I don’t think he offered anything new.

Foster dubs himself as Canada’s youngest retiree (without an inheritance or lottery win). His plan to retire early can be summed up like this:

  1. Invest part of your income each month
  2. Stay away from stock brokers, advisors and RSVPs
  3. Invest the money yourself into high yield dividend stocks
  4. Reinvest all dividends back into the stocks
  5. When your portfolio is large enough, retire and live off of the dividends – which have better tax treatment
  6. Your portfolio doesn’t need to be big so you can retire early… just live frugally in your retirement

I think his advice is too simplistic and can be dangerous to the niave investor. First, he downplays the risks, while high yielding stocks, such as utilities, are often less risky, they are not immune to risks. Not only can their market value be hit, but their dividend yield can too – in which case the retiree has suddenly lost a portion of their income. Secondly, while he says he is not an expert or a financial planner, the fact is he seems to have a knack for picking stocks, something the average investor will not have.