Mary Farrell's Beyond the Basics : How to Invest Your Money, Now That You Know a Thing or Two

Rating:
Summary: Best For Inexperienced Investors Looking for Overview
Review: "Beyond The Basics" emphasizes investing early and letting the power of long-term compounding work for you. Saving and time are the keys to investment success.

Farrell strongly believes in investing in equities over bonds, but the book has a solid chapter about bond investing. This chapter discusses the capital gains bond investors of the early 1980's received because the investors bought bonds when inflation and interest rates were high (and, hence, bonds had high yields). Then, of course, inflation was tamed, and bonds increased significantly in value, especially, longer-term, noncallable bonds.

Farrell writes, "Bonds provided annual returns of only about 3.1 percent between 1926 and 1981, but produced returns of 14.2 percent annually between 1982 and 1998."

Most of this bond revaluation was due to the control of inflation, and Farrell expects real returns of only 2% to 3% on bonds in the future. Investors shouldn't expect large capital gains from buying bonds today, she writes, because interest rates are low and under control.

Farrell wisely suggests matching bond maturity to the time when you will need the money. For example, if you need money to send your son or daughter to college in five years, Farrell says to consider bonds of a duration of five years. Zero coupon bonds are also discussed. While bonds serve a good source of income in the short-to-near-term, for investment horizons approaching ten years, Farrell favors stocks. But, if you're buying bonds, Farrell says be willing to buy callable bonds, because today there is little value in locking up the current yields and you might get slightly greater returns.

"Beyond The Basics" has a good section about tax-free, municipal bonds and bond insurance. There is also a comparison of real returns on tax-free versus taxable bonds. The relation is (1 - tax rate)(taxable yield)=(after tax yield). But, I assume most serious investors already know this.

"Beyond The Basics" discusses Farrell's concept of "thematic investing." Thematic investing involves making a top-down decision about what's happening in the world and how an investor might benefit from it. For example, two themes Farrell discusses are 1) the aging of the baby boomers and the likely benefit to the health care industry and 2) the growth of technology.

Health Care, especially pharmaceuticals, and technology are strong and profitable growth industries. Farrell likes buying growth stocks. Farrell also believes larger company stocks should do well, partially, because they have more exposure to foreign markets and more resources for innovation.

In addition, "Beyond The Basics" discusses mutual funds. I especially like Farrell's use of specialized sector funds to round out a portfolio. For example, if you want to favor the medical industry, you could invest in a specialized medical fund. This allows individual investors to make top-down investment decisions just like many professional investors do. However, the investor doesn't need to spend time studying individual companies.

Similarly, Farrell recommends mutual funds for investments in foreign countries. This is solid advice. However, she also briefly mentions that you could buy a mutual fund with a load. Ah, no thanks!! If you are "beyond the basics," you probably aren't into buying mutual funds with loads! But, because Farrell is Managing Director of PaineWebber, a brokerage firm, we can understand that she can't just come out and say, "Don't ever pay a front end sales load because there is absolutely no correlation between fund performance and loads." I can say it. Keep your money management fees low and you'll have much more in the future! She briefly mentions annual expense ratios and suggests keeping them low, which is good advice.

"Rethinking Retirement Planning" is my favorite chapter. Farrell does a great job of summarizing retirement planning. As in all of the chapters, Farrell uses abundant graphs and charts to illustrate her points. We learn that in 1945 there were 41.9 workers employed for each Social Security recipient. In 1995, there were only 3.3 employed workers for every recipient. The point is clear. Retirees shouldn't count only upon Social Security.

The book shows the power of tax-deferred compounding via 401(k)'s and explains why aggressive saving is necessary for retirement planning. Earlier retirement and increased longevity, combined with inflation, demand far more wealth for a comfortable retirement than many realize.

People view retirement far differently today, the author notes. Back in the 50's, for example, when pension plans were more common and more people worked in factory jobs, retirement was viewed as a deserved reward for past working years. Today, many people view work and retirement differently. Only 15% of people surveyed in a PaineWebber study planned a conventional retirement, while most planned to continue working. Today, people tended to view work as an integral part of their lives.

"Beyond The Basics" contains special chapters about "Investing For Your Children" and "Women And Investing." Overall, there is much good information and insight in this book, but it tends to focus more upon the general stock market than it does upon buying individual stocks. "Beyond The Basics" reads quickly and enjoyably. The book is best for both new and intermediate level investors. I think experienced investors will find "Beyond The Basics" a bit too basic.

Peter Hupalo, Author of "Becoming An Investor."

Rating:
Summary: Best For Inexperienced Investors Looking for Overview
Review: "Beyond The Basics" emphasizes investing early and letting the power of long-term compounding work for you. Saving and time are the keys to investment success.

Farrell strongly believes in investing in equities over bonds, but the book has a solid chapter about bond investing. This chapter discusses the capital gains bond investors of the early 1980's received because the investors bought bonds when inflation and interest rates were high (and, hence, bonds had high yields). Then, of course, inflation was tamed, and bonds increased significantly in value, especially, longer-term, noncallable bonds.

Farrell writes, "Bonds provided annual returns of only about 3.1 percent between 1926 and 1981, but produced returns of 14.2 percent annually between 1982 and 1998."

Most of this bond revaluation was due to the control of inflation, and Farrell expects real returns of only 2% to 3% on bonds in the future. Investors shouldn't expect large capital gains from buying bonds today, she writes, because interest rates are low and under control.

Farrell wisely suggests matching bond maturity to the time when you will need the money. For example, if you need money to send your son or daughter to college in five years, Farrell says to consider bonds of a duration of five years. Zero coupon bonds are also discussed. While bonds serve a good source of income in the short-to-near-term, for investment horizons approaching ten years, Farrell favors stocks. But, if you're buying bonds, Farrell says be willing to buy callable bonds, because today there is little value in locking up the current yields and you might get slightly greater returns.

"Beyond The Basics" has a good section about tax-free, municipal bonds and bond insurance. There is also a comparison of real returns on tax-free versus taxable bonds. The relation is (1 - tax rate)(taxable yield)=(after tax yield). But, I assume most serious investors already know this.

"Beyond The Basics" discusses Farrell's concept of "thematic investing." Thematic investing involves making a top-down decision about what's happening in the world and how an investor might benefit from it. For example, two themes Farrell discusses are 1) the aging of the baby boomers and the likely benefit to the health care industry and 2) the growth of technology.

Health Care, especially pharmaceuticals, and technology are strong and profitable growth industries. Farrell likes buying growth stocks. Farrell also believes larger company stocks should do well, partially, because they have more exposure to foreign markets and more resources for innovation.

In addition, "Beyond The Basics" discusses mutual funds. I especially like Farrell's use of specialized sector funds to round out a portfolio. For example, if you want to favor the medical industry, you could invest in a specialized medical fund. This allows individual investors to make top-down investment decisions just like many professional investors do. However, the investor doesn't need to spend time studying individual companies.

Similarly, Farrell recommends mutual funds for investments in foreign countries. This is solid advice. However, she also briefly mentions that you could buy a mutual fund with a load. Ah, no thanks!! If you are "beyond the basics," you probably aren't into buying mutual funds with loads! But, because Farrell is Managing Director of PaineWebber, a brokerage firm, we can understand that she can't just come out and say, "Don't ever pay a front end sales load because there is absolutely no correlation between fund performance and loads." I can say it. Keep your money management fees low and you'll have much more in the future! She briefly mentions annual expense ratios and suggests keeping them low, which is good advice.

"Rethinking Retirement Planning" is my favorite chapter. Farrell does a great job of summarizing retirement planning. As in all of the chapters, Farrell uses abundant graphs and charts to illustrate her points. We learn that in 1945 there were 41.9 workers employed for each Social Security recipient. In 1995, there were only 3.3 employed workers for every recipient. The point is clear. Retirees shouldn't count only upon Social Security.

The book shows the power of tax-deferred compounding via 401(k)'s and explains why aggressive saving is necessary for retirement planning. Earlier retirement and increased longevity, combined with inflation, demand far more wealth for a comfortable retirement than many realize.

People view retirement far differently today, the author notes. Back in the 50's, for example, when pension plans were more common and more people worked in factory jobs, retirement was viewed as a deserved reward for past working years. Today, many people view work and retirement differently. Only 15% of people surveyed in a PaineWebber study planned a conventional retirement, while most planned to continue working. Today, people tended to view work as an integral part of their lives.

"Beyond The Basics" contains special chapters about "Investing For Your Children" and "Women And Investing." Overall, there is much good information and insight in this book, but it tends to focus more upon the general stock market than it does upon buying individual stocks. "Beyond The Basics" reads quickly and enjoyably. The book is best for both new and intermediate level investors. I think experienced investors will find "Beyond The Basics" a bit too basic.

Peter Hupalo, Author of "Becoming An Investor."

Rating:
Summary: I highly recommend this book.
Review: As a fan of Mary Farrell's from her appearances on Wall Street Week, I was excited to read her new book.

I have some investment experience, but I am by no means an expert. I thought the book struck the perfect balance of giving me the practical information I need to invest better, without dwelling on the obvious. Farrell uses real-world investment situations that the reader can definitely relate to, and then offers solid advice that can be applied by anyone. I highly recommend this book.

Rating:
Summary: I highly recommend this book.
Review: As a fan of Mary Farrell's from her appearances on Wall Street Week, I was excited to read her new book.

I have some investment experience, but I am by no means an expert. I thought the book struck the perfect balance of giving me the practical information I need to invest better, without dwelling on the obvious. Farrell uses real-world investment situations that the reader can definitely relate to, and then offers solid advice that can be applied by anyone. I highly recommend this book.

Rating:
Summary: Scaring people into buying
Review: As if Suze Orman wasn't doing enough harm to women, now supposedly respectable women, like Mary Farrell, are trying to make money by playing off of women's fears. And she's doing it as a mouthpiece for her employer, Paine Webber. If you want money advice written by a woman, buy Jane Bryant Quinn's book then invest in some good mutual funds that you (not Mary Farrell) choose.

Rating:
Summary: Farrell Should Retire
Review: I finally read this book and wasn't impressed nor can I be totally negative. If you're new to investing this bland book can't do much harm.

For more experienced folks the tough markets of the last several years should have taught at least one lesson: You can't compete successfully on a dirt track with an old Cadillac - get yourself some new wheels. Same goes for investment advice as we continue in a very tough market.

Farrell served as the lead sycophant for celebrity investing guru Louis Rukeyser on tv's Wall Street Week for almost two decades. She never saw a stock or a market she didn't like. "Buy and hold, the market is moving higher, this is just a pause", blah, blah, blah. Never once did she display any original thinking and it shows in this book. This isn't bad advice it's just the typical swill you'll get listening to any commission money manager.

Farrell made her career safely playing the game for a retail brokerage firm and sucking up to Rukeyser. She made money but couldn't help her customers save theirs. Now it's time for her to step away from table. Want to make some money over the next few years (or not lose any)? Pick up a copy of Martin Weiss' "Crash Profits" and learn about deflation, interest rate plays, and buying low in a bad economy.

Rating:
Summary: Deceptive advertising
Review: I thought I was buying a well-researched book by a woman I've seen on television for decades. Instead, all I got was an advertisement from her employer, PaineWebber. At least when Price Waterhouse publishes books (and they've published some good ones) they put their name right on the cover so you know what you're getting. I feel duped by Ms. Farrell.

Rating:
Summary: Pretty Complete Book on Financial Investing for Beginners
Review: Mary Farrell will be familiar to many from her appearances as a panelist and occasional guest host on Wall Street Week. The simple, straightforward intelligence of those shows comes across in this book as well. The book is written in a gentle, simple way that makes investing seem much more comfortable as a subject.

Although she says that this book is for those who are beyond the basics, one person's basics are another person's advanced methods and vice versa. Actually, she portrays every important financial investing concept in here someplace. It will be especially helpful to those who have done limited investing before and do not have a business or investing education.

The subjects she covers include goal setting, developing and implementing an investment plan, savings for investment, updating your plan, and learning more about investing. To succeed in those five steps towards achieving your financial goals, she helps you understand the importance of compound interest and being in the market for a long time, the role of diversification, where to find investment information and what to use it for, how the Internet should be used, creating an investment team, how to identify powerful investment themes and stocks that represent them, how mutual funds can help, the potential role for bonds and other financial investments (including hedge funds), the special issues that women face, preparing investments for children, getting ready for retirement, and protecting wealth.

The main weakness of these discussions is that they tend to look at things from the perspective of the pros and cons, rather than fully exploring the odds. For example, few mutual funds match the indices over 10 years, and individuals usually do worse. You won't find those facts in this book. Naturally, the success of a brokerage firm (like PaineWebber where she works as an investment analyst) depends on people mostly trying to beat the market so you would expect those arguments to be made here.

For those who would like to invest to beat the market, by far the most interesting part of the book are her discussions of the investment themes of aging baby boomers and the information revolution. You will undoubtedly get some new investment ideas from this excellent, imaginative review.

If you decide to read this book, I suggest that you also read John Bogle's Common Sense on Mutual Funds. It will balance out the missing elements of the message here. After that, you will have moved beyond the elementary level of investment knowledge.

What you will still be missing is emotional experience. The ups and downs of the market cause people to make a lot of mistakes -- especially selling low and buying high. You'll have to be an investor for a while to learn about that. After you experience those issues, you probably should also read one of the many books on knowing yourself psychologically as an investor.

After you read this book, ask yourself what else you have yet to learn the basics of. Do you have the equivalent knowledge of finding the ideal job, buying a home, raising children, and having great relationships? If not, work on these areas as well to overcome your stalled, complacent thinking. Your life could greatly improve as a result.

Rating:
Summary: Simple, intelligent investment advice
Review: Mary Farrell, an investment strategist at PaineWebber, advises investors to put their money in large cap stocks, because they will beat small caps. Why? Large firms have spent heavily to reap the productivity rewards from technological advances. And large caps' earnings and sales will continue to outpace small caps, in part because of big companies' exposure to international markets. Low inflation and interest rates also boost large caps. Aside from this advice, Farrell's investment guidebook offers few specific suggestions. Rather, she writes, investors must determine their own goals and risk tolerance. Farrell gives easy-to-follow explanations of stocks, mutual funds, and bonds, along with an outline of estate planning. In spite of its title, this book is too rudimentary for expert investors. Still, because it contains useful information, we at [...] recommend it to personal investors who are trying to make sense of Wall Street. (Note: Most investments cited are specific to the United States.)


Rating:
Summary: A Big Disappointment
Review: This book gives a very sane and thorough overview on a broad spectrum of financial topics. For a first time author, Mary Farrell gets a lot of credit from me. Everything is delivered in a clear, very comprehensible style. I noticed some of the other reviews think this book is just a sales piece for Paine Webber, the author's employer. I did not think so and the author honestly mentions that potential conflict of interest at appropriate points within the text. I don't think the book is particularly targeted to women and there was definitely no talking down to the reader.

I'm an experienced consumer of financial services. I learned some new things from this book and reviewed some topics I'm already familiar with. Plus it was easy to read.