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Oblivious Investing

Oblivious Investing cover

It’s fair to say Mike Piper has made oblivious investing his own over on his Oblivious Investor blog.

Having coined the phrase, he had a head start, of course!

And with the publication of his new book Oblivious Investing: Building Wealth by Ignoring the Noise – available in all good bookshops called Amazon.com today – Mike can rightfully boast he wrote the book on the subject, too.

Of course, you might wonder whether you need a book on oblivious investing.

After all, the oblivious investing strategy can be neatly summed up as:

  1. Buy the stock market, cheaply and regularly
  2. Ignore your investment
  3. (Three decades or more later) enjoy your returns

Sure, you can also ask things like how do you best buy the market, or how should you invest a lump sum, and Mike covers some such queries in these pages.

But simplicity is the second best thing about the passive investing strategy — the first being results! Even this short book doesn’t need 100 pages to explain it.

Why oblivious investing is a bit like monogamy

No, the practical difficulty with Oblivious Investing is that it’s easy to explain and sign up to, but it requires dedication and effort to stay the course for 30 years or more.

  • If you’re an experienced investor, you can accept all the evidence that shows passive index investing produces the best returns for most people. But you’ll probably still fiddle and fret, at least around the edges of your portfolio.
  • If you’ve never invested before, you’ll have a hard time believing that the best investment strategy for most people is also the easiest and the cheapest. It is one of the great ironies of money management.

There’s an entire industry dedicated to making investing more complicated than it needs to be, not to mention the financial media — and even, arguably, this very blog!

Set against these forces of complication, a few books like Oblivious Investing or The Bogleheads Guide to Investing are like rare and plucky freedom fighters.

And just like guerrilla fighters, what such writers have to do with their books is win hearts and minds.

You don’t need a book to explain how to go about passive investing — it’s easy to do — but rather it takes a book to fully explain why you can safely ignore everything else.

You have to believe something so simple will eventually work if you’re to commit to it year in and year out, especially in the bad years.

The greater portion of Oblivious Investing is therefore dedicated to tackling the misleading ideology that says expense, worry, complication and confusion are necessary by-products of successful investing.

The book’s pagination illustrates this:

  • Part One: The Plan – 37 pages
  • Part Two: Ignoring the Noise – 82 pages

More than twice as much of Mike’s writing is devoted to what oblivious investing isn’t! Such is the task of taking on the status quo.

Oblivious Investing in a nutshell

This early passage sums up exactly what Mike’s Oblivious Investing book is about:

Some investors check their portfolio values online every day. Other investors feel that it’s necessary to read or watch the financial news each morning to see how the market performed the day before. Still others—obsessing endlessly over piles of data—constantly move their money around between various stocks or mutual funds in an effort to outperform the market.

What do all of these activities have in common?

  • They’re attempts to exert control over something that we simply cannot control (the stock market).
  • They arise from an abundance of worry and a lack of confidence.
  • They’re a complete waste of time.

Oblivious Investing sits at the opposite end of the spectrum. Oblivious Investing is about creating an investment plan and sticking with it, staying (or at least acting) oblivious to the daily whims of the financial markets.

That’s about a page of your 137 page book I’ve quoted there, incidentally. Mike Piper is the Ernest Hemingway of investment writing, and he uses words like he’s being charged commission for them.

I mean that as a compliment – this is far from the longest book you’ll ever read (or as Mike would say, “a short book”) but as a result anyone can read it, digest it, and then decide how to put its principles into practice.

Learning to be an Oblivious Investor

Having mentioned Hemingway, now would be a good time to say that much of Oblivious Investing is recounted as a story featuring Shannon, a 25-year old at the start of her investing career, and Toby, her obliviously investing uncle who is about to retire well ahead of schedule.

In a similar style to books like Rich Dad, Poor Dad and The Richest Man in Babylon, we see Toby answering  Shannon’s questions by asking her in turn simpler questions that she can answer for herself.

By page 29 she’s on board with stocks versus bonds for long term savings, and by page 38 she’s into index funds and away.

It’s very impressive how Mike is able to return to first principles in these pages — he barely assumes his audience can read a graph.

Yet despite this need for simplicity, the pages fly by, since Mike has the knack of explaining in five words what some writers (*cough* *cough*) would require 1,000 words to get through.

You can therefore safely give this book to anybody, and they’ll be able to read it in an hour and end up better informed about investing than 99% of the population.

Admittedly, things do get a little more complicated in the second part of the book – tackling the noise; not even Mike can get stuck into the active fund industry or the folly of stock picking without a few unfamiliar words.

But he still does a great job of arguing against everything from market timing and choosing hot funds to chasing growth and reading websites like Monevator.

(Please! Come back! He’s not infallible!)

Seriously, I may strongly suggest people invest the bulk of their money via an index tracking fund, but I also hold individual stocks and I follow the market’s ups and downs for sport. Compared to Mike and his Oblivious Investors, I’m barely two steps removed from Jim Cramer or even Nick Leeson.

What about you? Should you buy the book if you’re a reader of Monevator, and so are interested enough in money and investing to be reading a 1,000 word book review about a 20-word investing strategy?

I think so, yes. All I can say is I really enjoyed Oblivious Investing, and while much of the material was familiar, it’s very rare to see it laid out so clearly.

If you stumbled across my review while Googling your first steps in investing — or if you know somebody else who is getting started — then the recommendation is even easier to make.

Oblivious Investing is a must-read for novice investors. Buy a copy now.

Note for British readers: Since many Monevator readers are from the UK, I should mention Oblivious Investing is an American book, quoting American stats as well as mentioning a few strange things like CDs that have nothing to do with pop music (they’re like our fixed rate savings bonds). Also, the characters have odd American names like Cindy and Lauren. None of this takes anything away from the book, however, since the principle is the same for UK investors, and the stats broadly similar. And you can always edit the names in your copy with a pencil. You will have to buy it from Amazon.com, however.

{ 5 comments… add one }
  • 1 Mike Piper September 3, 2009, 1:27 pm

    Wow…I’m happy to see that you enjoyed the book so much. 🙂

    I think you really nailed it. The hard part isn’t understanding (or explaining) how to invest wisely. The hard part is actually doing it.

  • 2 Tony September 4, 2009, 11:17 am

    …. and the biggest noise is from the Financial Services Industry selling (often unsuitable) products. There’s no sales commission on index tracker unit trusts and ETFs. Perhaps the (UK) Retail Distribution Review will change matters – if the banks don’t water it down.

  • 3 The Investor September 5, 2009, 9:35 am

    Indeed. I’ve also noticed a new trend where fund managers have ‘seen the light’ about active management, so start of wealth advisory firms where they basically buy/allocate ETFs for you – for a hefty fee, of course. Laugh or cry?!

  • 4 Niklas Smith September 5, 2009, 10:47 am

    Re. the note for British readers: there are some UK sellers who sell the book, see http://www.amazon.co.uk/Oblivious-Investing-Building-Wealth-Ignoring/dp/0981454232/

  • 5 The Investor September 5, 2009, 12:00 pm

    Thanks Niklas, though I see some of those importers dispatch from the US anyway. The book would only be about £6 from the US store, plus shipping. Not sure what latter would be, but all these are charged £2.75, which gives a lot of $$ shipping!

    Might be a good option for those who’d rather deal with a UK supplier though.

    If anyone does the maths (or buys from the US in the UK) please do share your workings… 😉

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