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In this post, I will be reviewing the book Dollarlogic: A Six-Day Plan to Achieve Higher Investment Returns by Conquering Risk by Andy Martin.
Disclosure: This book review is not sponsored by Career Press, Inc., the publisher of Dollarlogic, nor by the author. As a result, the thoughts expressed in this review are unfiltered and unbiased. However, FinanceSuperhero was fortunate to receive a signed and dedicated copy of the book from the author.
Dollarlogic is available for purchase now via a variety of outlets; all links to the book contained within this review are Amazon affiliate links.
ABOUT THE AUTHOR
As an active investment advisor and mutual fund manager, Andy Martin boasts a unique combination of hands-on advisor/investor experience and a deep research base of novel investment ideas. He began his investment career with Merrill Lynch and is cofounder and president of 7Twelve Advisors, LLC, an SEC Registered Investment Advisor, and registered representative, general securities principal with FINRA member firm, Girard Securities, Inc. Martin has worked in virtually every part of the securities industry, including operations, sales, management, product development, research, and compliance. His research has been published or reviewed in a wide variety of journals and publications. He is Series 7, 24, 53, and 65 licensed, is a graduate of Belmont University (BBA in economics), and Vanderbilt University (MLAS), and lives in Nashville, Tennessee.
If the stock market was up 12% in a given year, what would you expect the return on your portfolio to be? If the stock market was down 12% in a given year, what would you expect the loss on your portfolio to be?
The above questions are just two shining examples of the critical questions Andy Martin poses in his quest to redefine the popular notion of investment risk while guiding the average investor toward greater introspection, wiser investing habits, and greater wealth.
As the title suggests, Martin, a 30 year industry veteran, lays out a six-day plan to achieving higher investment returns. This plan hinges upon one key fundamental: the minimization of risk, or what Martin calls dollarlogic. Explains Martin
You have heard it your entire life, and it is wrong. Risk does not equal reward. If it did, why would you wear a seat belt?
Many readers may initially be shaken by such a sudden challenge to their investment paradigm, but Martin’s evidence is compelling.
On Day 1, he leads readers to THINK about the fundamentals of risk and develop a healthy aversion to risk. By presenting a variety of statistics, financial and otherwise, Martin demonstrates several surprising truths about risk:
- Acting in supposed “less-risky” ways can actually put you at more risk
- A majority of successful entrepreneurs, while they may appear to be risk-takers, are actually risk-averse
- The media perpetuates countless risk myths by misrepresenting statistics through sensationalist language (i.e. “The DOW plunged 45 points today”)
On Day 2, Martin makes a compelling argument, backed by decades of market statistics, that stocks are actually less risky than bonds. How could that be possible? As the chapter subheading states, “Your objectives, not the investment, determine the investment’s risk.”
What is an investor to do? On Day 3, Martin recommends surprising advice:
Seek lower returns.
While this sounds like nonsense at first, Martin makes a compelling argument that minimizing losses is far more valuable than maximizing returns. He provides an example of just how devastating losses can be based upon one year losses of 25% and 50% on a $10,000 investment:
- If you lose 25%, or $2,500, you have to make 33.5% on your remaining $7,500 in the following year in order to break even.
- If you lose 50%, or $5,000, you have to make 100% on your remaining $5,000 in the following year in order to break even.
Martin also proves that higher average returns, while a worthwhile statistic, are not always indicative of greater portfolio value due to the principles of geometric average and compound returns.
On Day 4, Martin exhorts readers to predict themselves, not the market. He reasons that an understanding of your goals and desired outcomes is much more valuable than an attempt to predict the market based upon past results. With poignant simplicity, he advises readers to consider where they are going instead of dwelling on where the market is going.
Days 5 and 6 are focused on the nuts and bolts of a wealth management plan. To the dismay of do-it-yourself investors, Martin recommends hiring a trustworthy, well-credentialed financial advisor who is a good fit with your personal temperament and objectives to manage a diversified portfolio which aligns with your objectives; his reasons are compelling, to say the least.
In my opinion, the one flaw contained in Dollarlogic may be information overload; for a book written for the average investor, many of the graphs and figures require a great deal of mental gymnastics for the non-investment professional to decipher.
In the end, it is ultimately the witty humor, Martin’s personal anecdotes, and the countless memorable and decisively true statements that drive Dollarlogic. As Martin states in his Introduction, Dollarlogic is not a book, per se, but a six-day investment management plan. While that kind of description might serve to turn away many readers, Martin expertly interweaves stories and investment principles in entertaining fashion. He concludes the Epilogue by quoting philosopher William James, who said
The greatest use of life is to spend it for something that will outlast it.
In one blogger’s opinion, Andy Martin has written an investment management plan designed to help the average investor do exactly that.
Readers, do you think the statement “Risk ≠ Reward” is accurate? Do you structure your investments to maximize returns or minimize losses? Do you have an accurate view of your own future?