I originally wrote this review of Motivated Money a few years ago when I first read the book but never did anything with it. I recently found it again and though ti might be of interest for some readers.
Book Details
Title: Motivated Money: You’ve invested well? Compared to what?
Author: Peter Thornhill
Published: 2008
Motivated Money Review
Motivated Money is probably one of the best books about investing I have read so far. At only 132 pages, it is rather short but that’s all the author, Peter Thornhill, needs to explain the complexities of investing and his philosophies with his concise but knowledgeable text.
The book is geared towards an Australian audience and all the examples are Australian based. However I believe the principles can be applied to any country or market. The book doesn’t tell you exactly what you need to invest in to become rich; rather giving you the tools and the emotional intelligence (as Peter puts it) to find the investments that are right for you.
Peter covers the importance of working out what you are benchmarking your investment performance against, the ASX200, the All-Ordinaries Index, the S&P500? Working out your benchmark gives you a goal to achieve, something to strive for in your investment. Having this benchmark that you need to achieve will force you to work hard and do your due diligence to find the right investments to meet your goals(lifestyle & income).
There is a lot of material in the book covering the two-dimensional aspects of investments. And how many investors ignore the (arguably more important) aspect of income stream; in favour of the price/capital of the asset. He covers how only focusing on one dimension of the asset gives a distorted view of the actual return of the asset. In this section is where he also covers looking at your investment time frame. How it is preferable to take a long term approach (a view of decades) to investing; instead of a speculative approach (which relies only on the value of the asset) which allows us to have a more accurate view of the return of the asset.
Another interesting chapter is called “The Yield Trap”. In this chapter he covers the relationship between the price/capital of the asset and the income of the asset – the yield. Peter argues that the yield should not be the main factor in deciding whether a asset is right for you due to the volatility of this relationship. If the asset price rises or drops quickly this will alter the corresponding yield. Even though the income received from the asset is the same; the benefit of taking a long term approach is ignore these changes in price/yield as long as the income and price are going up over time.
What would an Australian investing book be without a mention of the great Australian real estate market. Peter covers a few points around the property vs shares debate. But one area I’ve been interested in recently is the gearing/tax effectiveness of shares compared to property. Property is commonly touted as being a very good asset for gearing and tax effectiveness. But shares also have this ability at an arguably easier level for the investor. Margin loans and warrants are just 2 such tools that allow you to gear up share investments with less risk (diversified investments) than buying a single residential property. All while being tax effective through the interest being tax deductible.
You are able to get a copy of Peter Thornhill’s book at motivatedmoney.com or perhaps at your local library if you are lucky :). If you want to hear some more from Peter, he did a podcast with the Aussie Firebug which you can listen to here. Let me know if this review was helpful and if more reviews like this would be beneficial.
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