Book Review: How to Really Ruin Your Financial Life and Portfolio

How to Really Ruin Your Financial Life and Portfolio. 2012. Ben Stein.

Ben Stein has accomplished a great deal in his life. He has degrees from Columbia University (economics) and Yale University (law), was a speechwriter for Presidents Nixon and Ford, and has worked as a law professor (Pepperdine University), a trial lawyer, a writer, an actor, and a political commentator. More important for readers of his latest book, How to Really Ruin Your Financial Life and Portfolio, Stein is also a keen observer of human nature. He draws on this talent and his own investing experience to deliver an excellent, tongue-in-cheek guide on how to avoid common financial mistakes.

Anyone (anyone?) who remembers Stein’s delivery of an economics lecture in the classic 1986 movie Ferris Bueller’s Day Off might be forgiven for expecting a dry, monotonous account of behavioral finance. What they will discover instead is a self-deprecating, humor-filled, and engaging book of instruction. Seasoned professionals and novice investors alike will laugh their way through its lessons because Stein possesses a brimming wit and a lifetime of collected wisdom, often gained through the same mistakes he cautions readers against. Like Bueller’s captive classmates, we would all rather avoid a lecture; but entertain us and we pay attention, recognizing and laughing at our failings and (hopefully) absorbing the lesson along the way. Stein’s wisecracking delivery ensures his message hits its mark and makes it stand out from a crowded field of investment advice books.

Even novice investors will immediately grasp Stein’s reverse psychology. For example, in Chapter 1 he goads readers to “scour the newspapers minute-by-minute and then trade frantically on the news. That is how the big boys do it. You want to wear the big boy pants, don’t you?” In Chapter 18, he sympathizes with those of us who entertain nagging doubts about the infallibility of media content: “I know you harbor a secret belief that no one, absolutely no one, can tell the future. But that’s wrong. If a man or woman is on a TV show about the economy, he or she can tell the future.”

The book, now in paperback, is divided into 49 pithy lectures, which grow shorter as the book progresses, exhorting readers to run wild with their behavioral flaws, their misconceptions about personal finance and investing, and their lives in general. The first chapter, which urges investors to trade as frequently as possible, runs nine pages, whereas Chapter 15, which encourages readers to skip the development of a financial plan, runs just five. The final 19 chapters, a series of brief notes about “How to Ruin Your Greatest Asset — You,” are a combined 13 pages. Stein thus provides an increasingly tight weave of rich advice.

Despite the insightful commentary and witty delivery, however, the book suffers from an internal inconsistency. Stein’s well-conceived suggestions to index, keep trading to a minimum, avoid the pitfalls of trying to pick winners, and be skeptical of the wisdom of the media are sometimes at odds with his storytelling. In particular, Stein says that some investment managers he knows are the exceptions to his rules, that their skills allow them to deliver above-market performance, thereby undermining his advice to avoid the hype and marketing of money managers. “There is simply no way that even the most well-trained, most intelligent investment managers have been able to beat the Dow over long periods except in the rarest of cases,” Stein writes. It turns out, though, that Stein is friends with some of those rare managers, which leaves readers wondering what particular skill he possesses to spot them. And wouldn’t it be nice if he could share that skill, perhaps via one of those business news channels to lend extra credibility? He also appears to contradict his own advice by maintaining an apparently active brokerage account rather than investing through a couple index funds at a discount brokerage. To be fair, though, Stein would not be so credible if, like us, he did not fail to correct some of his behaviors, nor would the book be much of a read if he merely preached indexing.

Ben Stein’s approach may lack the gravitas of a more academic tome, but like the fool in a Shakespearean play, he makes us laugh, delivers the truth, and, hopefully, gets us to mend our ways. By illuminating and poking gentle fun at our foibles, Stein entices a far wider range of readers to pick up and finish this book than would ever begin reading a dry but accurate treatise on behavioral finance, and for this he should be lauded.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.