Book Review : Dream Big

Dream Big is a book that is purported to be on achieving your investment goals. This was a book that was referred by Readers’ Cosmos for a review; in a nutshell, despite its weaknesses that I list below, I wish had this guidance early in my career. Being a Sales Guy, though upto speed in these matters, I normally tend to put off some things, and take decisions basis gut feel. This is despite my capabilities in Data Crunching as shown in previous artices on this blog itself. And this is also despite my continuing regular deep study of Economics as well – again documented on my blog. Investing is a specialized business; that much is true. Thus, for these reasons it was nice to read a book on investing. As is usual, I will first state the negatives and then the positives.

THE ANALYSIS - NEGATIVES

Any book that gives investment advice to people – long term  or short term horizon – should give a detailed look at all parameters, and not focus on just one theme. I am not claiming the authors are biased or partial – it is just that I don’t buy their overall approach. Could be I am a half-doctor; but as an ardent and educated Economist and a person educated in the subject, I too have an opinion. This is what I place in front of the reader in this section of the review. And I owe it to my readers to be unbiased and factual to the best of my knowledge. Apologies in advance – for the book is indeed an excellent one.

My first, second and third impression on reading the book that it seems to me to be a book that is too focused, far too focused on Mutual Funds as a solution. Blunt, Frank and  Straight : Mutual Funds can be A solution, not THE solution. The book harps too much – waay too much on Mutual Funds. Not that what they state is inaccurate – that it isn’t; it is factual so far as I am aware. But it lacks a comprehensive analysis, that would serve to drive home the point. I tried, in a short 2 – 3 minutes to do a small analysis, and the results were interesting, to say the least. I wont go into what the authors state as a solution – read the book for that. Despite my criticism- this is a book you should read, period. More of that in the positives section.

All I did was take a listing of returns from mutual funds over 1, 3 and 5 years, and looked at them. I didn’t even go to my trusty excel calculations {Read my other economics blogs for this, I do do some data crunching – with great reluctance, may I add. I prefer qualitative analyses myself. But for some things, you just cant beat data}. The returns varied from 5.6% for debt funds upto 20+ percent for equity funds. The category average was 6.5% for debt long term funds, as an example. Why should I invest in long term debt funds at all? Makes no sense whatsoever. FDs are inherently superior, any which way you look at it. We get between 7.8 – 9% on Bank FDs. And unless Debt returns are superior to that, net of taxation impact,  {both sides of the comparison}, makes no sense. And in matters taxation, the comparison isn’t so simple – what tax bracket are you in will determine your returns. For net of tax impacxt, go to your tax planner, or do your own calculations.  A generic statement of superiority of one over the other {either side} cannot be made; it isn’t an absolute, but a relative and requires planning basis your {the readers’} specific situation. What is good for me may not be good for you.  

Similarly, for pure equity funds, the category average comes to 11.5%. This is barely – barely – 3% higher than FD returns, simplistically speaking. Sure, some funds perform better than this – this is after all an average, taken from MoneyControl, where they have given category average. Thus, in order to make a strong case for Mutual Funds, you need give not generic advice – as this book does – but go deeper, build factual charts, have deep number crunching, analytical simple tools that can help us identify the good mutual fund to invest in. The risk, the downside risk is too great to be ignored. Unless you have the time to invest into regular fund analysis and tracking, don’t go down that road. How many of us have the time or the inclination in the modern world to do that? Hardly anyone. I know I don’t have the time. A word of advise for the authors – please do deeper, give data, exhaustive data, comparisons, calculations, and avoid generic theoretical statements, howsoever accurate may these theories be.

Next, even if you do identify the good ones – you cannot put all into MFs. There is something called portfolio management; a good investment strategy is about spreading risk – you should ideally have a mix of MFs – Equity heavy only {Avoid debt funds, pointless for the most part as I state above}; Bank FDs, Post Office Investments, and more. Further, we have to keep in mind overall economic scenario.  And on top of that, there is the problem of Agents vs Advisors – how do you trust your advisor isn’t an agent? Having sold insurance, I am too painfully aware of the ground reality. Unless there is a strong turnaround in the ethical aspects and process aspects of the trade, I do not recommend it. Why is that – simply because an agent who gives advice will {or may} do so for HIS benefit, not yours.  That said, there are indications of a redefinition taking place in the past 2-4 years, with focus on pure advice rising. Give it time.

Lastly, the analysis in the book comes at a most inopportune moment in terms of economics of India. The reason is that we are analyzing on top of a sustained and completely inexplicable bull run running into years and years with sky high valuations that have not  made sense to people like me for more than an year now. The current valuations are such that they distort perspective. Frankly, with cross sectoral distress mounting, despite some signs of a turnaround, now is not the time for going gung-ho on long terms. My call for now would be not to stay invested, but to book profits, and forget the benefits of SIPs please. They don’t make sense when market valuations are befuddlingly high, among the highest they have ever been in India. Caution is the buzzword for now for retail investors, people like me, in my layman opinion.

THE POSITIVES

I have been detailed about the negatives – as this is an issue in which people can get carried away. A sobering thought is needed is what I felt. There is no need to get carried away and call Mutual Funds the panacea – the authors don’t call it as such, so relax. They authors have been remarkably restrained, though totally sold on the idea of MFs imho. There was no apparent bias. It is just a strategy, that is all. Now, notwithstanding anything I stated above, the fact is that MFs are a vital tool in your portfolio. There, the authors are accurate – they just should not be the only ones. I think the book also states as much.

The book does a bang-up job of opening our minds to investment as a strategy, and acts as a superb primer and educator as to why you should be focusing a hell of a lot more on your investments. It also does a great job in tackling the fascination over real estate that most of us seem to have. But more than this, above all of this, this book is a superb resource on Mutual Funds. You will develop a nice, lovely and deep understanding of Mutual Funds, their types, and will be able to formulate your own strategy for investment into them. Just one word of advise here – ignore the taxation advise, mine as well as the book’s. Ask your tax planner. That is always the best.  All in all, I rate it 3.5 stars, a must read.

"This book review is a part of The Readers Cosmos Book Review Program and Blog Tours.  To know more log on to thereaderscosmos.blogspot.in"