The winner of last week’s giveaway Strategies for a Green Economy is Tom.  Tom please email me at livingalmost at gmail dot com!

This week I’m reviewing How I managed $20,000,000,000.00 by age 32, by Wade Sloame, CFA, CFP.  I was intrigued by the title. Again I’m going to try to concisely review the book and hopefully it won’t be too long and realize I couldn’t put everything in.  But leave a comment for a chance to win next Wednesday is the drawing.

Chapter 1 – Influences/The beginning

Wade explains his background and childhood.  How his stern upbringing gave him the skills necessary in his career. How discipline and determination made his goals achievable.

Chapter 2 – No Success without failure/Paying my dues

He explains that to become successful, it’s not about failure.  Rather it’s about learning from your failures because failure is inevitable.  I like the Warren Buffet quote at the end “If you were a golfer and every hole a hole in one, then the game wouldn’t be fun”.  That life is fun because it’s challenging. I agree.

Chapter 3 – Chasing Profit – Is the market efficient?

He begins by reviewing the Efficient Market Hypothesis (EMH), that states consistent excess returns cannot be achieved because the market is efficient and reflects all avilable information.  However there are different scenarios under this hypothesis, such as people having insider knowledge or sheer dumb luck.  Wade however, believes there are periods of market inefficiencies which can be used to profit a smart investor, but in the long term the market self-corrects.

Chapter 4 – Investment Philosophy

Wade says investing is an art and a science.  He has a cute quote by Yogi Berra “It’s tough to make predictions, especially about the future.”  Wade explains that people’s investment beliefs will involve earnings, growth, valuation, and competitives advantage.  Depending on which way people invest will weight each category.  He suggests that if you actively manage 20-30 hand picked stocks and watch them carefully, it’s possible to outperform the market.  However you must make a commitment to sticking by your strategy.

Chapter 5 – Hedge Funds

What is a hedge fund?  A hedge fund is a loosely regulated mutual fund.  Wade manages one for a living. I think, that people who typically invest in hedge funds have substantial assets.  It’s not for your average joe investor.  These are highly specialized investment funds, where the person in charge is trying to outperform the market.  This means that managers take greater risks than normal. I’ve heard of hedge funds shorting tons of stock, investing with venture capitalist, and Wade mentions many other risk scenarios.  Also because of the high fees involved, it’s very difficult for normal investors to make a profit.  Thus before you invest be sure to read and understand fully what you are investing in.

Chapter 6 – Managing Billions – Riding the Bull

Wade was promoted in 2002 to start managing a hedge fund of $20b.  He says he was young and hungry. I can’t help by wonder, does Wade, believe that in order to turn companies around now with the ecnomic crisis we’re in, perhaps young, hungry superstars within the company should be promoted and given a change to lead?  Does youth and hunger bring out more drive?

In this chapter Wade gives us a look inside at the day of a hedge fund manager!  Wowsa is all I can.  I understand now why Jim Cramer quit.  As a hedge fund manager Wade was supposed to poke and prod every company he considered investing in and do it tactfully.

Chapter 7- Technology and Globalization

Wade explains how he’s seen the transformation of our global economy.  How we are becoming more dependent and intertwined with other countries, even China.  But how will the US handle this shift?  The truth is that right now it’s showing itself more than ever.  We are all in the midst of a economic meltdown.  China is doing a bailout with immense investing in it’s infrastructure.  So is Europe. While the US is reluctant, it looks like we’ll be doing the same.  Right now we aren’t really individualized economies, we’re interdependent, such that when one fails, the rest begin to falter.

Chapter 8 – Winning Strategies

Wade starts out by talking about compounding.  He gives the example if Christopher Columbus had invested 1 penny in a 6% interest account and left it, it would now be worth $114 billion dollars.  He says that you have to look at the long range time periods and whether the real benefit is in chasing returns or following them.  He talks about John Bogle, explaining that index funds make sense because for the average investor, the market outperforms them because they chase returns.  Thus try to determine your investment style and develop a winning strategy.

Chapter 9 – Choosing an investment manager and advisor

Do you need professional help in managing your finances?  He says are you the type of person who outsources menial tasks?  Do you want someone with experience managing your money?  He explains the difference between a new breed of fee only advisors and advisors who charge commission on sales.  Fee only advisors have incentives to increase your portfolio because they get a bigger fee.  Commission advisors get a fee for selling you a product.

Chapter 10 – Credentials and Education

This chapter talks about investigating the credentials and education of your advisor.  Wade explains what a CFA or chartered financial analyst; and CFP or certified financial planner are.  He even tells you what the education and experience levels of these two designations.

Chapter 11 – What to do with your portfolio

He says that depending on your age and situation everyone’s investment strategy is different.  Remember however to diversify your investment.  Invest in a broad range of classes and assets to minimize loss when a sector underperforms.  And try to keep it low cost and tax efficient, because each bite away leaves less for compounding.   Then he ends with wishing us all good luck.
Hope you enjoyed the review.  Wade will be stopping by, so leave a comment/question and hopefully he’ll be able to answer!