Book Review: “Simple Wealth, Inevitable Wealth” by Nick Murray

One of the members of my financial planning study group mentioned that he gives all his prospect people a copy of “Simple Wealth, Inevitable Wealth” by Nick Murray. I was intrigued: I like to give the prospects something that pertains to them. It’s a tangible benefit I prefer over marketing things like pens or mugs with my company name on them. I have a bit of a library in my office of books I’ve bought used for just these occasions. (All have been previously reviewed by me, check the “book review” tag.)

Anyway, this book starts out really badly. He says, “be an owner, not a loaner” and tries to make the case for not just investing in a basket of equities, but investing ALL your money in stocks. Go 100% in, he says! I stopped and looked: copyright 1999. Um, yeah. I remember those days. I was selling stocks as they doubled and rebalancing into balanced mutual funds.

He’s maybe 50 when he wrote this book, and his advice about drawdown rates says “take 6% a year out of your stock portfolio”. He doesn’t mention bond ladders or buckets or guardrails. He doesn’t appear to have read Bengen or Pfau or Kitces. Financial planning has only really become a science in the past thirty years. I think he missed the start of it.

He goes on to say some good stuff about having an investment policy statement (without ever using that term) and makes some good points about keeping expenses low, but never mentions ETFs and at some points seems fine with variable annuities and 12-1b fees. Whatever, dude. He’s writing this in the late nineties – twenty years ago – and it shows.

Later he says to never let the tax tail wag the dog. Oh my God, one of those. Seriously, people, good tax planning can save you more in taxes than good investment advising can make you in returns (over and above the market.) We call it “tax alpha”. I’m speaking nationally on it in November (and in Boston on it in a week or two.) It’s a real thing, but not something the investment guys pay any attention to. He gave it one paragraph, mostly saying how unimportant taxes were to consider. Dunning-Kruger, anyone?

I liked some parts. He mentions that mutual funds are the box the present (stocks) come in. I liked that analogy. People get confused about the asset (stocks or bonds) and the wrapper (mutual funds or ETFs) and the custodian (Fidelity, Pershing, Schwab, TD Ameritrade, etc) and the titling (IRA, 401(k), after-tax/taxable, Roth, trust, etc.) He didn’t go past the first definition, but it reminded me that I should start there with more people when coaching them into this world.

He has a strong strong suggestion that you hire an investment advisor, which I liked, but he seemed to think that people’s goals were to be “a rational investor trying to become wealthy”. Most of my people are humans, not rational investors, and their goal is to be happy and financially free of worry. Wealthy is part of that, but trying to get as rich as possible no matter what they have to give up isn’t common in my world. They’re more likely to want to get as rich as possible while sleeping as best they can at night. Perhaps that’s because my people lived through the Dot Com bubble and Long-Term Asset Management blow-up and the housing bubble and the Great Recession. When I hear “this time it’s different, go all in on equities” (as a client said to me last week) I stop and check to make sure I’ve got a balanced portfolio that can weather the oncoming storm. Because I’m hearing things now that make me remember 2005.

My guess is that the stock crash comes when Trump is impeached OR when it becomes clear that he can’t get a tax break through Congress. I agree that indexing has changed the world, I agree that corporate profits are likely to be low (the cost of a dollar of income is staying high), I agree that it’s different now. Indexing did this. But I don’t agree that 100% in stocks is a good idea. I read history. The fundamental thing that stays the same are humans.

Who is this book for? Almost no one, unless I put a sticky note over the parts that say “go all in!” and another sticky note saying “we use ETFs now, and costs matter, and diversification across asset classes matter, and read three other books on drawdown rates before you take his advice.” If you are against ALL stocks, he makes a good case for why you MUST have stocks. If you don’t know why you need an investment advisor he makes a weak case for one. (I could make a better case, as could nearly everyone I know professionally.) Honestly, it’s not that good a book. I doubt I’ll give it to anyone.