After my interview with Derek Foster I was very curious about reading his new book. The book is divided into three parts: part I deals with his investment strategy, part II with investing for kids and the appendix is an update on his life from the last book.
In part I Derek goes through an introduction to DRIP’s and SPP. I’ve come to understand after reading the book the usefulness of these plans for small time investors. You have a lot more effort involved to get everything setup (don’t worry Derek gives you a step by step guide), but you’re costs can be rock bottom which is hugely important when your just starting out. Perhaps the most useful thing I learned was the difference between a real DRIP which allows fractional shares and a synthetic DRIP that you get in most self directed accounts which only provide full shares. I know it doesn’t appear to be a big difference, but it is. I’ll write a post on that next week.
In part II Derek goes into how to invest in your children’s name. He does comment a few times you have to be careful here as tax liability can be a bit of mind field and you would be hard pressed to sell a share that is registered directly in your child’s name. Despite this I like the idea. Why? RESP are limited to be used for your child’s education while a stock portfolio can be used for anything they like. They can keep the portfolio through school and just use the dividends to help pay for their education. This could potential setup them onto their own path for financial freedom decades earlier than most. Or they could sell the entire portfolio and use it for a house down payment. Really the choice becomes theirs (besides at 18 then now control the entire portfolio and can do anything they want with it).
Yet on the other hand I like RESP’s because I currently take the Child Tax Benefit I receive and deposit it into a RESP account which then the government gives me another 20% free. So you see our RESP account is totally government funded. I don’t need the Benefit to raise my child, so I will just gladly take free money and use it to fund his education.
In the last section of the book we get a few answers that everyone is dying to know. How is Derek really doing three years into his retirement? First off, yes, he admits he is doing some ‘work’ with publishing and writing two books. Yet I don’t feel that’s a problem. Retirement is about doing what you want, so if it involves a bit of work so be it. Second his portfolio is doing fine and the dividend increases are largely out pacing inflation so far. He also talks about a few sales from his portfolio such as Rothmans and a few new purchases such as Royal Bank of Canada.
Overall I liked the book, it provides a nice way to start out a non registered portfolio with small amounts of cash which is an often overlooked topic in the most investing books. Yet I do have a few general issues with the book. First off the entire book is only 177 pages which is a bit light in my mind given the $19.95 price tag. My second complaint is the paper in this print run was a bit thin. You can faintly make out the text on the other side of the page while reading it. This drives me nuts. So Derek, next print run please upgrade paper weights if you can. My last comment was the graphic design on the cover is a bit pixelated which makes the entire book look a bit cheap. So overall I like the content, but I have a few bones to pick with the publisher.
Now onto the contest. I’m giving away one free copy of The Lazy Investor to one lucky reader. Here are the rules. To enter you must leave a comment on this post with a valid email address so I can contact you if you win. One entry per person and you must have a Canadian mailing address. I’ll accept entires until 8pm (Central Time) on Sept 10, 2007. After which I’ll pick the winner with a random number generator. I’ll only use your email address to contact you if you win to obtain your mailing address.
Best of luck to everyone and have a good weekend.