Book Review: Yes, You Can Be a Successful Income Investor!

The inaugural book review will be for Ben Stein and Phil DeMuth’s book, Yes, You Can Be a Successful Income Investor!Overall, this was an interesting book that was based on the premise that stocks may not be as strong as they have been in the past. Specifically,

“…over the coming 20 years, the total returns from equity investing could fall significantly short of their historical yearly average of 10 percent” (pg. eight)

They see two scenarios playing out. The first is that the market falls dramatically, and following a period of consolidation would return to the normal 10 percent per year. The second scenario is that the market simply chugs along, delivering significantly lower total returns than normal. Obviously, these are not very rosy pictures.

To help combat these two scenarios, the authors provide a system of investment that focuses on investments that produce income. More specifically, they discuss in detail the various types of income producing vehicles:

1. Bonds
2. Stocks
3. Preferred Stock
4. REITs
5. Annuities

For each investment type, the authors present detailed background information covering the fundamentals of how these investments work. I often found myself skipping this information, looking for more of the ‘meat’ on how they recommend to invest. The REIT chapter is good to help understand them. The seem to cover bonds in the most detail, probably because they can be complicated and there are many different types of bonds.

I of course enjoyed the chapter on stocks the most. They spoke about the Mergent’s Dividend Achievers list as well as the S&P Dividend Aristocrats and how to use these lists as a basis for choosing stocks to invest in. They provide a simple yet effective step-by-step guide for how to choose stocks that seems pretty straight forward. It involves using Morningstar and ensuring you are looking at utilities and banks, as well as other industries.

The real meat of the book is in the last chapter, where the authors describe how to put an income producing portfolio together. They offer a few different alternatives, depending on your risk tolerance and what you are trying to achieve. Their approach errs on the simple side, which is good because the more complicated the approach, the harder it can be to stick to it.

Again, overall I liked the book. It was a quick read, mainly because I skipped a lot of the background stuff and looked for the ‘how-to’ suggestions. Their advice is straight-forward and simple, which is what I believe investing should be. My only complaint, as a Canadian, is the book is very U.S. focused. However, the principles are the same and can be generally applied.

A long time ago, I posted about some of the books that I have found valuable. It can be found here. If you have any other suggestions for books that you have read on dividend investing – let me know.