I finally managed to get Derek Foster’s follow-up to Stop Working: Here’s how you can! from the local library. I’m glad that I checked it out of the library instead of springing $20 for it because the author is following a recipe well known to Hollywood producers — find a formula that works and follow it up with as many sequels as possible. I can’t fault him for trying to earn a buck but if you’ve already read the first book, you’ll find little of interest here.
As you might surmise from the sub-title “start with $50… and no investment knowledge”, the book deals with investing in a handful of companies that offer Dividend Reinvestment Plans (DRIP) and Stock Purchase Plans (SPP). Surprisingly, Derek even discusses an example portfolio to start with: Bank of Nova Scotia, Imperial Oil, Enbridge, Fortis and RioCan. A portfolio like this, on average, can be expected to behave like the Canadian market and would be a vast improvement to investing in high-MER mutual funds.
While I have no trouble accepting that DRIPing is a worthwhile strategy, I am not sure how you can buy individual stock with “no investment knowledge” and “no thinking”. In fact, the opposite is true. If you decide to buy individual stock, whether directly or through a broker, you’ve become what Graham would call an “enterprising investor” and by definition need to “devote time and care to the selection of securities that are both sound and more attractive than the average”. Otherwise, why would you bother? You can walk into a TD Canada Trust branch, open a mutual fund account, sign up for pre-authorized contributions and start investing in index funds with rock-bottom fees for as low as $25.
The second half of the book deals with teaching kids the basics of investing through the joys of stock ownership. I found plenty to disagree here. For instance, Derek thinks that kids should fund their own education and doesn’t believe in RESPs. I beg to differ. The Canada Education Savings Grant (CESG) alone makes it worthwhile to contribute to a RESP. And if parents have a strong opinion on who pays for college, they can withdraw their contributions for their own use and use the growth and grants to fund their kids’ education.
Bottom line: If you’ve read Stop Working, you’ll find little new here that you won’t find elsewhere, especially online resources dedicated to DRIPs and SPPs. If you missed Derek’s first book, it should be one you should check out.