E-mail a friendAndrew Tobias
airdate February 15, 2005
Award-winning writer Andrew Tobias has made a career of taking the mystery out of money. He's the author of numerous books, including the New York Times bestseller, The Only Investment Guide You'll Ever Need. Although his main theme is investment, he's also written on politics, insurance and other topics. Tobias is treasurer of the Democratic National Committee and an opponent of the GOP's efforts to privatize social security. He's also an activist and serves on the Human Rights Campaign board.
Andrew Tobias
Tavis: We continue our "Road to Wealth" series with Andrew Tobias, author of one of the best-selling investment books in history. The book is "The Only Investment Guide You'll Ever Need," first published in 1978 with a new edition just out this year. He's also treasurer for the Democratic National Committee, a post he's held since 1999. He joins us tonight from New York City. Mr. Tobias, nice to have you on, sir.
Andrew Tobias: Great to be with you, Tavis.
Tavis: I want to jump into the book here in just a second, but big news, of course, with regard to the DNC. You have a new boss, a guy named Howard Dean.
Tobias: I heard of him. He's terrific.
Tavis: So tell me how terrific he's going to be for the DNC, 'cause a lot of folk were scared of this guy just a few weeks ago.
Tobias: Well, I've been a fan for a long time, and I think that--obviously, he brings the grass roots with him, but I've gotten so many big checks just in the last couple of days as this was coming down. There are an awful lot of people who see Howard's leadership skills and his no-nonsense approach--he's gonna do a great job for the DNC.
Tavis: He follows, of course, Terry McAuliffe, who made and shattered and broke all kinds of records with regard to fund-raising for the DNC. Indeed, John Kerry was the best bankrolled Democratic candidate for president ever this last time around, but Howard Dean really revolutionized fund-raising, as you well know, with what he did with the Internet. How important is that skill going to be to raising money for Democrats?
Tobias: That's going to be more important than ever. Terry McAuliffe, who just stepped down, did a phenomenal job, and Howard agrees with that and is just going to take it to the next step. The Internet and the grass roots and all the local organizing and empowering the 50 state parties, which have really not gotten a whole lot of help from Washington in the past, it's gonna be an even better day, and it's gotta be because, of course, the result this last November was, you know--on the one hand, we did better than anybody ever did except for George Bush, but, obviously, not good enough. We got 9 million more votes than last time, but terrible outcome, so we have a lot of work to do, but Howard, I think, is gonna lead us there.
Tavis: Tell me, in the coming months and years whether or not we're going to see a more even-handed race where money is concerned on the national level between Republicans and Democrats as we saw this time between Kerry and Bush, or was Kerry raising that money an aberration for Democrats?
Tobias: I don't think anymore. I think especially with the power of the Internet, that's power to the people, and there are more of us than there are of them. It didn't look that way last November, but I think going forward, we will--I'd like to think we're always going to hold our own, and sometimes as we did this time, we're gonna do better than the Republicans.
Tavis: All right, let's shift gears and talk about advice that we can all benefit from and not just talk beltway money politics. "The Only Investment Guide You'll Ever Need" was the book you wrote, as I said, 25 years ago, and I've been waiting to chide you about this because if this is the only investment guide I would have ever needed, Mr. Tobias, why are we in our eighth edition, sir?
Tobias: It is so embarrassing, Mr. Smiley, to have to update and revise. The first few times, we tried coming up with new titles like "Still The Only Investment Guide" or "The Only Other Investment Guide," but, you know, much of it is word perfect the same as in--hasn't changed a word since 1978, but tax laws change and the Internet is invented and things happen that-- I have the most fun with the parts...being lazy, the most fun with the parts that don't change, but the Internet has given so many more opportunities to save money. Before I get to the stock market part, part of the book is just how you can get off the debt treadmill and save money, and the Internet has been tremendous for consumers, not necessarily as good for investors, but for consumers, the Internet has been amazing, so, you know, there's lots of stuff each time to revise.
Tavis: Let's talk about the stock market here in just a second. Before I do that, though, give me 2 or 3 things that come to your mind off the bat here of things that you wrote 25 years ago with regard to investing that absolutely-- principles that you talked about then that have not changed that are still constants.
Tobias: Well, start early. Slow but steady wins the race. Keep your expenses low. Buy low, sell high, that doesn't change. Some of the stuff is as old as "Aesop's Fables" or Benjamin Franklin. My only job with the book, frankly, has been to write it in a way that, hopefully, people who don't usually read books about money because they think it's gonna be too complicated or too boring, people can actually do it because the advice doesn't change very much. The basics people can get lots of places, but if they don't read it and they don't spend a weekend to actually take control of their finances, it doesn't do 'em any good, so I try to make the medicine go down easily, as I guess what the purpose of this book is.
Tavis: Whether or not President Bush will succeed in privatizing social security, we will have to wait and see. Clearly, we know where the Democrats are lining up on this fight with the president, but let me ask you a money question relative to the stock market and social security because if the president does succeed, we're now talking about, you know, what do you call it, private accounts or personal accounts. We're talking about people taking that money and essentially investing it, so talk to me about the stock market juxtaposed against this notion of how the president wants to privatize social security.
Tobias: Well, I would argue that we already have a wonderful privatized retirement system in this country. It's called your Roth IRA, which is usually a little bit better than a traditional IRA, but the Roth IRA and the SEPs and Simples and Keogh plans and the 401k you might have at work or the 403b--there are so many ways to save for retirement in private accounts, social security, as I see it, is that bare bones insurance program just in case all else fails. But if President Bush succeeds in taking money out of social security, you're going to need to invest for the future even more, and, yes, one of the places to put your money for the long term absolutely is the stock market. Over the long term, stocks generally out-perform safer investments.
Tavis: Let's talk about some of these guidelines in this book that still make sense, again 25 years later. "Only invest money you won't have to touch in many years."
Tobias: Well, you know, some people invest when they get a bonus, and then they sell when the roof starts to leak and they need to pay for the roof. You're entrusting your investment decisions to the roof if you do that. What I beg people to do is not start with the stock market until they've covered their other bases. You have to pay off all those high-interest credit cards. Not having to pay 18% on your credit card is as good as earning 18% tax-free, risk-free, so pay off the credit cards, buy a used car if you can't afford a new car for cash instead of with a car loan. Have $1,000-worth of the things you would've bought in the course of a year anyway, but buy them in bulk on sale, so you can make that $1,000 stretch to buy $1,400 worth of the very same things. Use high deductibles on your insurance. Have a rainy-day fund, all those kinds of things. And the sad truth is, that leaves out an awful lot of people watching now who don't have those bases covered yet. But if you have covered those bases, and you are contributing as much as you are allowed to to your employer's 401k up to that match that the employer might give and you've done all those basic things, then--then you might indeed want to invest in the stock market, but not just because you've got a little extra money and you're going to have to take it out in a few days.
Tavis: I'm sorry. A few moments ago, you mentioned buy low and sell high. Indeed, you talk about that in the book. I was talking to somebody the other day, though, who actually offered a funny liner, a funny one-liner, but it's true. When people like Andrew Tobias say, "Buy low and sell high," how do you know when high is?
Tobias: Ha! Well, I mean, they're right. I talk about if you do decide to play the market for yourself, different ways to try to do it, but really for most people, their stock market money should be through index funds, which are low, low-expense funds that invest in the whole market. They're like a horse that has a 20-pound jockey instead of regular mutual funds that you see advertised more widely that have 100-pound or 200-pound jockeys. So you buy index funds and you put $100 a week or $100 a month, whatever you can comfortably afford, for a lifetime. If you do that, you don't actually try to buy low and sell high. You have a long-term strategy of putting money away in the market, and when the market goes down, instead of feeling terrible, you say, "Oh, that's good. This month I'm getting my shares on sale," or "Boy, the last couple years, the market has just gone terribly low," if that happens, "That's good, that's not bad, because I'm buying more shares on sale." Eventually, and I'm talking now to people in their 20s and their 30s and their 40s, eventually when you're in your 60s, 70s, and 80s taking this money out, you will have done very well. So even though I have some fun in the book about how to buy individual stocks, and I certainly do some of that myself, for most people, index funds, slow but steady. It's so simple, and it generally does much better than all your friends and neighbors.
Tavis: You advise in the book that we should ignore the noise. Ignore the noise.
Tobias: Well, you know, when someone does get into the market to play the game and they buy stock in whatever company...I don't want to use a name...but then suddenly they read a headline, oh, there was a fire in the Argentine plant of this company, whatever. Got to sell. Or somebody was promoted. I got to buy. Or something happened. This constant noise and all these stocks--if you have a good company that you think, over the long run, is well-managed and has products that you believe in, just buy it and hold it. To try to get in and out all the time, besides the brokerage commissions and the taxes, if you have any profit, it's very hard--it's like treading water, where the faster you churn, the sooner you're going to drown, because you've lost all your energy. It's so easy for the amateur to get distracted by the noise in the market.
Tavis: Tell me in 30 seconds, now that I have "The Only Investment Guide I'll Ever Need," indeed, in its eighth edition, do I really need an investment broker? What say you of brokers?
Tobias: Well, I think that most people, for their stock market money, should go through index funds. You don't need a broker. If you do know enough to and do want to buy individual stocks, I would do it through a deep discount broker, where the commission might be 8 or $10 a trade instead of $200 a trade or at least 50 or 100, depending on their size. But, you know, take it slow. You certainly don't want to go into the stock market with no advice if you don't know what you're doing. So...
Tavis: Yeah. Well, the Democrats are happy that Andrew Tobias is their treasurer. You might be happy that he wrote this book 25 years ago, now in its eighth edition, "The Only Investment Guide You'll Ever Need." Andrew, nice to have you on. All the best to you.
Tobias: Thank you, Tavis.
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