“Pablo Picasso spent a lifetime learning to paint like a child. Investors might be wise to do the same. Allan Roth’s How a Second Grader Beats Wall Street reminds us that the most important investment principles are actually simple truths that we lose sight of as our lives and investment approaches grow more complicated. By returning to the basics, we can both simplify our finances and improve our investment results.”
–Don Phillips, Managing Director, Morningstar, Inc.
“There has been no time in our financial history when implementing the simple investment plan in this book has been more important.”
–Dan Solin, author of The Smartest Investment Book You’ll Ever Read and The Smartest 401(k) Book You’ll Ever Read
“Allan Roth shatters the Wall Street myth that investing is too complicated for ordinary investors. Using his son, Kevin, as an example, Allan shows us, in his easy-to-read writing style, how we can construct a simple personal portfolio that is almost certain to outperform the vast majority of investors. If you have been looking for an easy-to-understand book about how to invest successfully—this is it.”
–Taylor Larimore, co-author of The Bogleheads’ Guide to Investing
“Allan presents in a very clever way why a second grader can outperform most investors, professional and individual. He demonstrates both why smart investing is both simple and also why it is not easy for adults to execute because of behavioral mistakes to which they are prone.”
–Larry Swedroe, author of Wise Investing Made Simple
“I have a very strong feeling that sometime in the not-too-distant future I will happily be working for Allan Roth’s son! If you buy only one how-to book this year, this is the one! Allan Roth is a National Treasure.”
–Mike Causey, senior correspondent, FederalNewsRadio.com
“Successful investing should be a matter of choice, not chance. Follow this book’s advice and your probabilities of success are 100% in your favor.”
–Paul Merriman, author of Live It Up Without Outliving Your Money!, and publisher of FundAdvice.com
“Allan Roth gets an A+. It is no surprise that a second grader beats Wall Street, because everything we need to know about beating the pros is taught in the first grade. That is when we learn to add and subtract. And after subtracting the high fees and commissions that the pros charge, their results fall far short of a simple market return.”
–Richard Ferri, CFA, investment advisor and author of The ETF Book
“Using just a bit of logic and a dash of arithmetic, Allan Roth lucidly explains why low-cost index funds should be the investment of choice for 2nd graders as well as their parents and grandparents.”
–John Allen Paulos, mathematics professor at Temple University and author of Innumeracy and A Mathematician Plays the Stock Market
“Kevin, the second grader, is really smart and cool! He knows what it took me decades to learn. A smart strategy is to diversify broadly across US stocks, international stocks and high-grade US bonds using low-cost, tax-efficient index funds. He even taught me how individuals can increase their fixed-income returns without incurring higher risks. He will also teach you about asset location and the importance of saving in the most tax-advantaged savings vehicles, like a 401(k) and Roth IRA. By following Kevin’s advice, we, too, can be smart investors. But we may never be as cool as Kevin!”
–William Reichenstein, Powers Chair in Investment Management at Baylor University
“If you’d like to learn more about what makes good (and simple) investing, Roth’s 2009 book, How a Second-Grader Beats Wall Street, is a good start and a must for any index investor’s library.”
—Scott Burns, AssetBuilder
From the Inside Flap
Investing is simple, but never easy. We carry a lot of investment baggage, including hot tips from friends and thefinancial media, as well as complicated financial recommendations from Wall Street “experts.” Yet the biggest obstacle we face is the tendency to outsmart ourselves.
In order to overcome this obstacle, you need to follow straightforward strategies that will consistently push yourportfolio ahead of the pack by an additional 3 to 4percent annually. These are strategies that work in upmarkets and especially in times of market crisis and panic. Most importantly, these strategies are basic enough for even a kid to understand.
In How a Second Grader Beats Wall Street, you’ll follow the story of Kevin Roth—an eight-year-old who was schooled in simple approaches to sound investing byhis father, seasoned financial planner Allan Roth—and discover exactly how simple it can be to become a successful investor. Page by page, you’ll learn how to create a portfolio with the widest diversification and lowest costs; one that can move up your financial freedom by a decade and dramatically increase your spending rate during retirement. And all this can be accomplished by using some commonsense techniques.
Along the way, Kevin and his dad discuss fresh, new approaches to investing, and detail some tried-and-true but lesser-known approaches. They also take the time to debunk the financial myths and legends that many of us accept as true and show you what it really takes to build long-term wealth with less risk. You’ll also learn how not to confuse the unlikely with the impossible.
Whether you’re young or young-at-heart, the straight-talking advice found here will help you:
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Design a portfolio composed of a few basic building blocks that can be “tweaked” to fit your personal needs
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Go beyond indexing, which owns the entire market, and actually beat the market
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Reengineer your portfolio to stop needlessly paying taxes
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Increase your return, regardless of which direction the market goes, by picking the “low-hanging fruit” we all have in our portfolios
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And so much more
Engaging and insightful, How a Second Grader Beats Wall Street takes you through Kevin Roth’s real-life story, while driving home key strategies and tools you can implement in your own portfolio. With just a little time and a little work, you can become abetter investor. With this book as your guide, you’ll discover how a simpler approach to today’s markets can put you on the path to financial independence.
For more information, visit www.SecondGraderPortfolio.com.
From the Back Cover
Praise for How a Second Grader Beats Wall Street
“Meet Kevin Roth: financial savant, successful money manager, and second grader. Kevin, you see, possesses several unfair advantages over the rest of us: he doesn’t read the Wall Street Journal, worry about the economy, or watch James Cramer (well, maybe he does, but only with the sound off). But he solidly understands the principles of investment management. How a Second Grader Beats Wall Street, which can be consumed almost as quickly and enjoyably as the chocolate milk on Kevin’s lunch tray, will let you in on his profitable secrets.”
—William Bernstein, author of The Four Pillars of Investing
“There has been no time in our financial history when implementing the simple investment plan in this book has been more important.”
—Dan Solin, author of The Smartest Investment Book You’ll Ever Read and The Smartest 401(k) Book You’ll Ever Read
“The ‘Second Grader’s Starter Portfolio’ is one of the eight great ‘Lazy Portfolios’ we feature and update on Dow Jones/MarketWatch. Why? Because it’s a winner, regularly beating the S&P 500. It’s perfect for all Americans, young and young-at-heart, who are starting small and want to retire a millionaire someday.”
—Paul B. Farrell, JD, PhD, author of The Millionaire Meditation
“You can make investing as complicated as you want. Or you can make it simple. The beauty of Kevin Roth’s elegantly reasoned approach is not just that it’s clearer and easier to execute than most investing advice today. It’s also that in the long run, it’s likely to put more money in your pocket.”
—Eric Schurenberg, former Managing Editor, Money magazine
“One of the greatest gifts any author can bring to their reader is the ability to capture simplicity from complexity and convey the essence in a readable, understandable fashion. Allan Roth does that with his book How a Second Grader Beats Wall Street. His book will help readers realize that fads and fashion are trumped by the steady, less risky returns that come from rational diversification and a disciplined commitment to it. Everything in Roth’s book has special relevance in today’s turbulent and treacherous times.”
—George G. C. Parker, Dean Witter Distinguished Professor of Finance, Emeritus, Stanford Business School
“Don’t be put off by thinking the title is too cute. The great lessons of life are simple (but, as Warren Buffett advises, not easy). If you follow these important rules, successful investing is ‘child’s play’.”
—Charles D. Ellis, author of Winning the Loser’s Game
About the Author
Allan S. Roth is the founder of Wealth Logic, LLC, an hourly-based financial planning and investment advisory firm, that advises clients with portfolios ranging from $10,000 to $50 million. His expertise is in portfolio construction and performance benchmarking, and he is frequently quoted in the financial media. An adjunct finance faculty member at the University of Colorado at Colorado Springs and Colorado College, he teaches behavioral finance at the University of Denver’s GraduateTax Institute. Mr. Roth is a CPA and CFP with an MBA from the Kellogg School at Northwestern University. During the course of his professional career, he has held the position of finance officer for multibillion-dollar companies and has been a consultant at McKinsey & Company. Roth writes a personal finance column forthe Colorado Springs Business Journal. In spite of thesecredentials, Roth claims he can still keep investing simple.
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