Wednesday, January 4, 2012

Book Review: The Forever Portfolio

The Forever Portfolio: How to Pick Stocks That You Can Hold for the Long Run (2008) by James Altucher

The author presents an interesting (though far from novel) thesis: Invest in things for which there may be a strong need in the future. For example, he recommends investing in biotech companies that develop vaccines because certain diseases may become more prominent as the world's population grows; invest in companies that purify and distribute water because clean water may end up in short supply; invest in internet companies associated with potential growth trends; and so forth. The big problem with this book is that it is a haphazard mix of the author’s opinions, backed by little research, and it amounts to speculation (and his internet ideas are terrible). While there is some potential for big gains if you hit upon the right future need, the approach is far too risky and you could easily end up losing a lot of money.

Note: I read this book in August 2011.

2 comments:

  1. hello--i am reading the forever portfolio right now and i was wondering if you could be a little more specific in pointing out which aspects of his strategies for investing in internet companies you disagree with.

    also, what are some of the other books you are aware of (and like!) that advocate investing in companies for which there may be a "strong need" in the future?

    thanks,
    kevin

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    Replies
    1. Kevin: Thanks for your comment. It has been over a year since I read the book and I cannot remember what it was about his internet investment ideas that I did not like. I have not read any other investing books that address future needs. Sorry!

      However, I think it is important to make a distinction between ongoing and novel future needs. There are certain areas (such as energy, healthcare, and consumer staples) that are needed now and will likely continue to be needed in the future, so I think it makes sense to invest in companies that already play a strong role in fulfilling those ongoing needs. In the case of novel future needs that do not yet exist, I think it is too difficult to predict exactly how those needs will take form and determine which companies will lead the way in providing them. That is one of the reasons why biotech companies tend to be very speculative. Thus, I think the best course of action is to focus on established companies that provide ongoing needs -- and who knows, they might take the lead in addressing some of our novel future needs.

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