The Little Book of Main Street Money: 21 Simple Truths that Help Real People Make Real Money

Foreword

Jonathan sure picked a hell of a time to write a personal finance book. With 2008—the worst year for stocks since 1931—just behind us, about the last thing most people want to read about is how to manage what little money they have left. And yet investors ignore The Little Book of Main Street Money at their peril, for two reasons.

First, future stock returns, by any conventional yardstick, should be quite agreeable from this point forward. How is this possible, given the horrible state of the global economy and its increasingly creaky financial system? Simple. Thanks to the shellacking of 2008 and early 2009, stocks around the world have already borne their brunt. Along the way, they exhibited a degree of volatility not seen since the Great Depression. Between July and December 2008, for example, one index of real estate investment trusts (REITs) moved up or down more than 5 percent on 45 trading days, more than 10 percent on 16 days, and more than 15 percent on three days.

According to the perverse logic of the markets, prices had to fall to the point where investors could be assured that they would be rewarded for bearing high economic risk and extreme financial volatility. In the United States, yields now stand at almost 4 percent for the Standard & Poor's 500, 5 percent for unglamorous value stocks and 11 percent for REITs. Abroad, the yields—and thus expected future returns—are even fatter. In other words, high risk and high returns go hand in hand. Truly, the best fishing ...