Book Review: The Snowball Effect

06 Jan 2019 12:15
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Published in 2016 I am a little late getting around to reading this book but I did receive it as a Christmas present (it was on my list for Santa) and was thrilled when I unwrapped it. Now that I have finished reading the book here is my take.

The book is broken up into 7 chapters but the most powerful chapters that deliver the strongest message are the first three chapters. The first chapter focuses on explaining market risks and debunking the myth that stocks always go up. He walks you through each secular bear market starting in 1906 through 2011 and shows the reader through factual data that secular bear markets are more common than secular bull markets. Being a history buff I loved how the author walks the reader through secular bear market and the historical events unfolding that influence each event.

The next two chapters focus on how dividends are an important of the market return and the power of compounding (dividend reinvesting) and like the previous chapter uses actual data to prove his points. The message of these first three chapters is fairly direct; average investors should not focus on market price but invest for dividends and let the power of compounding do its thing to give you the “Snowball Effect”

The following chapters 4 thru 7, while not as powerful as the first three, are still significant. The reason they are not as strong is that they are not intended to deliver a message. Instead these chapters walk you through the various income paying market instruments that can create the snowball effect. Chapter 4 discuses small/micro-cap dividend paying stocks, chapter 5 discuses bonds, and chapter 6 discuses covered calls (options). The final chapter 7 is a summation of his Top 100 dividend paying stocks and how to develop a portfolio and provides an extensive appendix resource listing of various stocks.

Overall I enjoyed this book and highly recommend it to anyone who is about to venture into investing, The only thing I wished the author focused on a bit more was inflation risk and dividend growth. While the author does touch on the subjects as well as their importance, it is my opinion that a couple chapters devoted to just these concepts would have made this a perfect book

If you haven't read this yet then go grab a copy. The first chapter alone was worth the price.

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