Much of what Kay says is not rocket science but he explains it with more erudition than many. ‘Pay less,’ he advises, explaining how the charges levied by financial institutions grossly cut into our investments. ‘If you don’t understand it, don’t buy it,’ he adds. If only more would follow that advice and, at the same time, make the effort to understand what they should buy, we would have far more citizens with healthy retirement funds than currently reside in Britain.
In fact, this book should not just be read and ingested by the ordinary investor but also institutional investors. If many global banks had followed the ‘if you don’t understand it, don’t buy it’ principle, they would have questioned the mortgage-backed securities a little more before piling in over the last few years.
Kay’s final chapter looks, sadly, to the next bubble (which inevitably will happen) based probably on the same ‘sins’ that caused the last two. As he points out, ‘The New Economy bubble was the product of the self-serving puffery of corrupt analysts. The credit bubble was a game of “pass the parcel” whose participants vied to dump risks on players less well informed. Both bubbles were based on systematic misrepresentations no less venal because they contained an element of self-deception.’
Like the best books, websites and lectures on investing, this book pricks that bubble of self-deception and corruption, helping the reader (if he or she is willing to listen) to overcome the twin investing evils of greed and fear and have enough clarity of thought to see investment products for what they are.
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