​Josh Peters, CFA, is an equities strategest and editor of the monthy newsletter Morningstar DividendInvestor. He manages the newletter's two real-money model portfolios. ​I have read several hundred books on investing over the years and I found this book to be one of the most comprehensive and comprehensible. If you only have time to read one book on investing, this is the one you should read. 

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​Peters uses a simplified balance sheet to explain basic accounting concepts and terms, including shareholders equity, return on equity, profitability and dividends. A review of these four parameters enables you to quickly determine whether or not a particular company is worth further consideration as an potential investment. Based on the methods of analyses outlined in his book, you will be able to make your own judgements about the financial position and future propects of most public companies, and will no longer have to rely soley on the opinions of other financial experts.   

 

The author explains that common shares (and other financial products) only have value if they have the ability to return cash to their shareholders, perhaps not immediately in the case of start-up companies, but certainly within a reasonable number of years. The total return from common shares is the sum of the annual dividend payments to the shareholders, for as long as they hold the shares. Therefore, all else being equal, the lower the purchase price for the shares, the higher return on each share. ​

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The author devotes one chapter to the management of your investment portfolio. He explains that you should begin by determining the minimum annual income you will require in retirement to cover your costs of living, and subtract whatever company or government pension amounts you can expect to receive after you retire. The difference will be equal to the minimum income that must be generated by your retirement savings. Based on this figure, you can estimate the minimum amount of cash savings and the corresponding dividend yield you will require to meet your expected costs of living. Of course, in view of the uncertainties associated with any financial projections, you should apply a suitable factor of safety to your estimates.  

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