Review of Income Investing Secrets by Richard Stooker


If you're upset over the stock market (which just sank to the official bear market level of 11,215 as I write this), you're not alone. This is below the 11,700 the Dow Jones Industrial Average hit in 1999.

Income Investing Secrets is aimed at average investors -- who haven't made any money since 1999. It starts with one simple but upsetting premise (upsetting because it's so different than the way most of us are used to thinking) -- the market price of your portfolio doesn't matter if those securities are sending you regular checks.

Most of us like to look at the bottom line of our brokerage and mutual fund statements and see big numbers. 

If you can't or won't think any other way, this system is not for you.

But if you're so unhappy with the current state of the market you're desperate enough to try anything -- you can get learn a lot from this system.

It starts off by explaining the 7 principles of income investing. Of course, these aren't set in stone, but Stooker has culled the best concepts from the financial world and combined them, and then applies them to income investing.

Except for the total emphasis on investing for income, I don't know of any objective financial advisors who'd argue with these. 

Financial academics -- and an increasing number of young Wall Street money managers -- accept the efficient market hypothesis and the necessity for reducing risk by using diversification. Only financial experts who depend on commission-based products for their income would argue against keeping investing expenses to a minimum.

The section on the many expenses you pay if you own an actively managed mutual fund -- even a typical "no-load" fund is an eye-opener. He savages the industry.

Other financial authors have gone down this road, and stopped at advocating people put their money into a broad index fund.

Income Investing Secrets has the nerve to call index funds "optimizing an dysfunctional strategy."

Of course, investing for income is the "functional" strategy. In contrast to some books on the subject, he advocates putting your money into a broad mix of both equities and bonds. The proportions do change according to your age, with older people needing more bonds to provide them with more income now, and since they're less vulnerable to long-term inflation.

However, Stooker stresses maintaining the purchasing power of your portfolio, with both stocks that have a history of raising their dividends every year and Treasury Inflation Protection Securities (TIPS).

Also, he stresses risk reduction by relying on businesses that supply basic human needs: food, shelter and energy.

Therefore, he describes what types of securities to buy, and has researched the most efficient way to buy a broad cross-section of them rather than individual companies. (Diversification!)

One criticism of this system is that by the time he lists all the various kinds of securities to buy, varying it by your age group, it gets somewhat complicated. Then he follows with a chapter that tells you how to get 90% of the value of his program (including broad diversification) by putting your money into only two securities -- and names them.

Another criticism is that this is not a way to get rich quick. You can get rich -- he describes the math and gives an example of a woman who started with $5000 and followed this technique until she was worth $22 million at her death -- but it does take years.

Still, if you're in an index fund, you're behind your 1999 balance. You aren't getting rich at all!

If you insist that you or a financial advisor or mutual fund manager or stock picking guru can pick winning stocks and so perform better than the market -- you'll hate Income Investing Secrets.

But if you're depressed about the current state of the stock market, and even more depressed about its likely future (there's a long list of threats to the U.S. and world economies), but the prospect of receiving regular checks makes you smile, check it out:

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