8 Wealth Habits of Financially Successful People by Ron Malhotra

I recently finished the "8 Wealth Habits of Financially Successful People" by Ron Malhotra. This book is an introductory guide to personal finance, which I thought was succinct (with less than 80 pages). However, I felt that it was less entertaining than other introductory personal finance books such as: The Wealthy Barber (Chilton), The Millonaire Teacher (Hallam), or The Automatic Millionaire (Bach).

The 8 wealth habits as described by Ron are:

1. Think Differently
2. Invest in Yourself
3. Don't Trade Time for Money
4. Invest to Increase Wealth
5. Preserve and Protect Wealth
6. Don't Take Unnecessary Risks
7. Be Conscientious About Your Money and Future
8. Surround Yourself with Trusted Experts

This book is very short, so it works well as a review of basic personal finance concepts. However, it lacks any real depth into any particular personal finance topic.

Here's a short video from Ron explaining some psychological hurdles that keep us from becoming making wise financial decisions:

Blue Chips or Purple Chips?

In the world of investing blue-chip stocks are defined as a stock of a  large, well-established and financially sound company that has operated for many years. A blue-chip stock is generally the market leader and is often a household name. While dividend payments are not absolutely necessary for a stock to be considered a blue-chip, most blue-chips have a record of paying stable or rising dividends for years. The term is believed to have been derived from poker, where blue chips are the most expensive chips.

In John Schwinghamer's Purple Chips, he further refines his investment strategy to purple-chips, stocks that are of the highest quality blue-chips. What are the criteria for a blue-chip stock to pass as a purple-chip stock? Here are the three criteria listed in Purple Chips:

1. A minimum 7 years of positive earning per share (EPS) growth.
2. Smooth and predictable growth in EPS.
3. A minimum market capitalization of $1 billion.

In addition to these three criteria John lists three Financial Health Ratios that helps separate the purple-chips from the blue-chips:

1. 5-year return on equity is greater than 10%.
2. 5-year return on assets is greater than 10%.
3. 5-year net profit margin (average) is greater than the industry average.

Here's a short video introduction to the book:

Another Book from the Shark Tank

Robert Herjavec is best known for his roles on the reality television shows Dragon's Den and Shark Tank. In these shows budding entrepreneur's approach self-made millionaires for capital to help seed the growth of their business.

Robert Herjavec's "The Will to Win" is less of an autobiography (although he does talk about his upbringing and background) and more of a book packed with business advice and career tips. Robert is the son of a Croatian migrant who immigrated to Canada as a young boy. His father was stuck at a dead end job for his entire life sweeping factory floors because it was difficult for a non-english speaking immigrant to get decent work. Despite his father's bleak job opportunities, he was happy to move to a country where people were free to express their political opinions.

Robert started from humble beginnings and from that developed a strong work ethic and drive to succeed. Robert's initial source of wealth was a security software company he started. Later as his wealth grew he invested in various other things.

This book contains a lot of tip lists such as:
- Ten ways to measure productive fun
-  How salespeople can handle rejection
-  Three ways good leaders handle communication

I found that the tone of this book was sometimes that of a lecturing parent and sometimes the advice was a bit lofty and abstract. Something that any football coach would yell, like "work hard", "don't cheat", etc... . I found that the most interesting bits were the actual stories he told about his work experiences and the deals he's made. If you like the show Dragon's Den and/or Shark Tank than you'd probably like this book. Also, there is a book available by Kevin O'Leary another Dragon/Shark that you'd probably like (Kevin O'Leary).

Here's a short clip about the book:

The Best Way to Build Wealth

Here's another great read from "The Little Book..." series. The Little Book that Builds Wealth by Pat Dorsey is a book about finding great companies to invest in. He takes an important lesson taught by Warren Buffett which is to look for companies with economic moats. Moats used to be water ways built around castles to protect it from incoming invaders, an economic moat is similar only that it guards a company's earning from competing companies.

What does a company with a wide economic moat look like? Pat Dorsey explains the four common traits of a great economic moat:

1) Intangible assets - these are strong brands that entice customers to pay more. This also includes patents that a company may own. 

2) Cost advantages - some companies have important cost advantages based on scales of operations, proximity to resources or well-engineered processes.

3) Customer switching costs - some companies make it difficult for customers to switch to a competing company's product because switching is expensive and/or time consuming

4) Network economics - the more people who use this product the more valuable it becomes. For example Microsoft Office becomes more valuable as more people use it and share files even if there are free word processing and spreadsheet software available.

One of the easiest ways to tell if a company has a strong economic is by looking at it's long-term (10 year) average return on equity. This value tells an investor how efficiently a company utilizes invested capital to generate more earnings. If the return on equity is in the double digits year after year, it's a good sign that it has a strong economic moat and probably has one or more of the traits listed above.

Happy hunting!