Wealth 101 by Wade Cook

This is a book with several tips for creating and managing wealth. The author, Wade Cook, is said to have started as a taxi driver and grow a small fortune as a real estate investor. His main technique in real estate is, however, not the best in the point of view of many people (and maybe that is why he is not in this business anymore). He used to buy houses, fix them up, and sell the house almost imediately. This is known in real estate jargon as "flipping" properties.

To make flipping easier for him, he would just take enough money to pay his expenses and sell the rest of the equity in the form of monthly payments that would be spread in 20 years or more (basically a second mortgage). This process works, however there is a small caveat: the house must be initially bought in the same conditions, as an assumable mortgage. With the fierce competition among lenders nowadays, this type of assumable mortgage is almost non-existent, and therefore there is little opportunity to use this technique.

The second part of the book is about investing in the stock market. The author suggests some techniques that are correct, but that are too sophisticated, or too risky for the amateur investor. For example, he suggests the use of leverage, or the use of naked options to explore the ups and downs of the market. The problem is that not even the experts can predict the market movements, and without proper money management such a strategy is hundred per cent sure to lead to disaster.

The last part of the book is about estate planning. He gives some ideas about how to protect your estate, using insurances, trusts, and other well known strategies.

This book is easy to read, and has some good points that are interesting to check. However, there is too much misinformation to be really worthy the price. For example, in the section about options he gives some examples where it would be easy to get 20% of return in a transaction (selling covered calls -- which is a completely safe operation). I would be very glad to find such an opportunity, but the simple fact is that they don't exist, the book simply created some figures. With all these problems, although interesting in some aspects, the book deserves no more than 2 out of 5 stars.

Post a comment