As some of you know, Derek Foster is the self-professed “Canada’s Youngest Retiree” who has written two books on how he did it. Essentially, he has a portfolio of dividend yield stocks and income trusts and he lives off the cash flow from these holdings. Last week, there were some rumblings from the personal finance blogging world about some of Foster’s claims. Larry MacDonald summaries the issues here.

Rather than concentrate of Foster individually, I wanted to make a few comments about the “personal finance industry”- books, seminars, info-commercials and other products/services sold to the general public to help achieve financial independence. I am not sure if anyone has conducted an analysis but it must be a multi-millionaire dollar industry; some people probably spend more money attending or buying these products than actual funds invested.

Sales and marketing experts talk about marketing “noise.” There is a lot of it- we are constantly bombarded with advertising: in our emails, in our mail-boxes, in our public spaces, even in not so public places like ads located above urinals. One of the by-products I have noticed about cutting through the noise is the rise of tabloid journalism- take a small and inconsequential event in the grander scheme of things and hype it up as the greatest thing on earth: PARIS HILTON IS GOING TO JAIL! The only thing I care about related to the Hilton’s is whether I can get a room in their hotel for cheap. But it attracts readers and journalism in the internet age is, in some respects, columns which break the flow of advertising (I am writing this partially tongue in cheek).

The finance world is not immune. If you read the headlines, you would think either (a) we are heading to a depression where we run out of oil and we all perish hungry while waiting in line to fill up our SUV’s with gas; or (b) this is the greatest boom of all time (an article Fortune wrote the issue before the credit crunch hit the market). To give you a real-life example, a hedge fund is being sued right now by a company for, in part, going through the trash of the CEO to dig up dirty and then to feeding it to the media- who ran these stories, of course, since it was so juicy (makes you wonder whether the dog is wagging the tail or the other way around in journalism).

The point being that everything should be read with a critical eye. No author is going to tell you that their method to achieve financial independence may take time, involve a certain degree of risk and sometimes may be a pain in the butt to achieve.

My second point is that all of these guides are specific to a certain point in time- someone achieved financial independence using a method that worked in a certain period of time and under certain a certain economic environment. Canadian Dream: Free at 45 writes that some dumb luck was involved in Foster retiring at a young age and also corretly points out luck favors the bold. When I read these books I take context into mind- someone made their mark in real estate or stocks under a market condition that may have passed. Thus, assuming the method actually works and is still legal (i.e. the laws haven’t changed since that time), the ROI and time-lines involved may not apply to the reader- certainly, the fundamentals of investing don’t change but the specifics may (as you may know, my favorite saying is “context is everything”).

I am going to end this rather long post by reprinting a portion what I wrote in my 6th ever post when only my family read this blog:

How many people tell you about their investment losses? I suspect very few. But people will tell you about their successes. However, by the time they do so, the investment product will most likely be a lot more expensive than when they bought it. In many respects, the answer to the question [the original question being: what should I invest in?] will be: a really expensive product.