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The following are comments about material appearing in the book which may be incorrect or incomplete.

Chapter 1, pg 6 —

Figure 1-02 shows the value over time of a $100 investment made in the S&P 500 in 1925 with dividends reinvested vs. dividends not reinvested.  It appears in the book pretty much as shown below.

It makes the difference between reinvesting dividends (the top line) and not reinvesting dividends (the bottom line) look pretty impresive, but it also makes it look like there isn't much difference until 50 years or so after the initial investment.  That's because the vertical scale is linear.

A more typical way to show compound growth such as this would be to use a semi-log chart, as shown next.  (A somewhat less serious problem with the chart above is that the horizontal scale distorts the amount of time at the beginning and end of the data.)

All that's really going on here is the difference between about 10.5% compound annualized growth (dividends reinvested, on the top line) and 5.7% compound annualized growth (dividends not reinvested, on the bottom line).  The semi-log chart (with time properly represented on the horizontal scale) makes it clear that there is constant percentage growth in the value of the investment regardless of whether or not dividends are reinvested.  That's because the lines are straight (remember that straight lines on the SSG chart indicate consistent compound growth?).  It also shows more clearly that reinvestment of dividends affects the investment value right from the beginning and provides an consistently increasing benefit as more and more time passes.

Chapter 4, pg 42 —

The second bullet item in the right column ("Don't forget to consider the taxes you'll pay ...") should refer to Chapter 9 (not Chapter 12).

Chapter 9, pg 137 —

The highlighted "Overcoming the Tax Bite" discussion is a bit misleading.  It says "When you pay taxes on the capital gains from the proceeds of the sale, you have less money to invest in a new stock."  That much is correct.  When you sell a stock in a taxable account you will need to pay taxes on any capital gain.  If you think of the market value of the stock as an asset (what you own) and the capital gain tax due as a liability (what you owe) then the net worth (assets minus liabilities) is what you have left after selling the stock and paying commissions and taxes.  Asset value minus liabilities is less than the asset value. 

The discussion goes on to say "A new purchase in a taxable account might have to increase by 5 to 40 percent (in simple price appreciation) just to cover the costs of selling."  Said another way, the net worth of a stock you sell may have to increase by 5 to 40 percent before it equals the asset value before you sold.  That's true, but it's not particularly relevent to the decision to sell a stock.  The net worth of a stock is what really matters; the net worth after you sell is exactly the same as the net worth before you sell.

You aren't any less wealthy for having sold a stock at a gain.  The commissions and taxes you paid due to the sale were something you owed (a liability) all along.  Some of the money you were investing wasn't really yours (you owed some of it to the government for taxes and some to the broker for a sales commission).  When you sell a stock you need to settle those liabilities. 

What you do lose by selling is the ability to continue deferring payment of those liabilities.  Tax deferral certainly is beneficial.  What's even more beneficial is selling a stock, paying the taxes and commissions, and buying a different stock with significantly better prospects for future return.  If the new stock appreciates 2 or 3 percentage points per year faster than the old stock (say, 15% per year instead of 12%), and you're keeping your commission costs under control (below 1% of the market value of the stock sold), that generally means that you'll be better off for having sold the old stock to buy the new stock.

The discussion closes with "Chapter 10 explains how to use the stock challenge tree when commissions and taxes are a factor."  In chapter 10, the very end of page 159 and page 160 talks about the Challenger tool in Toolkit 5.  Among other things, that tool compares the potential after-tax values of the old and new stocks to show you a break even point.  This is comparing the net worth of the two stocks, not the net worth of the new stock vs. the asset value of the old stock.  The comparison does not involve any need for up to 40% appreciation before you break even.  You can read move about this here.

Chapter 11, pg 176 and 177 —

The description of RV is incorrect (or, at least, incomplete).  In Toolkit, RV in PERT Report column R is the current PE in column P divided by the average PE ratio from SSG section 3 (the five-year future average PE ratio in column T does not enter into the calculation).  That makes RV on PERT Report the same as the Projected Relative Value shown by Toolkit at the end of SSG section 4.  While this is the default behavior of Toolkit, the situation can be changed by utilizing various optional program features that allow you to modify the EPS value in column E.

The descriptions of US/DS (column Y) and Est Five Years High Price (column AB) suggest that the values may not match the values on the SSG.  With an up-to-date version of Toolkit, these value do match the values on the SSG (the inconsistencies in prior versions of Toolkit have been corrected in Toolkit version 5).  Here again, the situation can be changed by using option program features to modify the EPS value in column E.

Chapter 11, pg 179 —

The description of Total Return says it may not be the same value shown on PERT Report (% Compd Annual Rate of Return in column Z).  Here again (see Chapter 11, pg 176 and 177, above), the most common reason for the values to differ is due to inconsistencies in older versions of Toolkit that have been corrected in Toolkit version 5.

Chapter 13, pg 208 —

The second SuccessTip! says "NAIC Portfolio Record Keeper [PRK] can calculate internal rate of return for your investments so that you can compare them to market indexes."  The second half of that statement implies that PRK calculates return for your portfolio(s) in such a way that you can always compare them to published market index returns, which is not true.  The Additional Contributions section on that page discusses why such a comparison is not straightforward. 

The Performance Benchmark report available at www.bivio.com and the Club Performance & Benchmark Report available at www.myiclub.com properly compare investment club performance with index fund performance.  An Excel spreadsheet showing the details of how to make such a comparison properly for an investment club can be downloaded here.