Bill Gross' monthly Investment Outlook is among my long-term favorite readings: it is insightful -- I can always pick one thing or two from each issue, and it is succinct -- it's not hard for me to get 30 minutes every month to consume the wisdom from such a recorgized investor.

In September's Investment Outlook, Bill discussed investment structure, the business (or capital allocation) model that drives consistently superior performance (better alpha) in the investment industry. For example, bank's investment structure is to borrow at low short-term risk-free interest levels while lending at riskier but higher rates; insurance's successful formula is the free "float" money Warren Buffett always likes to talk about. Bill believes that in fixed income investment, such winning investment structure also exists and his team is profiting from certain structures. Of course, he cannot give the specifics of such structures -- the rapid capital flow in this global market will immediately neutralize the profitability of such structures.

I echo his message, and will claim that the right structure is important for personal finance management than many things else.

You can think many personal finance tools in terms of structures. For example, 401(k) is a structure that delays income tax and allows for tax-advantage growth (with the additional benefit of some employer matching, and borrowing from yourself in certain scenarios); Roth IRA is a structure that shields your gains completely from tax, and provides high level of liquidity. Compared to after-tax accounts, both 401(k) and Roth IRA are superior structures that enables better returns without additional efforts. Homeownership is another structure: it provides a shelter that solves the basic human needs, and with the accompanying mortgage it becomes a leveraged investment with less volatility compared to stock markets.

More often than not, when my colleagues talk about how to get more money, they think about getting the hottest stock. I don't deny stock investment is an important element of wealth building (it is a higher-yielding and riskier structure than money market), but betting on some short-term momentum, in my eyes, is much less reliable than placing the money in the right structure, and allowing the structure to consistently earn you more money than less efficient structures. Unless you believe you have the right crystal ball (in that case you can drop your job and focus on investing), you should learn these "structures" first.

Unlike in Bill's case, sharing such personal finance best practices will not diminish the returns from exploiting the best structures. That's the beauty of personal finance information exchange -- your gain does not come from another guy's loss. (So please come back frequently and check out what's new at PFBlog.com.)

(P.S. I'm not saying I don't pick stocks -- I do, although my near-term record is not pretty. However, I am still in the black since I entered the market at the top of the tech bubble. You cannot ask more than that.)