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Title: The Four Pillars of Investing : Lessons for Building a Winning Portfolio by William J. Bernstein ISBN: 0-07-138529-0 Publisher: McGraw-Hill Trade Pub. Date: 26 April, 2002 Format: Hardcover Volumes: 1 List Price(USD): $27.95 |
Average Customer Rating: 4.55 (42 reviews)
Rating: 4
Summary: Can efficient markets go barking mad?
Comment: Four Pillars is one of the best of the 15 investing books I have read. It is noteworthy because the book:
* integrates numerous theories of investing (Indexing, Efficient Market, Portfolio theory).
* places returns of various asset classes (large/small/growth/value stocks, bonds, REITs, minerals, cash) into historical perspective, then lays out a clear argument why the future may not resemble the past.
* provides extensive evidence why investors should steer clear of brokerages, mutual funds, and the cheerleading financial news industries.
* Bernstein has a colorful command of the language.
It would be no problem to give more details of why this book is outstanding, and I think other reviewers have done just that. I will instead explain why I rated this book four and not five stars:
* Bernstein is an Efficient Markets proponent, claiming that the markets are wiser than any individual investor or money manager. He concludes there is no room for stock picking. On the other hand, he observes, in his own inimitable style, "once a generation the markets go barking mad". Well, which is it? If the markets are efficient, then they will never go barking mad. And if they occasionally go barking mad, then they aren't always efficient.
* Bernstein claims that it is a fool's game to try to beat the markets (seeing as how they are efficient). He then proceeds to claim that Portfolio Management can consistently and over the long run beat the markets (albeit by less than 1%). Perhaps he should have added a caveat to his statements rather than create the appearance of internal contradiction.
* Bernstein makes extensive use of statistics to prove that, on average, the average investor cannot do better than the market average. He then goes on to prove that it is highly unusual for investors to have returns that are statistically unlikely. While this is simply a tautology, it is presented as a great insight into the market. For that matter, the odds that you have a college degree and have 5 close friends with college degrees is about 1 in 100. Yet I would wager that most people reading this review fit that category. Bernstein's observations are technically correct, but are a good example of Mark Twain's statement "there are lies, damned lies, and statistics".
I raise these points not to quibble over the validity of this or that idea in this excellent book, but rather to highlight that this book includes a healthy mixture of investing theory and astute observations, and given the complexity of the market, they do not always fit perfectly.
I have only one complaint. Bernstein waits till nearly the end to state that he is only referring to long term investing for retirement. Personally, I like to play the market with money I can afford to lose, and I generally "swing for the fences". Four Pillars is downright derisive towards this type activity. This caused me cosmic dissonance until I divined this unstated assumption.
Rating: 5
Summary: Every investor should read this book!
Comment: William Bernstein's new book, The Four Pillars of Investing, has been eagerly anticipated by readers of his first book - The Intelligent Asset Allocator. I think that readers of The Four Pillars will be just as happy as they were with the first book.
Bernstein, together with a number of financial writers including Larry Swedroe and John Bogle, have written passionately about the merits of disregarding most of the preachings of the financial media and marketers and instead urge readers to take a sensible, rather than emotional, approach to investing. In an easily readable style understandable by most anyone, The Four Pillars provides an outstanding overview of basic concepts of risk in projecting portfolio returns and in explaining why so many investors spend so much money for worthless investing advice and management.
The Four Pillars does a wonderful job of explaining the axiomatic principle that anticipated returns are related to the risk of an investment. I've found that Bernstein's greatest strength is that he is able to explain the mathematical and statistical underpinnings of investment theory in a way that most readers can understand. His writing is not overly technical and the book was a joy to read. Bernstein's discussion on the underlying reasons that actively managed mutual funds, stock picking and market timing only generate high costs and poor performance is excellent and quite convincing.
I thought the book did a particularly good job of describing the mental factors involved in a long term investing strategy. The book was written after the technology crash and the events of 9/11 and draws on these events to explain the type of mental anguish which investors must anticipate over the course of a long term plan. Unlike many investment writers who simply advocate investment in equities because they historically have done better over the long term, Bernstein takes pains to advocate a diversified portfolio tailored to the investor's level of risk tolerance so that an investor can stay the course through thick and thin.
For people who believe that they have a unique ability to actively trade their way to market beating returns - read this book and it will change your life.
Rating: 5
Summary: Excellent Read - Wonderful Advice
Comment: This book is for everyone from the novice investor to the most savvy investor. The author does a wonderful job of explaining concepts and ideas without getting caught up in a bunch of analytical data and graphs. I wish this book had been published when I was much younger. All young people justing getting started in the work world should take the time to read this book. It will definitely help you later. Definitely worth the time to read this book!
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Title: The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk by William J. Bernstein ISBN: 0071362363 Publisher: McGraw-Hill Trade Pub. Date: 22 September, 2000 List Price(USD): $29.95 |
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Title: Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor by John C. Bogle ISBN: 0471392286 Publisher: John Wiley & Sons Pub. Date: 06 October, 2000 List Price(USD): $19.95 |
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Title: A Random Walk Down Wall Street, Completely Revised and Updated Edition by Burton G. Malkiel ISBN: 0393057828 Publisher: W.W. Norton & Company Pub. Date: April, 2003 List Price(USD): $29.95 |
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Title: The Intelligent Investor: The Definitive Book On Value Investing, Revised Edition by Benjamin Graham, Jason Zweig ISBN: 0060555661 Publisher: HarperBusiness Pub. Date: 08 July, 2003 List Price(USD): $19.95 |
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Title: Asset Allocation: Balancing Financial Risk by Roger C. Gibson ISBN: 0071357246 Publisher: McGraw-Hill Trade Pub. Date: 01 August, 2000 List Price(USD): $55.00 |
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