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Title: What Wall Street Doesn't Want You to Know : How You Can Build Real Wealth Investing in Index Funds by Larry E. Swedroe ISBN: 0-312-27260-X Publisher: Truman Talley Books Pub. Date: 01 December, 2000 Format: Hardcover Volumes: 1 List Price(USD): $25.95 |
Average Customer Rating: 4.43 (23 reviews)
Rating: 5
Summary: worth its weight in gold
Comment: Every investor should read this book. Its conclusion--that
investors should keep to low-cost index funds, broadly
diversified internationally and across asset classes--is
supported by an extremely thorough review of relevant research.
Why should you buy low cost index funds? Swedroe says:
(1) Fund fees--not past performance and Morningstar ratings--
are the prime determinant of performance within asset classes.
High fees, low returns.
(2) Typical funds have high turnover, incurring substantial
trading costs, market impact costs (having to pay too much for
large blocks of stock), and most importantly, paying out huge
capital gains to taxpaying shareholders.
(3) Indexing helps an investor clearly identify her strategy,
and therefore stay the course, better than strategies based on
"a little of this and a little of that."
(4) Almost all variation in mutual fund returns is attributable
to the investing style used (small versus large cap, growth
versus value), and * not to stock picking per se *. Therefore,
if you want exposure to an investing style such as small cap
value, buy the index, and don't pay a manager 1.5% to mimic the
index.
(5) Almost no funds beat the market on a long-term basis.
These points are indisputable, and should lead all investors to
put down their Fortune and Barrons and get on with their lives.
Of course, * somebody * needs to pore over company financials and
market trends and Fed policy, etc. But it should not be the
typical investor. And since people are out there doing it anyway,
there is no need for any given investor to * pay * them to do it
by paying high fees for money management and investment advice.
An aside: Swedroe's company, Buckingham Asset Management, has
access to an excellent set of low cost index funds from DFA.
These are superior to Vanguard's in two ways: (1) they offer
more asset classes, and (2) they screen * all * stocks for
valuation and size criteria, rather than restricting attention
to the stocks that happen to be in popular indices such as those
from Russell or S&P. But, unfortunately, you need to use a DFA-
affiliated advisor to have access to the funds. If you don't,
then good luck finding an international small-cap or small-cap
value index fund.
Rating: 5
Summary: A must read for the serious investor
Comment: After working with countless investors throughout my career, I have grouped them into primarily two categories - amateur investors and serious investors. Amateur investors will continue to succumb to Wall Street's hype of picking individual stocks and actively managed mutual funds in an effort to beat the market. This should come as no surprise, as this is how Wall Street makes its living, and the industry will spend billions of dollars in advertising revenue to entice them to continue this pursuit. As a result, the amateur investor who is more attuned to the speculative nature of investing will have little use for this book.
However, if you are a serious investor who is committed to maximizing your returns for the long haul, this book is a must read. Mr. Swedroe first details the fallacy of pursuing top-performing stocks and mutual funds, and why this activity is in fact detrimental to building wealth. He then explains the various risk/reward dimensions of various asset classes, and most importantly shows the reader HOW to build a diversified portfolio by combining these asset classes of passively managed (index) funds with their tolerance for risk in relation to an investment time horizon.
When it comes to investing, it has been said that the only difference between genius and stupidity is that genius has its limits. The incredible volatility of the stock market has forced many investors to deal with the conflicting emotions of fear and greed in this context. For investors who have finally chosen to remove themselves from Wall Street's losing ways and instead build a simple and sophisticated portfolio for the long haul, Swedroe's book is pure genius.
The author has become the pied piper of passive portfolio management. His efforts at revealing the genius of passive investing (indexing) continues to impact thousands of investors who tune in to his work. Swedroe's new book is certain to have a major impact in the ongoing indexing revolution that, despite its recent popularity, is only now beginning to reach the average investor.
Rating: 4
Summary: Diversify and Index Your Investments
Comment: Investors should recall that a 1990 Nobel Prize was awarded to three financial economists whose ideas helped legitimize what is known as 'modern portfolio theory' (MPT). MPT points to an investment strategy that author Larry E. Swedroe says is at variance with the interests and advice of the popular financial establishment (hence Swedroe's contentious title). For followers of MPT, stock and bond market prices represent, very efficiently, all that is known and expected by investors of a security. There is no evidence that markets systematically misprice securities. So, the market prices securities to their value. Markets work. A corollary is that no individual money manager will be able to consistently know more than the market. Wall Street's managed (active) efforts to exploit perceived market pricing inefficiencies fall short. Active managers are undone by higher fees and the taxes that trading profits generate. This is Swedroe's main argument with Wall Street. Stock selection does not work consistently or economically. Active management is flawed by its underestimation of market efficiency and its operating expenses. Bottom line: Money managers don't beat the indexes. Swedroe quotes Benjamin Graham, an icon for stock-pickers, near the end of his career apparently siding with the market efficiency school. Indeed academic research supports the idea that the most important factor in market returns is not stock selection but exposure to key asset classes (e.g., large or small company stocks, "growth" or "value" stocks, international or domestic stocks). Swedroe argues for passively 'managed' index mutual funds and exchange traded funds (ETF) on the basis of their lower expenses and the market's efficiency. Investors should have a globally diversified portfolio of "low correlating" assets because of the unpredictability of certain asset classes moving in and out of favor. Investors seeking greater returns may find them with small capitalization and "value" stocks. Swedroe identifies a key tenet of MPT in Chapter 10, namely, how diversification works to increase the average compound return of individual investments within the portfolio. A little more detail might have been useful in this section. WHAT WALL STREET DOESN'T WANT YOU TO KNOW is a helpful if somewhat repetitive introduction to the basic ideas of modern portfolio theory. The author revisits this material even more persuasively in his later book, RATIONAL INVESTING IN IRRATIONAL TIMES.
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Title: All about Index Funds by Richard A. Ferri ISBN: 0071387056 Publisher: McGraw-Hill Companies Pub. Date: 15 July, 2002 List Price(USD): $16.95 |
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Title: Rational Investing in Irrational Times: How to Avoid the Costly Mistakes Even Smart People Make Today by Larry E. Swedroe ISBN: 0312291302 Publisher: Truman Talley Books Pub. Date: 01 June, 2002 List Price(USD): $24.95 |
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Title: The Successful Investor Today: 14 Simple Truths You Must Know When You Invest by Larry Swedroe ISBN: 0312309791 Publisher: Truman Talley Books Pub. Date: 24 September, 2003 List Price(USD): $25.95 |
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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 Companies Pub. Date: 22 September, 2000 List Price(USD): $29.95 |
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Title: The Four Pillars of Investing : Lessons for Building a Winning Portfolio by William J. Bernstein ISBN: 0071385290 Publisher: McGraw-Hill Companies Pub. Date: 26 April, 2002 List Price(USD): $27.95 |
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