The Four Pillars of Investing: Lessons for Building a Winning Portfolio Hardcover – Jul 8 2010
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From the Back Cover
Since its initial publication, The Four Pillars of Investing has become a staple for the independent-minded investor looking to make better-informed investment decisions. Written by noted financial expert and neurologist William Bernstein, this time-honored investing guide provides the knowledge and tools for achieving long-term profitability.
Bernstein bridges the four fundamental topics successful investors use to generate exceptional profits on a consistent basis:
- The Theory of Investing: “Do not expect high returns without risks.”
- The History of Investing: “About once every generation, the markets go barking mad. If you are unprepared, you are sure to fail.”
- The Psychology of Investing: “Identify the era’s conventional wisdom and assume that it is wrong. More often than not, it is.”
- The Business of Investing: “The stockbroker services his clients in the same way that Bonnie and Clyde serviced banks.”
From the essential soundness of classic portfolio theory through the inherent wisdom of investing in multiple asset classes, The Four Pillars of Investing provides a distinctive blend of market history, investing theory, and behavioral finance to help you become a successful, self-sufficient investor.
About the Author
William Bernstein (North Bend, OR) runs a website--www.efficientfrontier.com--known for its quarterly journal of asset allocation and portfolio theory, Efficient Frontier.
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Top Customer Reviews
This book is more focused on the necessary level of understanding and clearly "how to" so you can actually implement the plan. The first chapter or two you may run through a little quickly, then it keeps getting more and more interesting. I can relate to many of the storied of financial "promoters"- I have seen many first hand attempting their pitch.
This is a book that everyone- from first job through retirement- should read and consider. We are subjected to so much media and social pressure- wake up!
Most Helpful Customer Reviews on Amazon.com (beta)
In any case, I separately relished Bernstein's 2009 "Investor's Manifesto"--which (as the author himself essentially concedes in its preface) is likely a better choice for lay, beginning investors because it minimizes (or "segregates") the "unnecessary complexity" of this "2002" book's sundry "tables, graphs and examples."
That said, there's certainly enough textual subject matter here NOT included in "The Investor's Manifesto" to warrant your perusing "The Four Pillars of Investing" too. Perhaps you should check out both books via your nearest public library before deciding which one(s) merit permanent inclusion on your personal bookshelf.
I would have easily given it a five star but, Bernstein engages in the marketing tactics of the mutual funds (he scorns) who do the same in order to sell/market to make more money on increased volume(shame shame). He doesn't update the text throughout the book to represent the recent economic events (like a typical college text book). He adds a college midterm paper length addition at the end of the book to update recent economic events. I advise, buy the cheaper original version and read the added ending on amazon in the "search inside this book" link (if they don't get rid of it after I make this post). Dr. Bernstein, you have a fiduciary responsibility to be better than this "new edition". Please refund.
What sets this book apart from other investing books is the breadth of areas covered, and also the writing style which is both "understandable and entertaining". A highly recommended read for any investor regardless of level.
Below are key excerpts from the book, that I found particularly insightful:
1) "The highest returns are obtained by shouldering prudent risk when things look the bleakest."
2) "Most small investors naturally assume that good companies are good stocks, when the opposite is usually true."
3) "Sine you cannot successfully time the market or select individual stocks, asset allocation should be the major focus of your investment strategy. because it is the only factor affecting your investment risk and return that you can control."
4) "Bubbles occur whenever investors begin buying stocks simply because they have been going up."
5) "Buying assets that everyone else has been running from takes more fortitude than most investors can manage. But if you are equal to the task, you will be rewarded."
6) "There are really two behavioral errors operating in the overconfidence playground. The first is the "compartmentalization" of success and failure. We tend to remember those activities, or areas of our portfolios, in which we succeeded an forget about those areas where we didn't...The second is that its far more agreeable to ascribe success to skill than to luck."
7) "By indexing, you are tapping into the most powerful intelligence in the world of finance - the collective wisdom of the market itself."
8) "Rebalancing forces you to be a contrarian - someone who does the opposite of what everyone else is doing. Financial contrarians tend to be wealthier than folks who like to simply follow the crowd."
9) "Risk and return are inextricably enmeshed. Do not expect high returns without frightening risks, and if you desire safety, you must accept low returns."
10) "This book should be seen as a framework to which you'll be continuously adding knowledge."
11) "The overarching message of this book is at once powerful and simple: With relatively little effort, you can design and assemble an investment portfolio that, because of its wide diversification and minimal expense, will prove superior to most professionally managed accounts."
I recommend this book to all laypeople who want to self-educate.
In my opinion, this may be the best investing book for laypeople ever written.
The first part was kind of thick, in my opinion (it is about history of investing and the risk/reward tradeoff). But if you slog through those first few dozen pages, you will be richly rewarded by the rest of the book.
Only other books that come close to this book, in my opinion, for self-education of laypeople are:
- Common Sense on Mutual Funds, by Bogle, and
- A Random Walk Down Wall Street, by Malkiel
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