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The Power of Passive Investing: More Wealth with Less Work Hardcover – Dec 7 2010


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From the Inside Flap

Investing is serious business and mistakes cost money. Whether you're acting for yourself or as a fiduciary for others, your aim should always be to reduce mistakes and increase the probability that the portfolio you're responsible for succeeds in achieving its objective.

Nobody understands this better than author Richard Ferri, an investment expert and founder of the advisory firm Portfolio Solutions®. Now, in The Power of Passive Investing, he reveals how this proven strategy can effectively put your portfolio in a better position to gain its fair share of market returns. This approach is done with a strong understanding and commitment to low-cost, passively managed index funds and exchange-traded funds (ETFs)—which, today, span almost every asset class and style, including U.S. and foreign equity funds, bond funds, commodities funds, and even currencies.

Filled with in-depth insights and expert advice, this reliable resource offers practical guidance on creating a sound, long-term investment plan—within a framework of controlled risk—and helps clarify and quantify the purpose of investing along the way. Containing dozens of historical studies covering several decades and financial markets, it will clearly show you how passive investors who buy the market will capture better results than most active investors who try to beat the market.

Divided into three comprehensive parts, The Power of Passive Investing:

  • Tracks the passive versus active debate from its beginnings early in the twentieth century to today and explores the advantages of investing in individual index funds and ETFs over individual actively managed funds

  • Focuses on portfolio decisions and investor behavior and looks at some of the reasons more people haven't put the power of passive investing to use yet

  • Discusses the purpose of investment policy and makes the case for passive investing in terms of four different groups: individual investors and their families; trustees of charities and private accounts; pension trustees and those who select investment options for employer-sponsored pension plans; and professional investment advisors

Attempting to earn above-market returns with a portfolio of actively managed funds is both a waste of time and money. A well-designed, passive investment approach that utilizes index funds and ETFs has the highest probability of meeting your financial goals and is the most prudent choice for your money. The Power of Passive Investing will show you why this is true as well as how this approach can work for you.

From the Back Cover

"Rick Ferri has done investors a great favor by collecting in one place the consistently overwhelming evidence that index funds keep beating active funds. The only remaining problem for 'passive' investing is the name. Why don't we all agree on a single change and call indexing success investing?"
—CHARLES D. ELLIS, bestselling author of Winning the Loser's Game and The Elements of Investing

"Indexing wins because indexing must win. The best index funds win simply because they eliminate management fees and sales loads, and minimize operating costs and portfolio turnover and its costs. But Ferri takes us from theory to reality, providing scores of examples and tabulations that prove that very point. I commend it to you."
—JOHN C. BOGLE, founder, The Vanguard Group

"Ferri writes in beautiful, simple language what I have been trying to tell all but the largest institutional investors—to build a diversified portfolio of index funds. I wish I had written the book myself."
—LAURENCE SIEGEL, Research director, Research Foundation of CFA Institute


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Amazon.com: 19 reviews
31 of 33 people found the following review helpful
Convincing, Educational and Powerful Dec 10 2010
By Ronny D. - Published on Amazon.com
Format: Hardcover
Having read Ferri's other investing books, I can attest that this one just might be his finest. It's preface begins with a letter from John Bogle, founder of the Vanguard Group and a champion of the individual investor. Ferri's other books tend to be product or topic specific but this one is different.

The Power of Passive Investing takes a broader look at the historical developments of index investing - one of the biggest trends to ever hit Wall Street. It analyzes the merits of indexing an entire investment portfolio vs. investing in mutual funds, stocks or other strategies that attempt to outperform. Like a court case before a jury, Ferri meticulously presents the evidence from both sides of the argument, adding his take along the way and letting the reader decide for themselves who they want to believe - Wall Street or the facts.

Toward the end, Ferri makes arguments in favor of indexing for all demographics, including charities, pension funds, individuals and even financial advisors. This book does more than just add to the debate of indexing vs. active management, it conquers the subject with stunning ease.
16 of 17 people found the following review helpful
A comprehensive resource Dec 20 2010
By J. Baker - Published on Amazon.com
Format: Hardcover Verified Purchase
This is the first book I've read from Rick Ferri and it won't be the last. Mr. Ferri jumps into the debate whether passive investing outperforms active investing over time. He sticks a fork in active investing starting in Chapter 1 and by the end of the book it's a virtual blood bath. Ferri slays the active management zombies in this comprehensive book covering decades of academic research into the subject.

I'll submit that the writing was a bit intense and academic at times. But I don't think the author had much of a choice when presenting his case. His precise and detailed writing style was necessary to counteract decades of sales and marketing messages from Wall Street. At the end Ferri's victory is so lopsided that you feel kind of sorry for the active investors of the world.

My favorite section of the book was Part I: The Active vs. Passive Debate. While I had heard many of the arguments before, I've never read such a concise summary of the debate. And at the end it really crystallized my understanding of the market and how active funds under perform the market relative to their costs.

I highly recommend this book to all investors. I wouldn't necessarily recommend it as a first book on investing. I know Mr. Ferri has written other books which may be more suitable to new investors. But it's a great resource to new investors that understand the basics of investing.
24 of 28 people found the following review helpful
Great Potential Fails to Deliver Ultimately June 25 2011
By Scott A. Prost-domasky - Published on Amazon.com
Format: Hardcover Verified Purchase
This book is terrific if you need a thousand arguments and facts that back up his case that passive investing is the way to go for most investors, including individuals and trustees of pension funds and other large accounts. However, it felt like I was reading a thrilling murder mystery, only to find out the last two pages of the book were ripped out. When I bought and read this book, I thought I was going to get two things: 1) reasoned case for passive investing (got it) and 2) a "how to" of sorts that would tell me how I could apply the lessons in this book to my own investment portfolio (didn't get that). However, I was left with nothing to do to my own portfolio unless I read a few more of his books, OR I could just go hire someone to do the job for me, because it's obviously just too complicated. Frankly, if you couldn't explain it to me in this book, why would I rush out and go buy your other books?
6 of 6 people found the following review helpful
A smart investment approach Jan. 8 2011
By Steve T. - Published on Amazon.com
Format: Hardcover
Rick Ferri goes all out to present why it is so important to understand the benefit of passive investing. He presents scientific study after scientific study to make his point that active investing is not going to make you money in the long run. Coming from a former broker this means a lot. Even though over a year ago I had read other books that advocated this investment approach and I believed that it made sense, I really did not do anything about it. After reading his book, I realized that it made no sense waiting around for some miracle to happen and I have now switched to a passive allocation model using passive investments wherever I was able to do so. I wish that I had done this a long time ago rather than chasing past returns and hoping that the manager of the year was going to do his magic again. He clearly explains why the "possibility" of a high return is not the same as the "probability" that it will happen. I consider myself to be a logical person and I have read that past results don't predict future results but I bought the wall street hype that told me that somebody out there has the secret to beat the market. I needed this book to beat me over the head and get me out of my stupor. This book is excellent but he could have made it extraordinary by including actual examples of asset allocations and more information about ETF's. These are explained in his other books. Do yourself a favor and read this book. It will help convince you that you can employ a method to do do well in your investments with low costs and low worries.
8 of 9 people found the following review helpful
Best one yet Jan. 16 2011
By SNOOKIE - Published on Amazon.com
Format: Hardcover Verified Purchase
I have all of Rick's books. This one is one of the best books that he has written.
By the way the portfolios shown in previous of Rick's books survived the market colapse and made money for the investor throught out the entire period.

I have been an investor for the last 76 years and I rely on my stock portfolio to provide funds in addition to social security. I rely on my portfolio to keep this old lady's peace of mind during these dangerous times for investors and to keep me wealthy and healthy.


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