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on March 7, 2016
This book is a must read for all investors, notice I said all. I would also recommend as first read for newbie. The only reason why I did not give it a 5 is because I would like to see a more simplistic n specific portfolio construction for someone who is new to the field of self directed investment, nevertheless this book is amazing!
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on September 4, 2017
A must for new and experienced investors. I've never seen the logic for investing this way so clearly articulated and well laid out. You must learn how to manage your money and invest it properly and not be taken to the cleaners by people who will take half your investment fund at a rate of 2% per year.
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on May 25, 2017
Superb value. Tons of great info here for an unbeatable price.
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on September 16, 2017
Classic book on investing. An essential book for your investment library.
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on March 24, 2015
Essential passive investing book. Explains both why and how. It's my entire foundation for equity investing.
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on February 17, 2014
I read his earlier "Intelligent Asset Allocation" books several years ago and enjoyed it; the math didn't put me off perhaps because of an engineering degree. Although I understood well, I still wasn't ready to put it into practice.

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!
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on January 9, 2017
Reinforced my strategy of investing in index funds and minimizing fees. The section on behavioural finance was very informative and instilled some basic rules of buying low and selling high, the benefits of rebalancing and that past poor returns usually mean positive future returns and vice versa.
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on January 23, 2004
William Bernstein, market historian, scholar, and strategist, writes this new book with the confidence of his experience and the courage of his convictions, just as he did in his earlier "The Intelligent Asset Allocator." The work is an expansion on the theme that you cannot beat the market by timing or hiring active professional fund managers, so allocate, sit back, and enjoy the long-term ride. His advice is equally applicable to the novice as well as the veteran investor. You get a short course on what market returns you should expect, why you cannot beat the market, why the professionals can't help you, and how to set up your own portfolio using index funds. In other words, he has no use for the investment business other than the index funds it produces.
Chapter 5 on Manias is an excellent history of economic progress, and obviously the groundwork that led to his soon-to-be-published "The Birth of Plenty" (mid-2004) on the origins of the West's affluence. I particularly appreciated his credit to Hyman Minsky on the pattern of bubbles. Although Kindleberger has covered much of the same ground and with greater visibility in the press, Minsky's contributions are more insightful to understanding the distinct nature of economic manias.
Another interesting tidbit is his portrayal of technology as being, in general, a bad business endeavor. Bill Fleckenstein has made this point frequently that technology, unlike Buffett's desired "consumer monopoly," is easily outmoded and supplanted with the new, new thing. Let's just be thankful that earlier entrepreneurs took the time and the risk to create progress.
The true worth of the book comes under the heading of "Why investors lose money." This is the cornerstone of Bernstein's philosophy stating that if you can keep from losing, you will win:
(1) Instead of joining the herd mentality, get out when "everybody" knows that something is a good thing. It only means that everyone who wanted to buy already has; there are no buyers left. Prices can only fall.
(2) Overcome overconfidence by checking the performance figures. Few professionals ever "beat the market." Why do you think you can?
(3) Understand that all investments return to the mean, thus past performance is no indication of future performance.
(4) Don't trade for excitement. Look elsewhere for entertainment.
(5) Keep your eye on the long term and don't be panicked out by emotional short term swings.
(6) Realize that there are no "great companies." The 1000+% returns are few and far between.
(7) Accept that the market is random. Therefore don't get fooled into believing patterns repeat. Index funds are the only way to go.
(8) Check your accounting carefully. Don't overstate your successes while forgetting your losses. Keep track of the portfolio's total return.
(9) Don't get taken for a ride by the investment industry. Trust no one.
It gets a little trickier when he begins building portfolios. Using representative stereotypes, he sets up hypothetical investments using US stock index funds made up of large caps, small caps, large value, small value, REITs, plus Foreign securities. The remaining assets should be split up between cash and bonds (long and short). Your results will be dependent on how well you can approximate this theories. Another catch comes with "rebalancing." Bernstein's advice here is also well taken. Sell out a portion of the superior performers to bring your percentages back in line to their desired weigh in the portfolio and re-allocate those funds into the underperformers to bring their numbers up to desired percentages. Regardless of his distain for decision making, this does require skill and action on your part, but Bernstein has given you enough help to get the job done correctly.
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on June 17, 2003
William Bernstein once again makes his case for indexing and throws in a good story along the way. There is a lot to like about this book and the historical section in particular is interesting and unique in investment literature. Bernstein traces much of the performance of the last twenty years back to a sort of backlash to the deflation of the depression years and notes the troubles in coming off the gold standard in the early twentieth century. True to current investment themes he offers yet another estimate for long term future returns (lower of course). One of a cast of thousands. I am not convinced by the case he has made for indexing only. Not that I think indexing is a bad way to go (it may be the only way to go) but this book does not prove the superiority of indexing. It does provide a strong case for it however. Indexing is a great way to proceed for the monies we must have in the future. It is interesting to note that the literature from Tweedy Browne takes exactly the opposite side of the equation. Lately I have noticed this tendency in several investing books/resources. For instance Bernstein notes that there is no reason to expect a money manager that beats the market over a five year period to continue to do so. Tweedy Browne notes that there is no reason a priori to expect a money manager not to continue to do so. What is interesting is that this amounts to saying that the ability to beat the market is essentially random. This of course agrees with the vast majority of evidence. For the average investor (and most people are average investors) the indexing method is best by far. This probably includes most people that consider themselves day traders. Bernstein does point out that most professional money managers use indexing for their personal portfolios regardless of what they recommend to their clients. However, I am not sure if this phenomenon has been objectively studied. The bottom line is that indexing does reduce the probability that the individual investor will be eating Alpo in his/her old age. But indexing also reduces the probability that the elderly investor will be eating caviar as well. Bernstein knows this and goes out of his way to point it out. That being said the best approach may be to index most of the money and have some set aside for stock picking or active management thereby partaking of the best of both worlds. Berstein also uses the same black magic for establishing the model portfolios that he used in The Intelligent Asset Allocator. Once again, asset allocation is shown to be as much an art as a science. Whatever turns out to be true the reader will find this to be an interesting, generally well reasoned book.
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on May 5, 2003
Mr. Bernstein has written a solid book, based on his "four pillars" of investing. They are as follows "investment theory", "historical perspective", "investor behavioral errors", and lastly " brokerages et. all don't have a responsibility to their clients.
For those of you coming out of the dotcom fiasco many of you will find that this book will heal some of those wounds. The poor accounting practices, the fraud and deception by both analyst and corporations have all made today's investors sceptical and cynical.
Mr.Bernstein will be the guiding light for many of you. His lengthy discussion on investment theory will open your eyes to the various ways to go about investing, and in that respect he borrows a lot from Benjamin Graham's, Warren Buffet's mentor, value investing. Which smoothly leads into his second pillar historical perspective.
Mr.Bernstein shows mathematically that over time the stockmarket and the bond market converge until their yields are the same, which is very interesting if you believe that the only way to make money is when the markets go up, I don't.
Lastly he lambast brokers and money managers both for their incompetency to beat the indices and for their uncaring attitude to see their clients thrive and prosper.
Many of the subjects he discusses in his book will give investors renewed power and strength to attack the investing world again.
Where Mr.Bernstein fails is his leaving out the investing theory of non-correlative investment strategies. It's where you invest in different types of investments that have no relation to one another. This type of investing is essential during bear markets.
I have been involved with futures as an investor, broker.... It is the only known non-correlative investment to the stock market. It allows investors to still make double and triple digit returns while the stock market is collapsing. From my own experience this the only way I survived the dotcom bubble and it is the only way I know a lot of investors could have avoided this massacre as well.
Mr.Bernstein loses sight of alternative investments and of various other types of money managers outside of just stockbroker et. al. That is my primary criticism, but this book otherwise is sound and solide in its strategy and investment suggestions.
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