Customer Reviews

The Big Investment Lie: What Your Financial Advisor Doesn't Want You to Know

5 star:		(9)
4 star:		(1)
3 star:		(2)
2 star:		(2)
1 star:		(3)

 

 

The Big Investment Lie illuminates in interesting and entertaining ways the scary reality in America that tens of millions of individual investors, to their own enormous detriment, blindly and naively put huge sums of money into the hands of financial professionals who not only cannot consistently beat the market average, but also certainly rarely by enough margin to cover their fees.

Edesess, a mathematician who seems to have a knack for relating economic, financial, and business concepts through everyday stories and simple mathematical explanations, raises a red flag very high to warn readers that they should look more carefully at what fees they are paying for the returns they are getting. He shows how fees that may look small but are actually high can have a huge impact on capital appreciation and easily cost average investors tens of thousands of dollars, if not hundreds of thousands of dollars, over a lifetime of saving and investing.

Although his thinking about such topics as low cost index fund investing seems to be much in the same vein as Vanguard founder John Bogle and other low fee gurus and is therefore not necessarily original, the fact that so many millions of individual investors are still duped into chasing, at considerable cost, the higher returns fantasy that is cleverly dangled in front of them by the Wall Street marketing machine means that the message clearly still has not gotten through! Edesess's points, conveyed both through anecdote and analysis, are highly relevant and important because if taken to heart, they could probably save the individual investor community in the US billions of dollars. Wall Street might not like people to read wake up calls like The Big Investment Lie or another one in 2006 called Wall Street Versus America, but individual investors would be extremely well served to do so.

This book, written for the layman, is an attack on the pretensions of investment managers. The author, Michael Edesess, earned a PhD in mathematics from Northwestern and worked for years as a researcher and consultant in the investments industry. His book is in the same vein as Burton Malkiels' classic "A Random Walk Down Main Street". However it contains insights from his career which give the book a more personal flavor than the work of an academic. For example, he states that the firm he worked for employed financial analysts who developed stock 'screens'. No matter how much they fine-tuned their screens, they were unable to beat the market. Hearing a confession like that from an industry insider means more to me than an academic's statistical arguments. I do understand that some readers consider the author a hypocrite for criticizing an industry he was part of, but that hypocrisy, if you want to call it that, didn't prevent me from enjoying the book. However it may prevent some readers from enjoying the book.

The Publishers Weekly review above is completely off the mark. Mr. Edessess offers balanced portraits of Buffett and shows the true record of Fidelity Magellan. His debunking of hedge funds is both homorous and informative.I think his point that many people are wedded to their "will to believe" is quite accurate. As he points out, 80% (or threabouts) of funds charge large fees yet underperform their index. Recommended reading.

Humans have evolved through The Era Of Tooth And Fang, and the Era Of The Sword.

Now they are in the Era Of The Con. The purpose of the Con is to separate the gullible from their freedom, their money, their reason, and sometimes, their lives, for the benefit of the selfish and ambitious.

In the United States, the Con in promulgated by four major social institutions: Politics, Religion, The Media and Wall Street/Corporations.

The Big Investment Lie tells the gullible how and why they are being fleeced by Wall Street. It is probably a futile effort but it is an intelligent and courageous effort nonetheless.

Applying sophisticated mathematical principles and an insider's working knowledge of the "Street," Dr. Edesess dissects with surgical precision the ever-shifting deceptions, techniques and psychological ploys used by professional investment advisors to mask their exorbitant fees, exaggerate their mediocre performance and perfect their sales misdirections.

He also lays out with clarity "Ten New Commandments For Smart Investing" that will help the average investor harness the immutable power of mathematics to boost his portfolio over time without anxiety.

I wish Dr. Edesess had written this book and I had read it at the start of my earning career.

P. & M. Weinstock

Using common language with illustrations by interesting examples, this book explains the statistics governing stock market performance. It prompted me to make portfolio changes I wish I had done long ago - switch from mutual funds to low fee index funds.

To start with .... I'll confirm what Harry Pariser wrote previously. The idiot reviewer from "Publishers Weekly" either never read the book, or is incapable of understanding the contents. I have met Mr. Edesess several weeks ago, at a local AAII meeting, were he elaborated on his book and entertained us all. His analysis is right on the money. Many people will always keep looking for the "get-rich-quick" plan and believe anyone that claims they know the way. He helped me confirm our recent investment choice, which was to use DFA index funds to achieve the highest return for the risk, and expense, than any other plan.
I enjoyed every page of his book.

I read this book in one sitting. To his credit, it's quite informative and readable. I found myself nodding my head in agreement on a lot of his points -- e.g. the market is efficient, moves randomly and that you cannot predict its movements -- though I didn't necessarily agree with his conclusions as I found them to be grossly oversimplified and extreme. Warren Buffet's investment success, according to Edesess, is attributable to luck. A bold -- if delusional -- statement. In any case, I commend him on writing a readable book with substance.

I gave it one star because while reading the book, I couldn't help repeatedly saying to myself: "This guy just sold Lockwood for $200 million and made a fortune; and up to that point, he was handsomely compensated. He was in fact just like the greedy and unscrupulous investment advisers (the yacht owners) that he mentions in the book who made their fortunes by shaving off golden crumbs off a gold cake. Now that he is out of the business, he is in effect stabbing his colleagues in the back by bashing the very philosophy upon which Lockwood -- his own company -- was built." I found it a bit hypocritical and it left a sour taste in my mouth.

Read the perceptive review by Publisher's Weekly. It's dead on.

Read page 15 before buying this book!!! "In other fields, too, professional advice can be of doubtful value. An abundance of savage lawyer jokes makes it clear that many people think lawyers often do more harm than good-and overcharge their clients. Even in the medical field, doctors themselves will admit that their medical expertise can make a real difference only in a minority of cases."

Using "jokes" to support the argument that lawyers are harmful and overpriced? A good specialized lawyer with experience is invaluable. He needs to get a new doctor. My experience has been that doctors are often quite brilliant. I've never received bad advice from a doctor.

This book is a poorly written rehash of John Bogle's work. Some, certainly not all, investment advisors do add value in the area of asset allocation and emotional support. A good investment advisor will keep clients in the stock market when they would otherwise panic.

I congratulate him on the sale of Lockwood Financial Group. I hope he finds it in is heart to support inner-city children, the homeless, and the hungry at a local food pantry.

This could have been a tremendous book. There is a huge need for information on the mechanics of the investing industry. There is no need for an additional book on the virtues of index fund investing - a large number of other authors have already done that, and done a much better job. John Bogle, Rich Ferri, Larry Swedroe, the list goes on and on.

Edesess comes across as an industry insider who is disgruntled because they wouldn't cut him in on a big enough piece. He had the chance to deliver considerably more that people who are working to change the industry could have used, but doesn't seem to have been up to it.

This book details the real inner workings of both Modern Portfolio Theory and the so-called "Fiduciary Responsibility" of the Investment Advisor Class. A great explanation of how mathematically it is impossible for ordinary investors to "beat the market".

Great book.