Customer Reviews

The Prudent Investor's Guide to Beating Wall Street at Its Own Game

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The authors deliver an academically proven investment process for the average investor who is serious about preservation of capital and steady long-term growth. It isn't about chasing performance, outdoing somebody else, or outguessing the market. They explain ways to quantify and reduce risk and volatility throught effective diversification, and to maximize investment returns through strategic asset allocation using institutional, or asset-class/index, mutual funds. Using these strategies, investors, regardless of size of their wealth, can answer the fundamental question of which asset classes to use and in what proportions, with respect to the amount of risk they are willing to accept. Risk management requires managing expectation. Readers learn how to define their risk tolerance level based on their return objectives, as well as constraints, such as time horizon, liquidity needs, and available funds. Learning these easily understood concepts will put an end to the myths and mysteries of financial investing. This knowledge is key to overcoming the procrastination that is a result of the fears associated with unknown risks. Bobby Glass, CLU, ChFC, CFP Acorn Financial Services, Inc. Fairfax, Virginia

There is a huge mismatch between what is known by finance professionals and academics, and the literature that is generally targeted at retail investors. Forty years after the economist James Tobin set out his Separation Theorem disposing of the 'interior decoration' approach to investment (a little bit of growth here, a value stock there, not forgetting some fun on technology stocks), financial advisers are still getting away with peddling truly outlandish and superstitious notions. (My personal favourite among these fallacies is the notion that 'dollar-cost averaging' is a sensible and risk-averse approach to investing. Exactly the opposite is true.)
In short, investment advice aimed at the retail investor often does far more harm than good. This is one of the very few books aimed at retail investors that does more good than harm. Indeed, it does a lot of good, by explaining in a non-technical but non-patronising way the essentials of modern portfolio theory (a discipline that sees investment as a process of risk management rather than of 'picking winners'), and advises on cost-effective ways to put them into practice. Retail investors looking to make a killing on the stock market by day-trading should take a deep breath, forget everything they once believed, throw away all their market tip sheets, and buy this book instead. Among its many virtues, this book will ensure that they no longer *worry* about what the stock market does - the first step to getting a happy and fulfilled life. Strongly recommended.

I have spent about two years researching financial strategies by getting input from top tier professional advisors, perusing web sites, and reading books. Of all the information I've gotten, this book provides the most concise and effective approach to how to allocate your investment funds.

What you will learn through this book (backed by academic research primarily by the University of Chicago):

1) An overview of modern portfolio theory, which states that there is an optimal risk/reward curve that allows you to determine the appropriate mix between stocks and bonds for any given expected level of return or tolerance for risk.

2) Regardless of your tolerance for risk or desire for reward, the only thing that changes is the overall % allocation between stocks and bonds. When any investor looks at stocks, they should have the same makeup of stocks in their porfolio (international, large cap value, small cap, etc.). The difference between more and less agressive investors is that the stock composition will be a bigger piece of their pie.

3) Statistical analysis that gives strong proof that index funds ... beat mutual funds handily over the long run by several percentage points.

This book has provided me with the best framework for investing. It's a little redundant (as most informational books are), but well worth the read. I've purchased many copies of it and given them to friends and family.

I have been using this book since 98 and have consistently been generating positive 3+ year returns. I wish the authors would publish a updated book!

This was a great book and must read for all investors. Both of Goldie's books are pure Gold and help dispel all of the myths that many brokers and investment gurus love to perpetuate. A great place to learn the basics of Modern Portfolio Management.

This book shows how the prudent investor would be better off being the hare and not worrying about beating the market like the tortoise would do. The book will give you insight why the major companies use this methodology and how consumers can begin using it.

This is anything but a get rich quick book. John and Dan explain how consistent investing in a broad range of asset classes can provide returns superior to the "hot funds" often touted in magazines like Money. I recommend this book for any prudent investor.

I think the author's focus on asset class mutual funds useful, but that's only half the story. If you spend your time reading this, you won't learn anything about taking care of assets. All you learn is the standard Wall Street diatribe:

1. No one can predict the market (except for Wall Street Professionals)
2. The biggest mistake you can make is taking your money out of stocks and bonds once they are deposited (except to pay your advisor).
3. Don't trust your instincts, trust your Wall Street professional's instincts.

At the end of the book, probably hoping they have convinced their reader of his utter ignorance regarding money management, they kindly offer a chapter on finding your 'financial advisor', closing with their own email mailing addresses.

Guess what you are supposed to do.

The book is full of odd contradictions.

1. It's title proudly claims to be about 'beating' Wall Street, but the conclusion extols reliance on a 'financial advisor'.

2. For the first 3 chapters, the authors claim to accept 'random walk' theories, and points out the inability of top ranked fund managers to maintain their ranking as proof of the randomness of the market. For the remainder of the book, we are constantly advised only a professional can distinguish a long term positive rate of return. In other words, it's not a random walk. The guy's picking your asset class funds can suddenly defeat the random walk.

3. There is a chapter on defining your financial goals, but when determining your 'investment time frame', the authors advise using your life expectancy. Let me explain this to you. They advise putting your money in a Wall Street fund and updating your will. You should never plan on 'cashing out' and enjoying your rewards. That's pretty safe investment advice, if the client is alive, the money should stay put and the plan is still on track, even if it is down 70%. If he's dead, he won't sue over the bad advice.

4. In chapter 6 and 7, they advise ignoring tax implications. Chapter 8 is on investing with taxes in mind.

5. In the intro, the authors promise to show you how to do the math yourself. At the end of the book, there is just a bunch of formulas that refer to other formulas with values left undefined. I guess they figured no one was going to follow the math, and if they would, they were not their type of client, anyway.

I really learned alot from this book. It is an excellent review of some basic ideas.