36 of 36 people found the following review helpful:
5.0 out of 5 stars
Another Swedroe Classic, May 28, 2006
I was very impressed with this book and give it an A. Swedroe's investment advice is excellent and the writing style is very easy and fun to read.
I read all 4 of Larry Swedroe's stock investing books in the last few weeks, and although they are excellent books and I agree with most of his recommendations, he tends to re-use the same information in each book. To keep this book straight in my mind, compared with the other 3 books, this review is structured along his Outline of the book.
Truth 1: Active Investing Is a Loser's Game: It Must Be So
Larry lays out the case why active investing always loses to passive investing.
Truth 2: The Past Performance of an Actively Managed Fund Is a Very Poor Predictor of Its Future Performance
He does a good job of citing many studies demonstrating that past performance is not a good predictor of future performance.
Truth 3: If Skilled Professionals Don't Succeed, It Is Unlikely That Individual Investors Will
Truth 4: The Interests of Wall Street and the Financial Media Are Not Aligned with Those of Investors
He points out why passive investing is not promoted by Wall Street and the financial media.
Truth 5: Risk and Reward Are Related: Great Companies Provide Low Expected Returns
Truth 6: The Price You Pay Matters
Truth 7: The Most Likely Way to Achieve Above Average Returns Is to Stop Trying to Beat the Market
Truth 8: Buying Individual Stocks and Sector Funds Is Speculating, Not Investing
Truth 9: Reversion to the Mean of Earnings Growth Rates Is One of the Most Powerful Forces in the Universe
Truth 10: The Forecasts of Market Strategists and Analysts Have No Value, Except as Entertainment
Truth 11: Taxes Are Often the Largest Expense Investors Incur
Truth 12: Knowledge of Financial History Is Critical to Successful Investing
Truth 13: Adding International Assets to a Portfolio Reduces Risk
Although I agree with the author's claim that foreign stocks help reduce portfolio risk, I do have trouble believing or following his recommendation of 20 to 40% asset allocation in foreign stocks. I feel more comfortable with a 10 to 20% allocation to foreign stocks.
Truth 14: There Is No One Right Portfolio, but There Is One That Is Right for You
He points out that investing is not an exact science, and the optimum portfolio is difficult to achieve. Each person must get comfortable with the risks and complexity of their allocations. He also gives a convincing argument for skipping mid-cap stocks in favor of only small and large cap stocks.
Conclusion
A: The Enron. Debacle: Lessons to Be Learned
It was interesting to see how some of the supposedly smartest brains in the investing world loaded up on Enron stock, including the Janus funds.
Appendix B: More Investment Truths You. Must Know to Be a Successful Investor
Appendix C: Investment Vehicle Recommendations
Great list of investment choices to implement you asset allocation plan.
D: The Home Financing Decision:To Borrow or Not
Nice analysis of an issue than many investors struggle with. He combines a nice financial analysis with the "able to sleep at night" test.
All-in-all, a great book for serious investors who manage their own portfolios. To me, his four books are very similar. If you choose one of the four books to read, I think you will get 90% of his message versus spending the time to read all 4 books.
I would suggest companion books to supplement this book including The Richest Man in Babylon, Bogle on Mutual Funds, The Millionaire Next Door, The 4 Pillars of Investing, A Random Walk Down Wall Street, the Coffeehouse Investor, and the Bogleheads Guide to Investing.
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24 of 24 people found the following review helpful:
4.0 out of 5 stars
Index and Diversify - Echoes Earlier Books, November 17, 2003
This review is from: The Successful Investor Today: 14 Simple Truths You Must Know When You Invest (Hardcover)
Readers of Larry E. Swedroe's earlier books (including What Wall Street Doesn't Want You to Know and Rational Investing in Irrational Times) will find themselves in familiar territory here: Active portfolio managers underperform their benchmark indexes by about 1.8% even before taxes. Capturing the "incremental" advantage needed to justify portfolio management fees, trading costs, and tax consequences in an efficient market can happen, but it is more luck than repeatable insight. Exploiting the market's inefficiencies, its "anomalies", in a consistent way is impractical, because the markets do their job and adjust quickly to news. Ultimately, active stock selection and market timing are a loser's game not worth playing. Indeed, individual stock selection is a gamble for Swedroe since it it an example of "uncompensated risk" that can be so easily diversified away. The problem is that investors underestimate the great number of stocks that do poorly because of the spectacular results of a few. Better to own low cost, tax efficient, passively managed index funds. Diversify across a broad range of non-correlated asset classes to reduce risk. Use large and small company stocks, international and emerging market stocks, bonds, and real estate. Then focus on lowering management fees and owning funds that control capital gains taxes to reduce the drag on returns. So much of this reworks the author's earlier writing that readers will not miss a lot by choosing just one of his books. Still, "The Successful Investor" tries to update the material. And there is some good thinking on the risk of value stocks (versus growth stocks) and their relative performance during inflationary periods. Elsewhere, a case is made for including international small cap stocks (over international large cap stocks)and emerging market stocks in a diversified portfolio. Unfortunately there are few investment products that make these last asset classes available to investors at this time. Investors might be advised to look at the growing number of exchange traded funds (ETF) that shadow indexes at low cost to fill-in a portfolio's asset gaps. Otherwise, Swedroe's ideas direct the investor to building a diversified portfolio for the long run based on an evolving body of sound academic research.
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20 of 21 people found the following review helpful:
5.0 out of 5 stars
No More Gambling, January 8, 2004
By A Customer
This review is from: The Successful Investor Today: 14 Simple Truths You Must Know When You Invest (Hardcover)
One day in Las Vegas, I realized the best way to make money with gambling is to own the casinos. I never gambled again. Even better, I later realized the best way to make money with stocks is to be a broker, write an investment newsletter or manage a mutual fund. After all, if these guys know so much about investments, why are they hawking their expertise rather than just making a personal killing in the market?
After reading "The Successful Investor Today," I realized I was right! The odds are against you as a stock picker or mutual fund investor. Every time you win, you lose. You whet lots of little beaks every day. The behind-the-scene guys take their cut whether you make money or lose money.
Fortunately, your odds of winning tilt to your favor when you invest in the planet's commercial future. Larry Swedroe explains how you can do this without whetting the experts' beaks.
I've read several investment books and this was by far the best. It makes the most sense and explains why investing is so hard.
I wish the book had been a little more specific on how to work out your own allocations and where to buy some of the international investments. I was going to give the book four stars, but the author quickly answered my email questions and I'm in business!
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