Customer Reviews

The Successful Investor Today: 14 Simple Truths You Must Know When You Invest

5 star:		(15)
4 star:		(2)
3 star:		(1)
2 star:		(0)
1 star:		(0)

 

 

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.

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.

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!

I am the author of The Unbeatable Market: Taking the Indexing Path to Financial Peace of Mind. My book reaches essentially similar conclusions as does Larry Swedroe's The Successful Investor Today. Through his previous books, articles, and lectures Swedroe has been a tireless and effective advocate for what mountains of evidence proves is a superior way to invest-- passively managed index funds. Wall Street rejects passive management because it's antithetical to its self-interest. Swedroe makes this clear in Truth 4: The Interests of Wall Street and the Financial Media Are Not Aligned With Those of Investors. The hope of beating the market is very alluring for investors. That's why the "14 Simple Truths" of Swedroe's book are so vital for investors to know. Knowledge is the best defense against Wall Street's massive con game. His book is well written, well documented, and highly readable. If you're an investor, do yourself a favor and buy this book.

This is an interesting complement to the writings of William Berstein and takes a slightly different point of view on most of the topics including asset allocation and indexing. This is definitely a guide to the merits of indexing and diversification but the justifications come from a different direction than Bernstein and some may find this discussion more palatable. Swedroe keeps it simple and to the point. Once again I do not agree with every last word the author utters but overall this is a great book. The material may be similar to the author's previous books but the real value of his material in general lies in his different approach than say Gibson or Bernstein. No matter how you approach it the vast majority of evidence supports indexing over active management.

The investing approach espoused by Swedroe is actually among the simplest and least time consuming approaches available - that of passive index investing with occasional portfolio rebalancing. Yet he doesn't recommend it because it is simple, but because the research supports it as the best approach to yield the highest actual returns over time. The caveat "over time" is the key, which is what most people are interested in - not short term run-ups followed by disappointing losses. And "actual returns" since many people fail to consider trading costs, taxes, and other considerations that reduce their returns. One interesting study alluded to in this book and expounded on in his other books relates to the Value Line survey, which demonstrates market-beating returns and is highly rated in the Hulbert newsletter. Yet after considering trading and other costs, the returns underperform the market. Reality often stands in stark contrast to what we want to believe.

This excellent book sums up the case for a winning stock market strategy: Don't waste time, effort, and money trying to beat the market. Adopt a strategy of indexing to accomplish two goals: sharply reduced trading expenses and average market performance.

Since those who try to beat the market incur large expenses with their research and trading costs, indexing saves those costs and therefore provides superior stock market returns. Don't let Wall Street's hype fool you and don't pay huge fees for underperformance.

This book is recommended for anyone who wants to achieve better results when investing in the stock market.

Larry Swedroe's fourth book begins with an effective update on the "active investment management" vs. "passive investment management" "debate." His simple example on page 3 (A = B + C) conclusively demonstrates the logic that the high costs of active management doom it to failure. His recitation of the many studies of active management, and of the follies of chasing after the hot investment manager, provide important insights from both individual investors and investment professionals alike.
Mr. Swedroe also effectively addresses the significance of valuation levels of the market in "Truth 6: The Price You Pay Matters." In so doing, he provides an important working knowledge of the financial history of the U.S. markets, important for every investor to possess.
I enjoyed most his chapter on the impact of taxes upon investor's net investment returns, in which he provided good insight into the significance of this issue and the means to minimize the "tax drag" on investment returns.
Any investor who has any type of debt (credit card, car loan, or home mortgage) should be certain to review Appendix D, in which Larry presents the best insights I have ever read as to the impact that debt possesses upon investment decisions. Before an investor follows any advice to not pay off debt (and invest the funds instead), these 5 pages of wisdom are a must read.
In summary, Larry Swedroe's book, The Successful Investor Today, is an important addition to every investor's library. Like Mr. Swedroes' previous books, this book joins my "Top 20" lists - both for individual investors and professionals - as an essential read for those seeking to be informed and educated as to investments and financial planning. Larry Swedroe is one of the most influential authors today of investment articles and books directed to individual investors. He is a true master of taking the complicated concepts imbedded in Modern Portfolio Theory and presenting them in a format both understandable and useful to the individual investor.

Bought the book thinking it would be more of the same. However there are lots of interesting insights that make this book a must read.

While reading this book, I felt like I was in an audiance listening to a great debate. The arguments against passive investing were raised and refuted with compelling understandable arguments, and verifiable references.It was a pleasure to read the book both because it reinforced the value of passive investing and helped me better understand international allocations and fixed income allocations.