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The Big Investment Lie: What Your Financial Advisor Doesn't Want You to Know Hardcover – January 1, 2007

ISBN-13: 978-1576754078 ISBN-10: 1576754073

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Product Details

  • Hardcover: 298 pages
  • Publisher: Berrett-Koehler Publishers (January 1, 2007)
  • Language: English
  • ISBN-10: 1576754073
  • ISBN-13: 978-1576754078
  • Product Dimensions: 6.5 x 1.1 x 9.4 inches
  • Shipping Weight: 2.6 pounds (View shipping rates and policies)
  • Average Customer Review: 3.7 out of 5 stars  See all reviews (21 customer reviews)
  • Amazon Best Sellers Rank: #620,403 in Books (See Top 100 in Books)

Editorial Reviews

From Publishers Weekly

Having learned deceptive sales practices as a teenager selling magazine subscriptions, Edesess sold overpriced credit life insurance before becoming an investment adviser after a boss told him that "the way to make money is to handle money." By 2004, he found himself in Florida, failing to entice investors into a trading scheme that lost 80% over six months, when the company promoting the idea collapsed without paying him. That experience, he says, "provoked me to write" this book. But his pose as a reformed sinner is unconvincing. The how-to chapter on deceptive sales is more animated than his cursory review of academic literature arguing for low-cost, diversified, buy-and-hold strategies. He likes self-promoting investment failures, like the ones created by Charles Ponzi and the Beardstown Ladies, but disparages successful investors like Warren Buffett, Ed Thorp, George Soros and Julian Robertson. Edesses's most useful ideas are covered better in John Bogle's books, among others. (Jan.)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

About the Author

MICHAEL EDESESS is an economist and mathematician with experience in the investment field and in the energy and environment fields. He was a founding partner and chief economist of the Lockwood Financial Group until its sale for $200 million to The Bank of New York in September 2002. Previously an independent consultant to institutional investors, his clients included several of the largest investment banking and consulting firms. Dr. Edesess has spoken at conferences on investment research and taught international finance at the graduate school level, has been published in The Wall Street Journal and The Journal of Portfolio Management, and has been interviewed on CNBC. He was a Senior Fellow at the University of Denver's Institute for Public Policy Studies and taught a wide variety of courses as an adjunct professor.

More About the Author

MICHAEL EDESESS is an accomplished mathematician and economist with experience in the investment, energy, environment, and sustainable development fields. He is the coauthor of "The 3 Simple Rules of Investing: Why Everything You've Heard about Investing Is Wrong - and What to Do Instead" as well as author of "The Big Investment Lie", both published by Berrett-Koehler. He is currently a visiting fellow in the Centre for System Informatics at City University of Hong Kong, a research associate of the EDHEC-Risk Institute, and a partner in a private investment advisory firm. He writes regularly for Advisor Perspectives and other publications, and has spoken at conferences on investment research and taught courses in international finance, mathematics, statistics, systems analysis, and energy and environmental economics at six universities. His articles have been published in the Wall Street Journal and the Journal of Portfolio Management, and he has been interviewed on a number of radio and TV stations. He was a founding partner in 1995 and chief economist of the Lockwood Financial Group until its sale to The Bank of New York in September 2002. Previously an independent consultant to institutional investors, his clients included several of the largest investment banking and consulting firms. He holds a bachelor's degree from the Massachusetts Institute of Technology and M.A. and Ph.D. degrees in pure mathematics from Northwestern University.

In addition to his work in investments, Dr. Edesess is active in the fields of environmental and resource economics and international development. He chaired the board of International Development Enterprises USA, a nonprofit focusing on increasing the wealth of poor rural smallholders in developing countries, and he has chaired the board of Rocky Mountain Institute, a prominent energy think tank in Snowmass, Colorado, and the Rocky Mountain Advisory Board of Environmental Defense. He has written for numerous publications and spoken at conferences on energy, sustainable development, economics, and investment. His articles on these topics have appeared in Technology Review, Rising Tide, the Christian Science Monitor, Rocky Mountain News, and Pensions and Investments.

Customer Reviews

We recommend this book as a warning to all investors.
Rolf Dobelli
Edesess comes across as an industry insider who is disgruntled because they wouldn't cut him in on a big enough piece.
Marshal Berthier
A great explanation of how mathematically it is impossible for ordinary investors to "beat the market".
Adrian D. Powell

Most Helpful Customer Reviews

20 of 21 people found the following review helpful By OC Dan on January 2, 2007
Format: Hardcover
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.
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14 of 14 people found the following review helpful By California reader on January 7, 2007
Format: Hardcover
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.
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9 of 10 people found the following review helpful By Harry S. Pariser on April 23, 2007
Format: Hardcover
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.
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15 of 19 people found the following review helpful By P. Weinstock on March 13, 2007
Format: Hardcover
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
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12 of 15 people found the following review helpful By R. A. Diercksmeier on May 1, 2007
Format: Hardcover
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.
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