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The Four Pillars of Investing: Lessons for Building a Winning Portfolio [Kindle Edition]

William Bernstein
4.6 out of 5 stars  See all reviews (115 customer reviews)

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Book Description

Sound, sensible advice from a hero to frustrated investors everywhere

William Bernstein's The Four Pillars of Investing gives investors the tools they need to construct top-returning portfolios­­without the help of a financial adviser. In a relaxed, nonthreatening style, Dr. Bernstein provides a distinctive blend of market history, investing theory, and behavioral finance, one designed to help every investor become more self-sufficient and make betterinformed investment decisions. The 4 Pillars of Investing explains how any investor can build a solid foundation for investing by focusing on four essential lessons, each building upon the other. Containing all of the tools needed to achieve investing success, without the help of a financial advisor, it presents:

  • Practical investing advice based on fascinating history lessons from the market
  • Exercises to determine risk tolerance as an investor
  • An easy-to-understand explanation of risk and reward in the capital markets

Editorial Reviews


The Four Pillars of Investing offers a comprehensive, incisive and pithy treatment of the issues. -- Barron's; May 27, 2002

From the Back Cover

"A TRIUMPH!  Bill Bernstein's new book offers sound principles, unvarnished history, and unmatched understanding of the process of successful investing.  It is my candidate for the best investment book of 2002."--John C. Bogle, Founder and Former Chairman, The Vanguard Group, Author, John Bogle on Investing

William Bernstein has carved out a reputation as one of the most brutally honest, yet consistently accurate, voices in today's financial wilderness. In The Four Pillars of Investing, Dr. Bernstein explains how any independent investor can construct a superior investment portfolio by learning these four essentials:

  • The Theory of Investing­"Do not expect high returns without risks."
  • The History of Investing­"About once every generation, the markets go barking mad. If you are unprepared, you are sure to fail."
  • The Psychology of Investing­"Identify the era's conventional wisdom and assume that it is wrong. More often than not, it is."
  • The Business of Investing­"The stockbroker services his clients in the same way that Bonnie and Clyde serviced banks."

From the essential soundness of classic portfolio theory through the inherent wisdom of investing in multiple asset classes, The Four Pillars of Investing focuses on the four fundamental topics that every investor must understand--and presents an easy-to-follow, step-by-step program for achieving long-term investing success.

"Bernstein is little known. But that's changing, and the sooner you get to know him, the better off your retirement portfolio is likely to be."--Robert Barker, Columnist, BusinessWeek

William Bernstein's first book--The Intelligent Asset Allocator--remains one of the most honored investment books of recent times. Hailed by national publications, including BusinessWeek, and by independent investment icons, including Vanguard founder John Bogle, it has become an instant classic for its well-researched analyses and rules for successful investing.

Now, in the commonsense investor's guide The Four Pillars of Investing, Bernstein returns with the knowledge and tools investors need to assemble low-risk, winning portfolios without professional advice. This down-to-earth book lays out in easy-to-understand prose the four essential topics that every investor must master--the relationship of risk and reward, the history of the market, the psychology of the investor and the market, and the folly of taking financial advice from investment salespeople. It pulls back the curtain to reveal what really goes on in today's financial industry as it outlines a simple program for building wealth while controlling risk.

Straightforward in its presentation and generous in its real-life examples, The Four Pillars of Investing presents a no-nonsense discussion of:

  • The art and science of mixing different asset classes into an effective blend
  • The dangers of actively picking stocks, as opposed to investing in the whole market
  • Behavioral finance and how state of mind can adversely affect decision making
  • Why the mutual fund and brokerage industries, instead of your partners, are often your most direct competitors
  • Strategies for managing all of your assets--savings, 401(k)s, home equity--as one portfolio

Investing is not a destination. It is a journey, lined with stockbrokers, journalists, and mutual fund companies whose interests are diametrically opposed to yours. The Four Pillars of Investing shows you how, with relatively little effort, you can determine your own financial direction and assemble an investment program with the sole goal of building long-term wealth for yourself and your family.

Product Details

  • File Size: 3288 KB
  • Print Length: 316 pages
  • Simultaneous Device Usage: Up to 4 simultaneous devices, per publisher limits
  • Publisher: McGraw-Hill; 1 edition (April 26, 2002)
  • Sold by: Amazon Digital Services, Inc.
  • Language: English
  • Text-to-Speech: Enabled
  • X-Ray:
  • Lending: Not Enabled
  • Amazon Best Sellers Rank: #248,192 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

Most Helpful Customer Reviews
289 of 297 people found the following review helpful
5.0 out of 5 stars Win by not losing. January 23, 2004
William Bernstein, market historian, scholar, and strategist, writes this new book with the confidence of his experience and the courage of his convictions, just as he did in his earlier "The Intelligent Asset Allocator." The work is an expansion on the theme that you cannot beat the market by timing or hiring active professional fund managers, so allocate, sit back, and enjoy the long-term ride. His advice is equally applicable to the novice as well as the veteran investor. You get a short course on what market returns you should expect, why you cannot beat the market, why the professionals can't help you, and how to set up your own portfolio using index funds. In other words, he has no use for the investment business other than the index funds it produces.
Chapter 5 on Manias is an excellent history of economic progress, and obviously the groundwork that led to his soon-to-be-published "The Birth of Plenty" (mid-2004) on the origins of the West's affluence. I particularly appreciated his credit to Hyman Minsky on the pattern of bubbles. Although Kindleberger has covered much of the same ground and with greater visibility in the press, Minsky's contributions are more insightful to understanding the distinct nature of economic manias.
Another interesting tidbit is his portrayal of technology as being, in general, a bad business endeavor. Bill Fleckenstein has made this point frequently that technology, unlike Buffett's desired "consumer monopoly," is easily outmoded and supplanted with the new, new thing. Let's just be thankful that earlier entrepreneurs took the time and the risk to create progress.
The true worth of the book comes under the heading of "Why investors lose money.
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174 of 178 people found the following review helpful
By R. Love
Right up front, I read Bernstein's first book and thought it was a classic. However, it wasn't a huge market success which the author admits for many reasons but it was/is still a fine book (The Intelligent Asset Allocator).
Now Bernstein comes back with an even better book from the standpoint of being readable for just about any kind or type of investor, experienced or inexperienced. The math and the charts are still there but with less rigorous emphasis. ...
The Four Pillars of Investing is both a historical review of investment success and failure with a very honest discussion of risk and reward. The pillars are the theory of investing, the history of investing, the psychology of investing (which is now recognized as a critical component in understanding why we invest the way we do) and finally, the business of investing. BTW, the humor in many of these chapters has not been lost either. I don't think your favorite stock broker or investment pro is necessarily going to enthusiastically recommend that you read this book.
Much of what is in the new book should be almost automatic wisdom/rules for investors but as we all know, we usually stray far and wide from good advice and common sense. In this post high-tech bubble collapse period, some solid review of investment principles is necessary. Call it back to basics if you will. It's just that Bernstein backs it up with the data to prove his points.
What really makes this book different from the first book (for me personally) is that Bernstein has finally put the portfolio construction recipe on paper in Chapter 13 called Defining Your Mix.
And now a special message to parents of high school and college graduates: buy them a copy of this book. Don't worry if they don't read it now.
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95 of 97 people found the following review helpful
5.0 out of 5 stars Best Investment Book I ever Read January 22, 2006
I'm a hedge fund manager, treasurer of the board of a small college, and head of the school's investment committee. I also manage my own personal portfolio. I have a fair amount of experience in the investment arena across many areas.

This is the best single book I have ever read regarding investments for tax paying individuals of any economic level. I buy them by the case and give them away to anyone who asks me for advice. All of my family has one! If you take the time to read this book throughly and implement an investment plan based upon Bernstein's recommendations there is a high probability you will do far far better than if you try to do things yourself or use any sort of financial professional as an advisor.

I am always amazed how people will take years if not decades to amass some personal wealth and then not be willing to put 40 hours or so into understanding how to invest it. The "financial industry" will be happy to do that for you usually at a cost of 2% to 2.5% per year. If you have a 40 year investment period, you could DOUBLE the amount you'll have at retirement simply by avoiding the annual 2.5% fees!

Most of the reviewers who criticized this book miss the following key points:

- Taxes matter. Alot. Almost all of the data presented by the financial industry is on a pre-tax basis. Private individuals exist primarily in a after-tax world.

- Sure institutions may do things differently. They don't pay taxes. If you move things around frequently, taxes will end up being your biggest single expense. Expenses are death to the success of any long-term investment program.
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Most Recent Customer Reviews
5.0 out of 5 stars Five Stars
This is a great book. While the topic is complex, the book is written in a straight forward manner that is easy to follow and understand. Read more
Published 8 days ago by kathryn rieckers
5.0 out of 5 stars The Best Investment Book that I've Ever Read
This is the book I recommend to friends who ask me for "tips" on investing. I would also recommend any of the books written by Larry Swedroe. Read more
Published 3 months ago by Red Pill
5.0 out of 5 stars This is the Way to Get Rich
It's extremely difficult to get rich quickly--possible but highly unlikely. You get rich slowly by employing these four pillars and let the magic of "compounding" interest... Read more
Published 5 months ago by Stan57
4.0 out of 5 stars Great in small spoonfuls.
Overall I liked this book however I could only listen to a bit at a time. Found myself getting bored quickly. Don't expect to be able to listen to it all at once. Read more
Published 6 months ago by Heather L. Wilson
5.0 out of 5 stars Your Bible on stock and bond investing.
A fantastic book on investing. I went through at least 20 books and educational CD sets on investing and I would call this the Bible of stock and bond investing. Read more
Published 6 months ago by Szabolcs Sovenyi
5.0 out of 5 stars Fantastic - do yourself a serious service and read this
For some bewildering reason, most people, from all walks of life, do not know the fundamental truths about lifelong investment. Nether did I. Read more
Published 11 months ago by Yaniv Bar-kana
3.0 out of 5 stars Four Pillars of Investing
Some good information but somewhat simplifies the investing process and probably falls short on identifying possible pitfalls and risks of investing.
Published 15 months ago by D. F. Keese
5.0 out of 5 stars This is classic that every investor should read
The author does a great job of laying out solid foundation for successful investing. Stick to these basics and don't waist your time trying to beat the market. Read more
Published 15 months ago by D687
5.0 out of 5 stars Excellent book!
This book taught me a TON of information about investing and turned into one of my first hobby "passions". Read more
Published 16 months ago by DSW II
5.0 out of 5 stars One of the best comprehensive investment books I've read
Bernstein does an amazing job of weaving history, philosophy, and practical investment advise into one extensive text. Read more
Published 18 months ago by A. Baudy IV
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More About the Author

William Bernstein, Ph.D., M.D., is a practicing neurologist in Oregon. Known for his quarterly journal of asset allocation and portfolio theory Efficient Frontier, Dr. Bernstein is also a principal in the money management firm Efficient Frontier Advisors, is a frequent guest columnist for Morningstar, and is often quoted in The Wall Street Journal.


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