The Intelligent Portfolio: Practical Wisdom on Personal Investing from Financial Engines (Hardcover)

~ (Author), William F. Sharpe (Foreword)
Key Phrases: initial investment, smart diversification, equity portfolio, Financial Engines, Legg Mason Value Trust, United States (more...)

Editorial Reviews

Review

"The irreverence [Jones] displays toward history as a predictor for investment is one of dozens of viewpoints that fly in the face of conventional portfolio-building wisdom." --The Star-Telegram

"A very comprehensive book which covers risk versus rewards, past performance versus future expected returns, market timing versus long term investing, and investing in individual stocks versus investing in mutual funds. He also discusses diversification, fees and expenses, and the tax consequences of investing. All of his recommendations are backed up with extensive research and presented in an easy-to-understand manner."--Stockerblog

Product Description

The Intelligent Portfolio draws upon the extensive insights of Financial Engines—a leading provider of investment advisory and management services founded by Nobel Prize-winning economist William F. Sharpe—to reveal the time-tested institutional investing techniques that you can use to help improve your investment performance. Throughout these pages, Financial Engines’ CIO, Christopher Jones, uses state-of-the-art simulation and optimization methods to demonstrate the often-surprising results of applying modern financial economics to personal investment decisions.

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Product Details

• Hardcover: 370 pages
• Publisher: Wiley (May 2, 2008)
• Language: English
• ISBN-10: 0470228040
• ISBN-13: 978-0470228043
• Product Dimensions: 9 x 6.3 x 1.3 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 4.7 out of 5 stars  See all reviews (11 customer reviews)
• Amazon.com Sales Rank: #91,948 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

18 of 19 people found the following review helpful:

5.0 out of 5 stars In-depth investment advice requiring thoughtful reading, May 17, 2008

By	California reader - See all my reviews

This book is authored by the chief investment officer of the web-based "Financial Engines" service. I have used "Financial Engines" in the past and wondered how they came up with their recommendations ... this book increases my respect for the service. The book appears to be written for the "intelligent layman" audience -- not an academic work but definitely requiring effort to get through. There's a tremendous amount of material on asset allocation, at a depth I have never seen before. It is devoid of math, but it still treats topics at considerable depth. Not a "pop lite" investment book. Professionals reviewing their 401k plans will benefit from it, as well as financial planners who want to deepen their knowledge of asset allocation methods for their clients.

18 of 20 people found the following review helpful:

5.0 out of 5 stars Unconventional, smart advice, June 3, 2008

By	J. Bender (San Francisco) - See all my reviews (REAL NAME)

In the crowded space of personal investment books, this one distinguishes itself with some unconventional and intriguing advice. Here are some highlights I found eye-opening:

- Rebalancing is a bad idea! Rebalancing back to your 'target allocations' is effectively making a contrarian 'bet' that some assets have become overvalued and others undervalued. Such a bet against the market doesn't fit with the EMH.
- Small/value tilt isn't worth it; Midcap growth may be better! This was a shocker, as almost every asset allocation book out there advises tilting toward small/value, in keeping with the Fama/French research. But if you believe that overall market risk is the only kind worth taking, then the only 'tilt' worth making is toward asset classes with high correlation to the market and higher volatility than the market (e.g., higher 'beta'). Which, as it turns out, is Midcap growth! (and smallcap growth too, to a lesser extent)
- REITS, emerging markets, commodities -- not worth it. Again, some surprising advice. Emerging markets aren't well correlated with the overall market, so why bother with higher expenses when you can get your beta elsewhere? Ditto for REITs, which are really 1) a sector bet 2) a sector which is implicitly included in equities (all companies own real estate) and 3) a sector you're already overexposed to if you own a home. Finally, commodities -- I hardly need convincing there -- they're not a return-generating asset class at all.

So what should you focus on? Expenses, for one! The author makes a powerful case for choosing your asset classes with full awareness of the expenses of each. Again, get your beta the cheapest way you can, even if it means dropping an asset class. The foregone diversification benefit pales in comparison to the difference in expenses, in most cases. The author demonstrates this numerically.

Bottom line: this is probably the smartest book I've read in personal investing space. Although it's left me with plenty of questions to ponder, the final advice given is hard to beat.

11 of 12 people found the following review helpful:

5.0 out of 5 stars Highly recommend, May 18, 2008

By	T. Gallagher - See all my reviews (REAL NAME)

This is a great book for anyone who wants to gain confidence in making their own investment decisions or anyone who just wants to be able to have a smarter discussion with their financial planner.

Jones very effectively demystifies the rules of investing and stays focused on "what you need to know" to manage a retirement account or other personal investment account for the long term. He avoids chapters full of finance terms and discussion of investments that most of us shouldn't be investing in anyway. Instead, you get an engaging, smart book that you can read in a weekend that almost feels like sitting across the table and getting advice. He covers the subjects in just the right amount of depth-- you won't be left scratching your head, or feeling like you've once again been told "the rules" about things like diversification, but still don't know exactly what to do.

You'll finish this book and feel a lot more confident about your money and have a much better perspective on market headlines. Would highly recommend this read.