368 of 395 people found the following review helpful
Don't waste your money on this book - buy Bogle's!!,
This review is from: The Lies About Money (Hardcover)
I was really looking forward to this book, as I have read Edelman's previous books and enjoyed them. This book is not a comprehensive how-to guide concerning personal finance, but rather, it is a book written to justify a sea change in Edelman's investment philosophy. The main theme of the book is simple: Mutual fund companies are ripping you off with hidden fees, high expenses and shady dealings. To anyone with a pulse, this should not come as a surprise. John Bogle pointed this fact out 15 years ago, and he has been shouting it from the mountain tops without pausing to take a breath ever since. Anyway, Edelman has apparently FINALLY, after all these years, realized what was going on right in front of his face the entire time. I don't know about you, but a smart guy should have understood this situation within five minutes of opening a financial practice! It does make one question his credibility. I hope this doesn't sound like I'm talking down to him, because I think he really is a very intelligent man who wants to help his clients. I just think he's too caught up in his own version of the world.
The way I see it, Edelman has been attacking index funds viciously for decades. He has used perjoratives such as "I hate index funds" from the beginning of his career. Now, he is an indexer in disguise. He refuses to outright endorse the indexing concept, but even a glance at this book will prove he believes in buying almost all the stocks in a given sector and holding them long term without virtually making any changes to the mix. Now, where I'm from, THAT IS INDEXING. I don't care how you dress it up, the guy has recognized the folly of active management. What's more, investigate DFA, the fund company he now endorses. DFA's own marketing materials preach the virtues of their investment approach - indexing!! (Note: They do create their own indexes. But they are remarkably similar to the popular indexes used by Vanguard, et. al.) Also, DFA mandates a fee paid to a planner for almost all DFA investors coupled with higher expense ratios than Vanguard funds. Their stated improvements on the commercial indexes are nullified by these extra costs. Remember, costs come from your bottom line no matter what any financial services firm may tell you!
And what are ETFs, something Edelman is now very enthusiastic about? They are indexed investments sold as securities on the exchanges! I believe Edelman is secretly a passionate indexer, however, he can't bring himself to say, "Folks, I messed up big time. You really can't beat the indexes. As a matter of fact it is mathematically impossible to do so."
One last thing that irritates me about this book. Edelman writes that fees are immaterial if the results are rewarding. How can he say this? When indexing, everything else is equal except for the costs! The more fees you pay, the poorer your indexed investments perform. The reality is Edelman is still a fee-based planner. He MUST MUST MUST justify these fees. They have made him a multimillionaire, and he can't live without them. This small part of his book makes me wonder about his objectivity.
The bottom line is this: save your money and buy John Bogle's lastest book, "The Little Book of Common Sense Investing". Bogle has been consistent and right on target since publishing his very first book. Plus, Bogle will prove to you that Edelman's advice is flawed. Bogle's writing is elegantly simple, and his solutions are fundamentally sound. When comparing the two books, Edelman looks like the Bogle wannabe who still hasn't mastered his guru's teachings. All in good time, Mr. Edelman, all in good time.
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Showing 1-10 of 18 posts in this discussion
Initial post: Oct 5, 2007 4:36:57 PM PDT
Last edited by the author on Oct 5, 2007 4:37:20 PM PDT
Daniel Plesse says:
In reply to an earlier post on Oct 8, 2007 9:51:50 AM PDT
Claire M. says:
Your response makes no sense.
In reply to an earlier post on Oct 10, 2007 12:40:29 PM PDT
John J. Maurer says:
I agree. Daniel Plesse makes no sense.
Fat kids and war? LOL, WHAT?
Posted on Oct 10, 2007 3:18:31 PM PDT
Daniel Kaplan says:
Per paragraph 4, as a fee based planner working as a fiduciary, I'd trust Ric's advice more than a commission based planner. For compensation, the commission based planner is more likely to sell you something that is suitable, but not the *best* choice if it is in his interest. A fiduciary must put the interests of the client ahead of his interest. Being fee based, rather than commission based removes a financial planner's economic motivation to pick an inferior product for his client. Financial advisors don't work for free (who does?). It makes sense to chose one who has no motivation to sell a product that is less than ideal.
I haven't finished reading the book yet, but it appears he is going toward a more ETF based investment approach. So far, in the book, he has given good evidence how in recent years, the Retail Mutual Fund industry has manipulated their practices to make their mutual funds look like better performers and obscure higher costs. You can't blame the Retail Mutual Fund industry for doing this. As businesses, their job is to both sell their product to make their consumers (purchasers) happy and generate the most profits for their stock investors so the stock price of the mutual fund company goes up. Improvement of the bottom line is the primary goal of all businesses, or they are not adhering to their fiduciary responsibility to their investors.
If Ric's investment philosophy has changed toward index ETF's, due to changes in business practices of the Retail Mutual Fund industry, I can't blame him for that. He's looking at current conditions and looking for the best deal to achieve financial goals. If some other and better product pops up in the future, I'm sure he'd endorse that too. As consumers of investment products, it makes sense for us to move our money to products that are superior for achieving our goals. It should not matter that these products are similar to those we have shied away from in the past.
In reply to an earlier post on Oct 10, 2007 5:58:56 PM PDT
Daniel Kaplan, nice to read your post! Here's my beef with Edelman: He suggests ETFs for those who cannot afford to get into DFA. So, his first choice is DFA. The problem is his YEARS of blasting index funds and then turning around and endorsing them without admitting he was dead wrong all this time. I cannot trust my money to someone who makes techtonic shifts in his investment philosophy and feels he doesn't need to explain this shift one bit to people who pay for his advice.
Posted on Oct 18, 2007 3:18:36 PM PDT
Barrett Porter says:
Sorry to tell ya Jeffery but the fees paid to advisors who use DFA funds do not nullify the value that DFA funds can offer over Vanguard. The data has clearly indicated that the advantages of DFA funds, net of their higher expense ratios and advisor fees, is still there. It would take about an hour to write out the basics as to why and i'm afraid i am not that compelled at this time.
In reply to an earlier post on Oct 21, 2007 9:08:17 AM PDT
Barrett Porter - Sure, you can go into the past and data mine to prove almost any point you want to make. We could go back and forth doing this all day long. You could even write a book of 6 or 8 thousand pages proving your point simply by looking in your rear-view mirror. Analyzing the past is not the point, my friend! The unavoidable gravity machine called regression towards the mean indicates clearly that what goes up will come down. If DFA had the magic pill that guaranteed superior market returns every time, they would have literally performed a miracle. Plus, DFA would simply be raising the appropriate benchmark which we use to judge their performance. Once again, buying the benchmark is a safer, cheaper, more painless way of consistently participating in the progress of the markets. DFA WILL change their strategy as time moves on becasue things they do today will simply not work out as well as the benchmarks. I, for one, don't believe they are perfect human beings who can charge what they want because they believe their latest strategy is the Holy Grail of investing. By the way, your claim contradicts one Mr. Warren Buffet of Omaha, Nebraska who has written many times that no strategy works for very long. Are you claiming that you know more than Mr. Buffet? If DFA were as great as you say, then EVERYBODY would invest with them.
In reply to an earlier post on Oct 24, 2007 1:40:54 PM PDT
J. A. says:
But remember that you are looking at the past. How do we know the small/value tilt will be of any value in the future?
In reply to an earlier post on Nov 20, 2007 6:44:43 PM PST
Last edited by the author on Nov 24, 2007 3:23:04 PM PST
daniel kaplan --hmmm...you sound like you work for edelman. he rails repeatedly against commission-planners in favor of fee-based planners which i'm sure has nothing to do with the fact that he's a fee-based planner. you are evidently not aware that all major investment houses are emphasizing fee-based accounts over commission-based accounts. i have worked for one of these firms for the past 15 years. i can assure you that i would rather have ALL fee-based accounts.
what in the world is a *best* choice? put 100 financial advisors of any stripe in a room and ask them for their best choice and you'll probably get 100 answers. i have seen egregious things done by financial advisors from all types of firms. fee-based planners do not have a monopoly on good advice and can often be more expensive than wire house financial advisors because we, unfortunately, are unable to charge thousands of dollars for the "plan" to be followed up by a wrap fee for life. i wish. at the end of the day, i think the good, the bad and the ugly are spread evenly around.
i think i know one of the reasons that edelman has switched to etf's -- because of the lower expense ratios, you can charge the client more. no doubt this achieves "his" financial goals.
i've always found the argument that active managers do not beat the indexes to be a specious one. who decided that the bogey should be the s&p 500 just because you live in the united states? if all you did was beat/match the s&p this year, you've done pitifully. how about the rest of the world? if i move to canada, do i have to pick another index? last year, 30 markets did better than the U.S. i'd expect my money manager to participate globally. so is edelman saying that HE can beat the indexes by using index funds? huh? and that DFA has the smartest people in the room?
i used to listen to edelman regularly, but i lost patience with the way he disparages the competition to make himself look better -- even to the point of exaggerating and, yes, lying.
regarding manipulation and bad practices by mutual funds, nothing can be worse than what investors do to themselves. if edelman condemns mutual funds without also discussing behavioral economics, he is being truly misleading. can you say "dalbar report?" i read one or two of his books, but they lose steam half way through (as do the majority of financial books i've read).
Posted on Jan 8, 2008 2:37:52 PM PST
NoVa Flip Flops says:
"Bookman," you missed the mark. Ric is NOT now endorsing Index funds (yes, he spent some time discussing proven results from indexes, but his proofs were only used to demonstrate you that you have much less chance even beating the market by picking individual stocks yourself (and as an added point, said that is a horrible metric of "success"). He rolled out quotes from "experts" who cannot choose stocks well- or even plan for their own financial retirement, which is what his book is aiming to help you do.
Ric is endorsing, as he always has: personal, situation-specific asset allocation...the difference now is you get diversity via institutional funds or ETFs. The whole reason he tells you to buy an institutional fund is NOT to take advantage of the index, as institutional money managers are required by their very demanding clients that they stick to a philosophy of...again...asset allocation, not "pick every block on the roulette wheel." The benefit is not "owning the market," but owning larger shares of what the fund manager believes is the best of the market while managing risk through diversification, not simply picking stocks that dive with an insurance plan of owning every stock that may shoot up. Alternatively (if you don't want to become his customer and gain access to institutional funds), you can use his dummy-proof allocation pie chart and select ETFs that represent what YOU believe own the better shares of the market by classification, as ETFs are indexed all sorts of ways.
I'm not on this website to agree or disagree with the book, and only wanted to comment so people have correct information.