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The Four Pillars of Investing: Lessons for Building a Winning Portfolio (Personal Finance & Investment) Hardcover – July 8, 2010
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From the Back Cover
Since its initial publication, The Four Pillars of Investing has become a staple for the independent-minded investor looking to make better-informed investment decisions. Written by noted financial expert and neurologist William Bernstein, this time-honored investing guide provides the knowledge and tools for achieving long-term profitability.
Bernstein bridges the four fundamental topics successful investors use to generate exceptional profits on a consistent basis:
- 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 provides a distinctive blend of market history, investing theory, and behavioral finance to help you become a successful, self-sufficient investor.
About the Author
William J. Bernstein, Ph.D., M.D., is a neurologist and the cofounder of the investment management firm Efficient Frontier Advisors. He is the author of three finance books―The Intelligent Asset Allocator, The Four Pillars of Investing, and The Investor’s Manifesto―and two volumes of economic history, The Birth of Plenty and A Splendid Exchange. Bernstein is currently working on a history book exploring the effects of access to technology on human relations and politics.
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Top customer reviews
The information in this book is generally not complicated, and there is little math involved. The content is easy to understand, even if you are a relative newcomer to investing. He does a nice job of explaining the value bias, which states great companies often don't make great stocks. He also spends a chapter on the Dividend Discount Model, which is a fairly accurate method of determining future returns. And he has a chart in the book which gives estimated returns for various asset classes for the next few decades (hint: diversify into small, value, REIT).
If you have read books by John Bogle or Larry Swedroe, you probably already know the main themes of this book. But if you have not, I would recommend this as a great way to learn about long-term investing.
My only criticism is that, in terms of winning converts to this unexciting but intelligent approach to investing, the same objective has already been achieved more concisely, entertainingly and convincingly by the original works of John Bogle (Bogle on Mutual Funds, for example), whose contributions are glowingly acknowledged here.
* Despite the fact that you think you are the world's gift to the financial world you probably aren't going to be able to beat the market. (If you are reading this Warren, I am not talking about you.) So, you are probably going to be better off investing in stocks broadly. In other words, invest in an index fund or two instead of picking individual stocks. You will enjoy low fees, yet still beat most of the dummies (and man, does he pan those folks!) who manage mutual funds.
* You should diversify into international stocks. You should invest in bonds if you are risk-averse.
* You need to be careful about your own psychological tendency to ruin the performance of your portfolio by buying high and selling low. I can verify the truth of this!
* You need to get off your duff and actually save and invest some money for your retirement (!)
* You should completely ignore what the financial pundits and the popular press have to say about the stock market and which stocks are "hot".
* Plan your retirement carefuly and realistically and keep it in mind as you pick your investments.
* Run from full service brokers and DON'T TRUST THEIR ADVICE in general because most are just lining their own pockets and don't really care about yours.
Overall it was a good book which is why I gave it four stars. One issue I had with this book was that it was a bit long-winded and slightly preachy. Yes, Mum, I know I need to eat my veggies but that doesn't make for a particularly exciting read. The message of the book could really have been summarized using a set of bullet points on one page. Believe it or not, this is Mr. Bernstein's second try at writing a readable treatise. Third time is a charm?
So, if you are looking for the quick bottom line, maybe this isn't the book for you. If you are looking to read about the history of the stock market with a generous helping of mathematical analysis to boot, go for it!
One other bone to pick: Mr. Bernstein makes so many references to the Vanguard fund family it starts to seem like one long info-mercial.
Overall though, the book contains a lot of reasonable advice that you would be wise to take.