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The Investment Answer Hardcover – January 25, 2011
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"An excellent primer for the investor who is not a finance specialist." --Eugene F. Fama, Robert R. McCormick Distinguished Service Professor of Finance, Chicago Booth School of Business, widely recognized as the "father of modern finance," Nobel Laureate in Economics, 2013
"Goldie and Murray have distilled the essence of the matter, and
explain in clear English, the advantages of using a fee-only financial advisor, how to select such, and how to work with one in the short and long run. This is sound advice, which you will rarely if ever get from a daily financial newscast." --Harry M. Markowitz, PH.D., Nobel Laureate in Economics, 1990, Father of Modern Portfolio Theory
"Gordon Murray and Dan Goldie have written a book that every
American should read. Its clarity de-mystifies the investment process and its insights can make anyone who reads it a better investor." --Bill Bradley, former United States Senator
"I'm glad to see Gordon and Dan collect these insights into a handy, easy-to-use primer so Gordon can stop explaining these principles at Sunday brunch and family birthdays. Full disclosure: Gordon's my brother-in-law. That said, I found this slim volume incredibly helpful in explaining how to think about investing. It's reassuring to know there are some simple principles anyone can keep in mind to make decent decisions and banish the vague anxiety most of us have about where we've put our money." --Ira Glass, Edward R. Murrow Award winner, Host of NPR's This American Life
"Murray and Goldie use simple yet compelling logic to explain the fundamental principles of investing. Their clear advice will improve your investment experience." --Kenneth R. French, Heidt Professor of Finance, Dartmouth College, Tuck School of Business
"Gordon Murray and Dan Goldie share secrets that Wall Street would rather you not know. You can implement a few simple strategies at a very low cost that will outperform most of the stock picking and complicated advice hawked by high-priced brokers. Read this book and prosper." --Joseph A. Grundfest, former SEC Commissioner, cofounder of Financial Engines, and Professor of Law and Business at Stanford Law School
"Wow! Goldie and Murray have just hit a home run. If I could give only one book on investing to my friends and family, this one would be it." --Bob Waterman, co-author, In Search of Excellence, former director of McKinsey & Company
"Demystifies the investment process . . . a book every American should read." —The Honorable Bill Bradley, former United States senator
"Wow! If I could give only one book on investing to my friends, this would be it." —Bob Waterman, bestselling coauthor of In Search of Excellence
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This is a clear, concise explanation of investing for the non-professional. I've already given away one copy and plan to give another. I've read LOTS of bits and pieces, but this puts it all together. Two areas highlighted that aren't well understood: the graph on risk vs asset allocation, and how volatility affects return.
Very slight caveat: I was given the book by an investment adviser, along with some additional material on the authors that somewhat highlighted Dimensional funds (at least one of the authors worked for Dimensional). Dimension investment is a newer indexing strategy that seems to me to be still unproven (the latest analysis I read is that at this point they are not doing better than regular indexes).
It is Chapter 1, that I feel is the most skewed and one sided. It is in this chapter that the authors make a strong case for Independent Advisors as the one and only professionals that have the client's best interest in mind because they are held to the legal standards of the Investment Advisers Act of 1940. I find that to be narrowed minded. I know firms that employ Investment Advisors which are held to the legal standards of the Investment Advisers Act of 1940. There are good firms that are both a brokerage firm and an investment advisor firm. There are retail firms out there that are horrible; just as there are also horrible Independent Advisors.
In Chapter 2, I would disagree with the authors' opinion about long term fixed income. I would suggest clients look at the benefits of a ladder of different maturities for many reasons. In Chapter 3, the authors' once again recommend bonds with maturities less than 5 years. I recommend a portfolio with many different maturities that fit the investor's long term goals.
In Chapter 4, cost does matter and affects overall performance. However, the authors' paint a picture that is very different from the managed funds I am familiar. There are many funds available that are managed with much lower expenses than they suggest with much better returns. Anyone can cherry pick performance and I would be wary of those that make such bold and broad statements. The passive type of funds they tout are the funds used by most Independent Advisors; again this is a bias opinion that fails to mention the fees you are paying the Advisor as a management fee. I would argue that yearly fees paid to an Independent based on the size of account could be more than the management fees of managed funds. Again, anyone can cherry pick to make their case. What an investor needs is an Advisor; be it an Investment Advisor with a retail firm or an Independent, to clearly explain both approaches so an informed decision can be made.
When reviewing any performance results, ALWAYS read the small print. Many reports will reveal in the small print the results do not include fees and expenses, which I believe to be an important element of performance. The authors are guilty of this in the book.
#1 mistake I witness, emotional investing. They do a great job describing this. The media helps to feed irrational thinking because gloom and doom sells. They fail to mention the cyclical nature of the market and that there are 2 distinct markets. There will be bear and bull markets; it is the attitude and demeanor of the hunter that determines success.
Good reading to you.
The prologue to the book sets up the content beautifully--stating in effect that this book contains information Wall Street doesn't want people to know about.
The book can be read in one sitting. Any investor who fails to take the time to read this book deserves what happens to them when they place blind faith in a Wall Street stock broker (a/k/a "Financial Advisor" or Financial Consultant") who will proceed to treat them like a mushroom.
In case one is not familiar with how mushrooms are raised -- they are grown in dark places and fed great quantities of fertilizer (as in manure).-- an appropriate metaphor for the way Wall Street treats its clients!.
While there are several books available to cover the various topics covered in this book, I found that this was an excellent starting place. If I want more in-depth information about a specific topic I know I can get another book devoted solely to that topic. I appreciated the summarized and to-the-point approach the authors took with this book. This is definitely a very good starting point and I highly recommend it.