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The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between Hardcover – November 2, 2009
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"So how do we take care of ourselves? Easy. I believe The Investor's Manifesto: Preparing for Prosperity, Armageddon and Everything in Between is the shortest and most lucid explanation of index investing and simple asset allocation yet written. . . . This is a must-read book."
—Scott Burns, Syndicated Columnist and Principal of Assetbuilder.com
From the Inside Flap
As recently as a generation or two ago, the lack of financial ability wasn't a handicap for the average person. But in today's world—where most of us have been forced to manage our own investment and retirement portfolios—it has become essential to understand the finer points of our financial life.
While the meltdown of 2008–2009 has compounded the complexity of the investment landscape, timeless investment principles can help you navigate even the toughest investment terrain. That's why bestselling author William Bernstein—a grassroots hero to independent investors—has written The Investor's Manifesto.
Approaching the problems of investing and saving from the perspective of someone who has had to figure it out for himself, Bernstein knows firsthand how difficult these endeavors can be—especially for those with little professional experience in this arena. Now, with the current market maelstrom as a backdrop, he skillfully describes what it takes to plan for a lifetime of investing, discussing stocks and bonds as well as the relationship between risk and return. Written in a straightforward and accessible style, The Investor's Manifesto:
Explores the theoretical basis of investing and designing portfolios, drawn in large part from financial history
Offers insights on dealing with the emotions and attitudes that routinely cripple investors
Discusses how to deal with the investment industry when executing strategies designed for anything from saving for retirement to putting a child through college
Addresses ways in which individual investors can construct diversified portfolios that can blunt potentially damaging market forces
Covers the concept of Pascal's Wager—which will enable you to identify and avoid worst-case investing scenarios
If there were ever a time to take control of your financial future, it is now. Potentially generous returns are available to the brave, the disciplined, and the liquid. If you follow the advice found here and keep your head while others lose theirs, then you will have a fighting chance of avoiding the financial pitfalls in front of you and profiting over the long-term.
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What makes does book very unique IMO is an amazing big picture coverage of 4 key knowledge areas that must be adhered to for very long term investing. Coverage of these areas protects from many pitfalls that most investors eventually fall prey to and a practical solution in the end for anyone to follow. This book provides a multi-century perspective i.e a long term view of investing that most of us badly lack or forget in our day to day investing. The book does a great job of explaining asset classes from first principles, reason for getting returns in the first place, risk premium etc. And the chapter on investor psychology was simply amazing - I learned a lot of stuff from that short chapter. For example, the ratio of good to bad market days is very close to 50/50, but ratio of good to bad years is very high! Being short sighted and reactive to the day to day movements can influence investors in making very irrational decisions. Personally I found this chapter very enlightening towards my own investing decisions.
I won't say this book is complete but I would say knowledge in this book is essential to master if you are to ever hope for a long term portfolio that you can be happy about trusting for bulk of your savings.
I took one star off because of a big weakness in one of the most important topic this book covers: asset allocation. Mr. Bernstein does an amazing job explaining the benefits of diversification vs. active picking and stock concentration. The book also starts great by introducing the concept of risk premium and even talks about inflation adjusted returns. It also sharply focuses on how one must be ready to risk or lose some of the capital in the short term to get gains in the long term. But it never ties them together into a coherent concept by altogether skipping the crucial concept of "risk-adjusted returns". I feel the book skips an extremely important cornerstone of portfolio construction. This can make a difference of night and day over the long run of how much sleep you lose over your diversified portfolio and your overall gains, crash scenario + average losses in the long run.
The actual allocation ground rules for your money into stocks and bonds is very hand wavy, sticking the customary way of 60% equity / 40% bonds or other functions of one's age. This is some ways can be a dis-service because portfolio construction has come a long way than this "simple to teach" yet very risky allocation. Even a 60/40 portfolio is not really balanced since in terms of risk (or volatility) it is very heavily weighed towards stocks i.e. probability of losing money (80-90% of your losses in such a portfolio may come from stocks). Another way of saying this is that it still has low risk-adjusted returns (ratio of return/risk). One can greatly improve the risk of the portfolio by even simple weighing techniques that take into account some measure of "risk" and/or correlation of different assets. This is the essence of diversification and enhancing the long term risk-adjusted returns. Perhaps the classic approach is simple to teach and follow for a wide range of audience, but if one is talking about one's life's savings, I feel an extra or half a chapter was warranted to make this book really complete in its recommendations. Maybe the author does not feel there is any other allocation technique fundamentally superior to the "classic" age based allocations, but it would be nice to know a sound justification.
Overall, despite this, very highly recommended for every beginner or intermediate investor!
- As an inexperienced investor, this book was very helpful in establishing a foundation of knowledge for me. More than that, the book provides numerous resources to support any interests that the reader may have. I really enjoyed this, as it sets me up for continued education in this area.
- The book understands its place. It provides a brief history of the market and the basic elements of investing, and doesn't try to extend into areas that area already covered in plenty of detail. This relates to my above point of providing supplementary resources in case the reader wants to dive deeper in a particular subject.
- This book was a very easy ready. I read it in a week of leisurely evening reading, and it was very easy to pick up where I left off.
- The narratives are very enjoyable. The author has a unique background, which lends itself to interesting discussions and tales that kept me entertained.
As an introductory book to the fundamentals of passive investing, I would happily recommend this to any readers.