Rating details. More filters. Sort order. Feb 20, Chad Warner rated it really liked it Recommends it for: Investors. Shelves: finance , non-fiction. An investment adviser and I were talking about the financial books we had read, and he highly recommended this book as the next on my list.
I can see why! Instead of immediately offering advice on how to invest, Bernstein takes a step back and makes sure you understand market theory, the history of the markets, the role of psychology in choosing investments, and the very real impact of expenses and the media's influence.
The book contains statistics, tables, graphs, analogies, examples, and theo An investment adviser and I were talking about the financial books we had read, and he highly recommended this book as the next on my list. The book contains statistics, tables, graphs, analogies, examples, and theory in a decently proportioned mix; my eyes never glazed over because of too many numbers. All this background information ensures that your investment decisions will be based on a wealth of data, rather than blindly following his recommendations.
I agreed with Bernstein in almost all areas, with the exception of tilting or overweighting market sectors. There are 2 camps of stock fund investors: those who slice and dice the market and those who hold the total market. Bernstein points to the higher returns of value and small caps demonstrated by Fama and French and others, and recommends overweighting them and underweighting growth.
John Bogle , on the other hand, preaches that the market is so efficient that there's no free lunch higher returns in any one sector over the long term, so it's better to just hold the entire market in a market cap weighted fund. I'm not entirely convinced either way, but I tend to side with Bogle.
Bernstein advocates wide diversification, passively managed index funds, and buy-and-hold for the long term. As a "lazy" buy-and-hold investor, I put myself squarely in the camp of these authors. The book presents the Four Pillars of Investing, then shows how to use the pillars to assemble a portfolio.
Own it all by indexing. If desired, add small and large value and REITs.
- The Four Pillars of Investing.
- Palaeoclimatology and Palaeoceanography from Laminated Sediments (Geological Society Special Publication Ser. ; No. 116)?
- ‘A mess’ and ‘rows’: evaluation in prime-time TV news discourse and the shaping of public opinion;
- The future of glycerol!
- 14 Ways to Invest $100,000 with Confidence!
Pillar 2: Investment History The more history you know, the better prepared you'll be for the market's ups and downs. Large and small value outperform large growth. When things look darkest, returns are highest. You can have 1 of 2 mutually exclusive investing goals: 1. The collective wisdom of the market is the best adviser.
- Winning With Stocks: The Smart Way to Pick Investments, Manage Your Portfolio, and Maximize Profits!
- What Is the Electron?.
- Functional reactive programming on the iOS.
For larger amounts, buy Treasuries directly, and use the Vanguard Short-Term Corporate fund for the non-Treasury portion. Adjust as necessary for other proportions.
Shares versus superannuation: Where should you invest?
Use value averaging instead of dollar-cost averaging: try to hit a target amount each month. If the fund declines, you must invest more. If the fund goes up, invest less. This forces investment at market bottoms rather than tops. View all 5 comments. Jan 19, Fraser rated it it was amazing. This forces investment at market bottoms rather than tops May 22, Krenzel rated it it was amazing Shelves: finance.
William Bernstein states that the "competent investor never stops learning. As a participant on the Bogleheads message board, I feel I am an educated investor but still I often get lost after reading all the different debates: Should I invest in tot In the introduction to his book, "The Four Pillars of Investing: Lessons for Building a Winning Portfolio," Dr.
As a participant on the Bogleheads message board, I feel I am an educated investor but still I often get lost after reading all the different debates: Should I invest in total markets or slice and dice my portfolio? Should I invest all my money at once or adopt a dollar cost averaging philosophy?
How much foreign exposure should I have? One day, while perusing the message board and sifting through some of these same questions, I found a suggested investing reading list, and this book was listed as the starting point. In this straightforward book, explained with easy-to-understand examples, Dr. Bernstein provides a solid framework for investors to begin to answer some of these questions. In setting this framework, Dr. Bernstein introduces readers to four basic concepts, or what he terms the four pillars of investing: the theory, history, psychology, and business of investing.
The first pillar, the theory of investing, gets most of his attention, as it comprises the first pages of the book and explains how the bond and stock markets work. In this section, Dr.
Why Capterra is Free
Bernstein emphasizes what he calls the "most important concept in finance" — the relationship between risk and reward. If investors want high returns, they must take great risks. Following this logic, Dr. Bernstein makes some conclusions that may seem foreign to most investors. For example, the best time to invest is not when things are going well, but when they are going poorly. Those who invest during a bubble are not taking a risk and therefore can expect low returns, whereas those investing during a bear market are taking a risk and therefore can expect but will not be guaranteed higher returns.
Similarly, those who invest in "good companies" like Wal-Mart can expect lower returns than those who invest in "bad companies" like K-Mart, because good companies, with low risk, are generally bad stocks, while bad companies are generally good stocks. This idea — that high returns cannot be achieved without significant risk — is the key concept Dr. Bernstein continues to emphasize throughout the book.
While the first pillar gets the most attention, Dr. Bernstein terms the second pillar, the history of investing, as "the one that causes the most damage" to investors.
5 Simple Steps to the Perfect Portfolio
What separates the professional investor from the amateur investor is that the professional recognizes that bear markets are a fact of life — they inevitably come about once every generation, usually sparked by a new technological advance. In fact, for beginning investors, a bear market is a blessing, allowing them to accumulate stocks at low prices.
This concept again ties to the relationship between risk and return: throughout history, in times of great optimism, when prices are the highest and the risk is the lowest, future returns are the lowest, and when times look the bleakest, and risk is the highest, future returns are also the highest.
In the third pillar, the psychology of investing, this relationship between risk and return is again raised. Most investors follow conventional wisdom of the time, investing in specific stocks or asset classes that are currently the most successful and thus buying at high prices. Bernstein provides two strategies to counter this psychology. He advises readers first to identify the conventional wisdom of the time and do the exact opposite.
He also advises readers that assets with the highest future returns tend to be the ones that are currently most unpopular. The investor that is able to go against the flow — to stick with unpopular asset classes and pay attention to his or her entire portfolio return — in the long-run will be the most successful. Finally, the fourth pillar concerns the business of investing, which details how brokers, analysts, and the media work together to make money at the expense of often ignorant investors by peddling bad or biased information.
Instead of paying exorbitant fees to brokerage firms or financial advisors, which steer investors to underperforming managed funds, investors can buy low-expense index funds through companies like Vanguard and thus tap "into the most powerful intelligence in the world of finance" — the market itself, which is, according to Dr.
Bernstein, the best advisor available. Bernstein concludes his book by applying lessons learned from these four pillars and giving readers practical advice for how to construct their own portfolios. Although this section fell short of answering all my questions, the book as a whole serves as an essential investing guide in providing investors with a basic framework to use in evaluating the myriad of investing choices available. As even Dr. Bernstein concedes, "Four Pillars of Investing" is not an all-encompassing book on investing. It is not the only book you will need to read, and it is probably not the first investing book you should read, but it is nonetheless a book every investor should read.
Apr 29, Zoe rated it really liked it. Very interesting book, well written but it isn't for people who want a quick buck. I liked how informative this book was.
The 9 Best Stocks to Buy and Hold for the Next Decade | InvestorPlace
I just didn't really learn anything new. But then there are no new things under the sun. If you are serious about investing your money, remember diversification, patience, spend less, forget about deceiving the market and remember no one can predict the future, no matter how their "track records" may indicate otherwise.
Finance Past performance isn't indicative of future Very interesting book, well written but it isn't for people who want a quick buck. Finance Past performance isn't indicative of future performance. View 2 comments.
Mutual Funds and Mutual Fund Investing - Fidelity Investments
Jul 05, Paul rated it really liked it. Bernstein argues that the successful investor must understand four essential content areas: the theory, history, psychology, and business of investing. Practically speaking, he argues that the best portfolios build on that understanding will be based on indexed mutual funds in several key asset classes. It is fair to say, however, that he argues that the market is much smarter and more eff Bernstein argues that the successful investor must understand four essential content areas: the theory, history, psychology, and business of investing.
It is fair to say, however, that he argues that the market is much smarter and more efficient than any one of its actors. Trying to beat the market consistently, year after year, is a pursuit doomed to failure. Also key to his understanding is the assessment that risk and reward go hand in hand. The latter does not come without the former. Berstein emphasizes the historical fact that the market periodically goes mad, resulting in bubbles and bursts.
Following fads, however, is a quick way to deplete a portfolio! Politicians, educators, athletes, academics, and many others routinely dismiss others in their fields.