So this is one of those books which I own because of a friend. Usually in those situations it's because the friend is the recognized author, and in this case my friend is the ghostwriter of this book. I went into it a bit skeptical because it's a personal finance book about how ten money managers/investors have systems to do the thing that historically speaking almost no one manages to do in the long term (beat the market), but I was also curious about it because I am in personal finance fandom and so this stuff is of interest to me. I came out of it slightly less skeptical of the theory but even more firmly convinced that for the vast majority of people, investing in index funds rather than attempting to actively manage your portfolio (or paying someone else to do it) is the way to go.
The structure of the book is basically ten mini-biographies of investors who fall into three main categories, depending on what their investing focus is: value investors, growth investors, and quant investors. All of them managed to beat the market average gain over the lifespan of whatever their fund was/is, and essentially all of them have numbers-based (rather than impulse-based) reasons for holding or selling the particular stocks in their funds, and they make calls based on that. And whether or not their individual methods succeed basically depend on a person's ability to trust that a downturn in a particular fund is temporary, because there's science behind the method, and that the fund will bounce back up eventually.
All of that is fine; it's essentially the same theory as buy and hold in general, only more targeted. But the fundamental appeal of buy and hold in index funds, which track the S&P 500 and don't involve active management and so therefore have very low fees associated with them, is that you don't have to think about or worry whether your method is actually a successful one, or whether the numbers you have based your decisions on are an accurate reflection of how a company is likely to do in the future. Plus, the only way to actively manage picking stocks to buy and sell that isn't just based on hunches and emotions is to do so actively, i.e. spend time and energy managing those investments. And if you want to do that, more power to you! But for the vast majority of people who want to invest in the stock market as a form of saving for retirement, that is almost certainly going to demand more time and energy than you want to give, and cause more anxiety and stress in the process. And if you want to invest in a fund someone else is managing to achieve the same 'better than the market' results, you've got to trust that the additional fees you will pay to own those funds won't be more than the market beat the funds will have, and that the particular fund you pick is actually managed by someone who is following a system and whose system works.
This book was written in 2008, before the financial crisis really hit home, and before it became clear that a lot of the public information that was available about various companies was, in a word, unreliable. I don't doubt any of the information included in the book is accurate, in terms of how much the various funds and methodologies had earned in various points in the market. But I do wonder very much how many of the people invested in those funds were able to stop themselves from cashing out at the bottom of the market because they hadn't been saved from that downturn by the money men in charge. If they had stayed in, they would have made back their money and some. But so did anyone invested in index funds, without the additional fees or worries. The structure of the book and the sentence-level writing was as good as I would have expected from my friend's writing ability. But I can't say that I came away convinced by the central arguments of it, or inspired to do more active investing with my money.
Grade: C
The structure of the book is basically ten mini-biographies of investors who fall into three main categories, depending on what their investing focus is: value investors, growth investors, and quant investors. All of them managed to beat the market average gain over the lifespan of whatever their fund was/is, and essentially all of them have numbers-based (rather than impulse-based) reasons for holding or selling the particular stocks in their funds, and they make calls based on that. And whether or not their individual methods succeed basically depend on a person's ability to trust that a downturn in a particular fund is temporary, because there's science behind the method, and that the fund will bounce back up eventually.
All of that is fine; it's essentially the same theory as buy and hold in general, only more targeted. But the fundamental appeal of buy and hold in index funds, which track the S&P 500 and don't involve active management and so therefore have very low fees associated with them, is that you don't have to think about or worry whether your method is actually a successful one, or whether the numbers you have based your decisions on are an accurate reflection of how a company is likely to do in the future. Plus, the only way to actively manage picking stocks to buy and sell that isn't just based on hunches and emotions is to do so actively, i.e. spend time and energy managing those investments. And if you want to do that, more power to you! But for the vast majority of people who want to invest in the stock market as a form of saving for retirement, that is almost certainly going to demand more time and energy than you want to give, and cause more anxiety and stress in the process. And if you want to invest in a fund someone else is managing to achieve the same 'better than the market' results, you've got to trust that the additional fees you will pay to own those funds won't be more than the market beat the funds will have, and that the particular fund you pick is actually managed by someone who is following a system and whose system works.
This book was written in 2008, before the financial crisis really hit home, and before it became clear that a lot of the public information that was available about various companies was, in a word, unreliable. I don't doubt any of the information included in the book is accurate, in terms of how much the various funds and methodologies had earned in various points in the market. But I do wonder very much how many of the people invested in those funds were able to stop themselves from cashing out at the bottom of the market because they hadn't been saved from that downturn by the money men in charge. If they had stayed in, they would have made back their money and some. But so did anyone invested in index funds, without the additional fees or worries. The structure of the book and the sentence-level writing was as good as I would have expected from my friend's writing ability. But I can't say that I came away convinced by the central arguments of it, or inspired to do more active investing with my money.
Grade: C
No comments:
Post a Comment