I was very impressed with this book and give it an A. Swedroe's investment advice is excellent and the writing style is very easy and fun to read. I read all 4 of Larry Swedroe's stock investingbooks in the last few weeks, and although they are excellent books and I agree with most of his recommendations, he tends to re-use the same information in each book.To keep this book straight in my mind, compared with the other 3 books, this review is structured along his Outline of the book.
Truth 1: Active Investing Is a Loser's Game: It Must Be So
Larry lays out the case why active investing always loses to passive investing.
Truth 2: The Past Performance of an Actively Managed Fund Is a Very Poor Predictor of Its Future Performance
He does a good job of citing many studies demonstrating that past performance is not a good predictor of future performance.
Truth 3: If Skilled Professionals Don't Succeed, It Is Unlikely That Individual Investors Will
Truth 4: The Interests of Wall Street and the Financial Media Are Not Aligned with Those of Investors
He points out why passive investing is not promoted by Wall Street and the financial media.
Truth 5: Risk and Reward Are Related: Great Companies Provide Low Expected Returns
Truth 6: The Price You Pay Matters
Truth 7: The Most Likely Way to Achieve Above Average Returns Is to Stop Trying to Beat the Market
Truth 8: Buying Individual Stocks and Sector Funds Is Speculating, Not Investing
Truth 9: Reversion to the Mean of Earnings Growth Rates Is One of the Most Powerful Forces in the Universe
Truth 10: The Forecasts of Market Strategists and Analysts Have No Value, Except as Entertainment
Truth 11: Taxes Are Often the Largest Expense Investors Incur
Truth 12: Knowledge of Financial History Is Critical to Successful Investing
Truth 13: Adding International Assets to a Portfolio Reduces Risk
Although I agree with the author's claim that foreign stocks help reduce portfolio risk, I do have trouble believing or following his recommendation of 20 to 40% asset allocation in foreign stocks. I feel more comfortable with a 10 to 20% allocation to foreign stocks.
Truth 14: There Is No One Right Portfolio, but There Is One That Is Right for You
He points out that investing is not an exact science, and the optimum portfolio is difficult to achieve. Each person must get comfortable with the risks and complexity of their allocations. He also gives a convincing argument for skipping mid-cap stocks in favor of only small and large cap stocks.
Conclusion
A: The Enron. Debacle: Lessons to Be Learned
It was interesting to see how some of the supposedly smartest brains in the investing world loaded up on Enron stock, including the Janus funds.
Appendix B: More Investment Truths You. Must Know to Be a Successful Investor
Appendix C: Investment Vehicle Recommendations
Great list of investment choices to implement you asset allocation plan.
D: The Home Financing Decision:To Borrow or Not
Nice analysis of an issue than many investors struggle with.He combines a nice financial analysis with the "able to sleep at night" test.
All-in-all, a great book for serious investors who manage their own portfolios. To me, his four books are very similar. If you choose one of the four books to read, I think you will get 90% of his message versus spending the time to read all 4 books.
I would suggest companion books to supplement this book including The Richest Man in Babylon, Bogle on Mutual Funds, The Millionaire Next Door, The 4 Pillars of Investing, A Random Walk Down Wall Street, the Coffeehouse Investor, and the Bogleheads Guide to Investing.
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