Review of The Successful Investor Today: 14 Simple Truths You Must Know When You Invest (Hardcover)

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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Review of Rational Investing in Irrational Times: How to Avoid the Costly Mistakes Even Smart People Make Today (Hardcover)

Modern portfolio theory (MPT) has an aggressive advocate in Larry E. Swedroe's RATIONAL INVESTING IN IRRATIONAL TIMES. Investors are advised to stick with index funds, tax managed funds, or exchange traded funds (ETF) and allocate across a range of asset classes. This investment strategy may be a little dull, Swedroe concedes, but his evidence for its soundness is compelling. This book is organized around 52 mistakes that investors make many of which might be avoided by adopting the author's strategy. Many of these mistakes are familiar to readers of the current crop of investment literature: Stay away from hedge funds, IPO's, market timing strategies, market gurus, yeserday's winners ("recency"), the misuse of margin, and high turnover portfolios. Recognize that many mistakes result from our own behavioral patterns including overconfidence in our skills, failing to sell our losers ("regret avoidance"), mistaking skill for luck, failing to rebalance over time to our basic plan, over-concentration in a company we think we know, etc. Much of this familiar territory. Where Swedroe distinguishes himself is in his relentless focus on a few key ideas that are logically developed and supported by recognized academic research. Financial markets are too efficient in their assimilation of new information for an active manager to consistently outperform a benchmark index. Lucky streaks are common but not proof to the contrary. News is by definition a surprise (viz., randomly occuring and unpredictable) and the evidence is strong that it is a "persistently important factor in stock performance". Active management will not anticipate the unexpected. Achieving "incremental advantage" over the market is therefore virtually impossible. Trading costs, tax issues, and the opportunity cost of having to hold cash in actively managed mutual funds are additional factors that make them structurally deficient. Separate studies by Mark Carhart and Russ Wermers support the underperformance of mutual funds relative to appropriate benchmarks. Meanwhile, the best way to reduce the portfolio risk of bad news in an uncertain world is to diversify. If your ouija board is warped, diversification might be a prudent strategy. The research of Fama and French, Ibbotson and Kaplan, and Brinson, Hood, and Beebower all reach a somewhat surprising conclusion: Far and away the most important factor in equity returns is not stock selection or timing. It is asset allocation based on market capitalization (size) and value (book to market, BtM). It is far more important to be in small cap value stocks or international growth than Industry Leader X over Competitor Y. Using indexed securities is an efficient way to deploy your assets to these broad asset categories. To be sure, Swedroe's argument for indexed securities over individual stocks and most actively managed mutual funds runs counter to an entrenched financial services establishment that is based on exclusive analyst recommendations, punditry, and televised stock news sizzle. Nonetheless every investor will profit by implementing some of the ideas in this book.



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Review of The Only Guide to a Winning Bond Strategy You'll Ever Need: The Way Smart Money Preserves Wealth Today (Hardcover)

I always thought that investing in bonds would be a pretty basic activity...You see an interest rate, you buy the bond, you get the payments.Wrong!I've been set straight by the book The Only Guide to a Winning Bond Strategy You'll Ever Need : The Way Smart Money Preserves Wealth Today by Larry E. Swedroe and Joseph H. Hempen.

Contents: Introduction; Bondspeak; The Risks of Fixed-Income Investing; The Buying and Selling of Individual Bonds; How the Fixed-Income Markets Really Work; The Securities of the U.S. Treasury, Government Agencies, and Government-Sponsored Enterprises; The World of Short-Term Fixed-Income Securities; The World of Corporate Fixed-Income Securities; The World of International Fixed-Income Securities; The World of Mortgage-Backed Securities; The World of Municipal Bonds; How to Design and Construct Your Fixed-Income Portfolio; Summary; Afterword; Appendices; Notes; Glossary; Acknowledgments; Index

While not an expert investor by any means, I thought I understood the basics about bonds.I figured that buying a bond meant that you looked at the rating on how strong the company is, chose something that was investment grade, and then buy the security that provides the interest rate that you want to achieve.The reality is far, far different.I didn't realize there's really eight risks you have to manage when buying bonds: interest rate risks, credit risk, reinvestment risk, inflation risk, event risk, tax risk, liquidity risk, and agency risk.I didn't understand that the lack of transparency in the broker market means that you can get severely burned on a bond purchase and end up losing your stated interest rate *and* your principal.And of course, there are a myriad number of products, each with benefits and risks, and you can easily end up buying something that was designed to be "sold", not designed to be "invested".Swedroe and Hempen do a great job in outlining these things and many more in a relatively clear way.I say "relatively" because there is a fair amount of math and financial concepts presented here that you *do* need to understand and think about.This book would never be mistaken for a "Bonds for Dummies" title, but for serious investors looking to thoroughly understand the subject matter without delving into all the minutiae of formulas and calculations, you'd have a hard time topping this offering.

I'd definitely recommend this book to anyone who is serious in their financial investments and takes personal responsibility for them.While you may be at the stage of life where equities are more important to you than bonds, there's information here that will allow you to round out your financial education and acumen, and it's a purchase that will pay for itself many times over.



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