NPR Listeners may recall a report in late 2010 about the passing of an investor who co-authored a slim volume of advice on investing. The Investment Answer is that volume, and I got around to buying (and reading) the book this week. It is designed to be read in one sitting -- perhaps the most iconoclastic facet of the book. One sitting? In fact, it pretty much works.
The authors describe, clearly and concisely, the 5 decision domains that every investor must address in order to achieve a coherent investment strategy:
- DIY versus professional help
- Asset allocation decisions
- Diversification decisions
- Active versus passive investing
- The importance of rebalancing
The book is certainly the most lucid and accessible exposition of a decision framework I've encountered, and I hope my kids will read it and act on it. It will have influenced my own investing decisions, as well, particularly in the area of diversification (not so simple as buying smaller amounts of more equities).
It is hardly the case, however, that the book will make you a good investor (damn). The first chapter almost lost me entirely... The authors, both of whom are (were) investment professionals, come down unequivacally on the "don't try this at home" side of the ledger. They offer useful advice about selecting an independent advisor (advice that might have been quite useful for me in my last unsuccessful selection thereof). But please... anyone who thinks that a fiduciary is working for you, just because the law says he or she should, is deluded. Your mileage may vary.
The discussion of all the reasons we amateurs make bad decisions about choosing and timing equities rings true. I recognize them all in my own, exceedingly short career in managing my own investments. Thankfully, I started within weeks of the bottom of the market, so the lessons have been cheap, and my random successes in the strongest market rebound in a century have washed the bile from my tongue (and perhaps lulled me into a false sense of competence). My strategy -- to buy strong companies at $0.50 on the dollar -- was excellent for about a year. Now what?
Goldie and Murray have pretty good answers and I'm going to work through them for my own efforts, but I'm done paying others for advice about the future. Nobody is going to look after your assets as well as you can. Especially if you read this book.
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Ranier San, from Magnuson Park, taken sometime last year when I had a dog to walk at dawn.
Its a bloody shame that it is still so difficult to insert a permalink for a book from WorldCat.
