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More About the Author
Product Description
Review
"The irreverence [Jones] displays toward history as a predictor for investment is one of dozens of viewpoints that fly in the face of conventional portfolio–building wisdom." ––The Star–Telegram
"A very comprehensive book which covers risk versus rewards, past performance versus future expected returns, market timing versus long term investing, and investing in individual stocks versus investing in mutual funds. He also discusses diversification, fees and expenses, and the tax consequences of investing. All of his recommendations are backed up with extensive research and presented in an easy–to–understand manner."––Stockerblog
Product Description
The Intelligent Portfolio draws upon the extensive insights of Financial Engines—a leading provider of investment advisory and management services founded by Nobel Prize–winning economist William F. Sharpe—to reveal the time–tested institutional investing techniques that you can use to help improve your investment performance. Throughout these pages, Financial Engines’ CIO, Christopher Jones, uses state–of–the–art simulation and optimization methods to demonstrate the often–surprising results of applying modern financial economics to personal investment decisions.
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Customer Reviews
Most Helpful Customer Reviews
Format:Hardcover|Amazon Verified Purchase
if you're looking for an investment book to contribute to your efforts to making the big bucks, this book is not for you. it is very much on the conservative side, this is more like a book for someone with some cash looking to invest their money as safely as possible to make steady and slow returns
Christopher seems to be a well eduucated man, but he seems to lack the ability to simplify his explanations. i often found myself reading over 1 paragraph 4-5 times to get what he was saying.
as i read the foreword, he made it clear why he was writing this book and who it was for. it was for a various group of people, including rookie investors, people who knew nothing of investing. and i must say i don't recomend this to any newbie investors. you will find your self struggling to grasp chris's explanations.which they were no need for
christopher would take an entire paragraph to explain the most simple concepts. such as correlations and so forth.nevertheless I did take my time to read his book and i did get everything.
Now on the good side, while Chris may have the inability to simplify explanations, I did learn many new things I have never herd of. many techniques institutional investors use. so i thank him for that
Christopher seems to be a well eduucated man, but he seems to lack the ability to simplify his explanations. i often found myself reading over 1 paragraph 4-5 times to get what he was saying.
as i read the foreword, he made it clear why he was writing this book and who it was for. it was for a various group of people, including rookie investors, people who knew nothing of investing. and i must say i don't recomend this to any newbie investors. you will find your self struggling to grasp chris's explanations.which they were no need for
christopher would take an entire paragraph to explain the most simple concepts. such as correlations and so forth.nevertheless I did take my time to read his book and i did get everything.
Now on the good side, while Chris may have the inability to simplify explanations, I did learn many new things I have never herd of. many techniques institutional investors use. so i thank him for that
Most Helpful Customer Reviews on Amazon.com (beta)
Amazon.com:
12 reviews
33 of 35 people found the following review helpful
Unconventional, smart advice
3 Jun 2008
Format:Hardcover
In the crowded space of personal investment books, this one distinguishes itself with some unconventional and intriguing advice. Here are some highlights I found eye-opening:
- Rebalancing is a bad idea! Rebalancing back to your 'target allocations' is effectively making a contrarian 'bet' that some assets have become overvalued and others undervalued. Such a bet against the market doesn't fit with the EMH.
- Small/value tilt isn't worth it; Midcap growth may be better! This was a shocker, as almost every asset allocation book out there advises tilting toward small/value, in keeping with the Fama/French research. But if you believe that overall market risk is the only kind worth taking, then the only 'tilt' worth making is toward asset classes with high correlation to the market and higher volatility than the market (e.g., higher 'beta'). Which, as it turns out, is Midcap growth! (and smallcap growth too, to a lesser extent)
- REITS, emerging markets, commodities -- not worth it. Again, some surprising advice. Emerging markets aren't well correlated with the overall market, so why bother with higher expenses when you can get your beta elsewhere? Ditto for REITs, which are really 1) a sector bet 2) a sector which is implicitly included in equities (all companies own real estate) and 3) a sector you're already overexposed to if you own a home. Finally, commodities -- I hardly need convincing there -- they're not a return-generating asset class at all.
So what should you focus on? Expenses, for one! The author makes a powerful case for choosing your asset classes with full awareness of the expenses of each. Again, get your beta the cheapest way you can, even if it means dropping an asset class. The foregone diversification benefit pales in comparison to the difference in expenses, in most cases. The author demonstrates this numerically.
Bottom line: this is probably the smartest book I've read in personal investing space. Although it's left me with plenty of questions to ponder, the final advice given is hard to beat.
- Rebalancing is a bad idea! Rebalancing back to your 'target allocations' is effectively making a contrarian 'bet' that some assets have become overvalued and others undervalued. Such a bet against the market doesn't fit with the EMH.
- Small/value tilt isn't worth it; Midcap growth may be better! This was a shocker, as almost every asset allocation book out there advises tilting toward small/value, in keeping with the Fama/French research. But if you believe that overall market risk is the only kind worth taking, then the only 'tilt' worth making is toward asset classes with high correlation to the market and higher volatility than the market (e.g., higher 'beta'). Which, as it turns out, is Midcap growth! (and smallcap growth too, to a lesser extent)
- REITS, emerging markets, commodities -- not worth it. Again, some surprising advice. Emerging markets aren't well correlated with the overall market, so why bother with higher expenses when you can get your beta elsewhere? Ditto for REITs, which are really 1) a sector bet 2) a sector which is implicitly included in equities (all companies own real estate) and 3) a sector you're already overexposed to if you own a home. Finally, commodities -- I hardly need convincing there -- they're not a return-generating asset class at all.
So what should you focus on? Expenses, for one! The author makes a powerful case for choosing your asset classes with full awareness of the expenses of each. Again, get your beta the cheapest way you can, even if it means dropping an asset class. The foregone diversification benefit pales in comparison to the difference in expenses, in most cases. The author demonstrates this numerically.
Bottom line: this is probably the smartest book I've read in personal investing space. Although it's left me with plenty of questions to ponder, the final advice given is hard to beat.
18 of 19 people found the following review helpful
Highly recommend
19 May 2008
Format:Hardcover
This is a great book for anyone who wants to gain confidence in making their own investment decisions or anyone who just wants to be able to have a smarter discussion with their financial planner.
Jones very effectively demystifies the rules of investing and stays focused on "what you need to know" to manage a retirement account or other personal investment account for the long term. He avoids chapters full of finance terms and discussion of investments that most of us shouldn't be investing in anyway. Instead, you get an engaging, smart book that you can read in a weekend that almost feels like sitting across the table and getting advice. He covers the subjects in just the right amount of depth-- you won't be left scratching your head, or feeling like you've once again been told "the rules" about things like diversification, but still don't know exactly what to do.
You'll finish this book and feel a lot more confident about your money and have a much better perspective on market headlines. Would highly recommend this read.
Jones very effectively demystifies the rules of investing and stays focused on "what you need to know" to manage a retirement account or other personal investment account for the long term. He avoids chapters full of finance terms and discussion of investments that most of us shouldn't be investing in anyway. Instead, you get an engaging, smart book that you can read in a weekend that almost feels like sitting across the table and getting advice. He covers the subjects in just the right amount of depth-- you won't be left scratching your head, or feeling like you've once again been told "the rules" about things like diversification, but still don't know exactly what to do.
You'll finish this book and feel a lot more confident about your money and have a much better perspective on market headlines. Would highly recommend this read.
13 of 14 people found the following review helpful
Easy read with great investment advice
30 Jun 2008
Format:Hardcover|Amazon Verified Purchase
This book was well written and easy to read.
The author makes the case that we would need about 1500 years of stock market return data to be able to predict stock market returns within +/- 1% with high confidence. Since we only have about 100 years of reliable data, we can predict within +/- 4% of the long term historical average. Over long 25 year time periods, stock market returns can vary by a factor of 6X or 6 times.
The author discusses the current world asset allocation of about 63:37 stocks:bonds. Interestingly enough, this is not far from the age old pension plan asset allocation of 60:40. The ratio of U.S. to foreign stocks is also about 60:40.
This author has a different opinion about periodically rebalancing a portfolio. He says rebalancing is really a market timing bet.........because you are betting against the consensus of market participants when the market asset allocation changes. He recommends rebalancing to changes in the over-all market allocation versus to a fixed stock:bond asset allocation ratio.
While conducting research for Financial Engines, they found that investors preferred having risk expressed in dollars versus percentages or sigma.
The author correctly focuses on using funds with low expenses, and he says most mutual funds have total expenses over 2% per year. He recommends adjusting your asset allocation around low expense funds...........if you are in a 401K with very limited choices. His work suggests that not investing in an asset class only costs you about 0.5% in return. If it costs you more than 1% in additional fees to get into a new asset class, then skip this asset class.
The author suggests having a maximum of 10% invested in REITs. He argues that if you own your home, you probably have no need for REITs as a separate investment.
The author also argues that commodities have a 0% expected return, so skip this asset class.
Over-all, this book is easy to read with very sound advice for investors.
In this age of full disclosure, it can be noted that I am the author and publisher of the book INDEX MUTUAL FUNDS: HOW TO SIMPLIFY YOUR LIFE AND BEAT THE PROS. This book is an introduction to the concept of index funds is and is sold on Amazon. I am also a contributing author to the book THE BOGLEHEADS GUIDE TO RETIREMENT PLANNING available from Amazon with an estimated release date of October 2009. I have also written 21 short stories on investing which are also available on Amazon.
If you want practical ideas on long term passive investing, read some of the books below:
The Richest Man in Babylon
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
The Millionaire Next Door
The Four Pillars of Investing: Lessons for Building a Winning Portfolio
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life
The Bogleheads' Guide to Investing
The author makes the case that we would need about 1500 years of stock market return data to be able to predict stock market returns within +/- 1% with high confidence. Since we only have about 100 years of reliable data, we can predict within +/- 4% of the long term historical average. Over long 25 year time periods, stock market returns can vary by a factor of 6X or 6 times.
The author discusses the current world asset allocation of about 63:37 stocks:bonds. Interestingly enough, this is not far from the age old pension plan asset allocation of 60:40. The ratio of U.S. to foreign stocks is also about 60:40.
This author has a different opinion about periodically rebalancing a portfolio. He says rebalancing is really a market timing bet.........because you are betting against the consensus of market participants when the market asset allocation changes. He recommends rebalancing to changes in the over-all market allocation versus to a fixed stock:bond asset allocation ratio.
While conducting research for Financial Engines, they found that investors preferred having risk expressed in dollars versus percentages or sigma.
The author correctly focuses on using funds with low expenses, and he says most mutual funds have total expenses over 2% per year. He recommends adjusting your asset allocation around low expense funds...........if you are in a 401K with very limited choices. His work suggests that not investing in an asset class only costs you about 0.5% in return. If it costs you more than 1% in additional fees to get into a new asset class, then skip this asset class.
The author suggests having a maximum of 10% invested in REITs. He argues that if you own your home, you probably have no need for REITs as a separate investment.
The author also argues that commodities have a 0% expected return, so skip this asset class.
Over-all, this book is easy to read with very sound advice for investors.
In this age of full disclosure, it can be noted that I am the author and publisher of the book INDEX MUTUAL FUNDS: HOW TO SIMPLIFY YOUR LIFE AND BEAT THE PROS. This book is an introduction to the concept of index funds is and is sold on Amazon. I am also a contributing author to the book THE BOGLEHEADS GUIDE TO RETIREMENT PLANNING available from Amazon with an estimated release date of October 2009. I have also written 21 short stories on investing which are also available on Amazon.
If you want practical ideas on long term passive investing, read some of the books below:
The Richest Man in Babylon
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
The Millionaire Next Door
The Four Pillars of Investing: Lessons for Building a Winning Portfolio
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life
The Bogleheads' Guide to Investing
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