Bernstein's book is all about the real truths of investing, ones that are well understood by the academic finance community, but vigorously denied by most of the investment community at large, in the face of overwhelming empirical evidence. Bernstein's 4 pillars are Theory, History, Psychology and Business (in this case, the business of investment management). His points are fairly clear. Most fundamentally, that the efficient nature of markets means the average retail investor is better off in a portfolio of tracker or indexed mutual funds rather than trying to seek the hot 'active' manager (whose future performance will most likely deteriorate back down to the median). The value an indvidual investor can add is via asset allocation (the proportion of his portfolio in stocks, bonds, property etc.) and by an awareness of the historic tendency of markets to form valuation 'bubbles' (of the kind the stock market has been deflating since March 2000). Bernstein covers all this ground and more (for example the whole issue of portfolio rebalancing, and the likely future returns from different asset classes) in a breezy, entertaining non-technical style... I am a former City fund manager and Chartered Financial Analyst, and I wish I had known half of what Bernstein teaches so easily when I started out. I was at one of the City's largest houses, and we created so little value for our retail clients (after fees) that it is laughable. If there is one major criticism of the book, it is that it is entirely American focused. There is no Vanguard equivalent in the UK, that offers a wide range of index funds for very low fees. So the UK reader will find himself frustrated that he cannot readily duplicate Bernstein's ideas. Also much of the advice about taxes, etc., requires translation into the UK milieu (it helps to know a 401k is a personal pension, for example). This book should sit alongside classics like Burton Malkiel's 'A Random Walk Down Wall Street' as well as UK books like 'No Monkey Business' by Stuart Fowler, as a much read and reread, non technical survey of best practice in personal investment.
I have read this book, The intelligent asset allocator and The birth of plenty by Mr Bernstein. In my opinion The intelligent asset allocator is the best among these books. The four pillars of investing is in my opinion more American oriented than The intelligent asset allocator. Certainly it is a good book and worth reading, but I would still start (as an european) with the older book.
While I do not follow or believe in the investment philosophy presented in this book, I still found this book educational. I appreciated how the author described the business of investing. In this section, he wrote about brokers, mutual funds, and the press. While these three perform different functions, he said:
"...their operations and strategies are somewhat different, but their ultimate goal is the same: to transfer as much of your wealth to their ledger books as they can."
I cannot overemphasize the importance for investors to understand the business of investing. Investing and the business of investing are two different things.
I also liked the section of when the author explained how Vanguard revolutionized the mutual fund industry.
"Vanguard became the first, and only, truly `mutual' fund company-that is, owned by its shareholders. There was, therefore, no incentive to mild the investors, as generally happened in the rest of the investment industry, because the funds' shareholders were also Vanguard's owners. The only imperative of this system was to keep costs down."
- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
Very readable - I read it over a weekend. Clear concise and accessible information. A lot of people in this area want you to feel how smart they are and make everything technical. Someone once said to me that the sure sign of excellence in any subject is to be able to explain it clearly and this book is clear.
I am in the process of putting my savings into the stock market for the long term. I feel very sure that this is the correct thing for me, but I have had a certain degree of anxiety on how to do this without risking wiping out our savings. This book had helped me to set my compass.
Only thing I am not sure about is that this book is strongly based on the efficient market hypothesis and so strongly advocates trackers ETF's etc. I understand where this is coming from, but I currently have an open mind on whether to go for index trackers or stock-picking mutual funds.
Very good book and I've no hesitation in recommending it.