The Prudent Investor's Guide to Beating Wall Street at Its Own Game

Who wouldn't want to learn how prudent people find disciplined ways to, through the course of their lifetimes as investors, buy low and sell high? This book puts into practical terms what financial advisors like myself have long prescribed to investors who want lower risk and better returns than that of the overall market as measured by the S & P 500, the Wilshire 5000 or the Dow Jones Industrial average. It's no secret that a large percentage of Wall Street's finest often fail to provide consistent returns in excess of the averages and, while most in the underperforming camp sell the idea of less risk, too many fail to deliver. In all my time in the financial services industry I've found that what most people want out of their investments in the market is exactly what this book delivers. It should be in every prudent investor's library.

Goldie and Bowen have put into laymen's terms what most Wall St. professionals and money managers do not know-- that no one can time markets, sectors, or pick individual (mispriced) securities with any consistency.The authors articulate a core investment approach that effectively makes all other investment strategies look like speculation. We all have heard that diversification is your friend but few,(even the most sophisticated advisors) understand the meaning of true global diversification,i.e.constructing a portfolio of asset classes which do not move in tandem(some zig when the others zag) in order to reduce the volatility or standard deviation of the portfolio and hence increase its compound return. As a result one can have a portfolio which includes some relatively risky asset classes but in the aggregate is more conservative. How many of us today wish we had taken this advice and included reits,short fixed income and international small cap value into our mix? As the authors point out, who knows what asset classes will be in favor tomorrow. However, if we follow this approach,we will capture their returns and a bit extra for reasons which they spell out.Goldie and Bowen clearly show the benefits of maintaining your target asset class weightings and the need to periodically rebalance when one class gets out of line.Just as compelling are the chapters that explain which asset classes pay you for the risk you take (eg. small cap vs. large cap and value vs. growth) and which ones do not (such as longer maturity fixed income). In my opinion this is the best primer for those who are interested in long term investing. The authors give us an understanding of the tools necessary to construct a core portfolio. Clearly we would all be better served to follow this advice with our investment capital and understand that stock picking, buying the hot fund, or timing the market (in other words what 99% of the world mistakenly views as investing) is really speculation. While these principles are timeless, given the returns of just two asset classes,the S & P 500 and the NASDAQ these past few years, this book should now reach a more responsive audience.

I have spent about two years researching financial strategies by getting input from top tier professional advisors, perusing web sites, and reading books. Of all the information I've gotten, this book provides the most concise and effective approach to how to allocate your investment funds.What you will learn through this book (backed by academic research primarily by the University of Chicago):1) An overview of modern portfolio theory, which states that there is an optimal risk/reward curve that allows you to determine the appropriate mix between stocks and bonds for any given expected level of return or tolerance for risk.2) Regardless of your tolerance for risk or desire for reward, the only thing that changes is the overall % allocation between stocks and bonds. When any investor looks at stocks, they should have the same makeup of stocks in their porfolio (international, large cap value, small cap, etc.). The difference between more and less agressive investors is that the stock composition will be a bigger piece of their pie.3) Statistical analysis that gives strong proof that index funds ... beat mutual funds handily over the long run by several percentage points.This book has provided me with the best framework for investing. It's a little redundant (as most informational books are), but well worth the read. I've purchased many copies of it and given them to friends and family.

There is a huge mismatch between what is known by finance professionals and academics, and the literature that is generally targeted at retail investors. Forty years after the economist James Tobin set out his Separation Theorem disposing of the 'interior decoration' approach to investment (a little bit of growth here, a value stock there, not forgetting some fun on technology stocks), financial advisers are still getting away with peddling truly outlandish and superstitious notions. (My personal favourite among these fallacies is the notion that 'dollar-cost averaging' is a sensible and risk-averse approach to investing. Exactly the opposite is true.)In short, investment advice aimed at the retail investor often does far more harm than good. This is one of the very few books aimed at retail investors that does more good than harm. Indeed, it does a lot of good, by explaining in a non-technical but non-patronising way the essentials of modern portfolio theory (a discipline that sees investment as a process of risk management rather than of 'picking winners'), and advises on cost-effective ways to put them into practice. Retail investors looking to make a killing on the stock market by day-trading should take a deep breath, forget everything they once believed, throw away all their market tip sheets, and buy this book instead. Among its many virtues, this book will ensure that they no longer *worry* about what the stock market does - the first step to getting a happy and fulfilled life. Strongly recommended.

The authors deliver an academically proven investment process for the average investor who is serious about preservation of capital and steady long-term growth. It isn't about chasing performance, outdoing somebody else, or outguessing the market. They explain ways to quantify and reduce risk and volatility throught effective diversification, and to maximize investment returns through strategic asset allocation using institutional, or asset-class/index, mutual funds. Using these strategies, investors, regardless of size of their wealth, can answer the fundamental question of which asset classes to use and in what proportions, with respect to the amount of risk they are willing to accept. Risk management requires managing expectation. Readers learn how to define their risk tolerance level based on their return objectives, as well as constraints, such as time horizon, liquidity needs, and available funds. Learning these easily understood concepts will put an end to the myths and mysteries of financial investing. This knowledge is key to overcoming the procrastination that is a result of the fears associated with unknown risks. Bobby Glass, CLU, ChFC, CFP Acorn Financial Services, Inc. Fairfax, Virginia