Winning the Loser's Game: Timeless Strategies for Successful Investing

Charles Ellis takes as his premise the applicability of the Efficient Markets Hypothesis, not as a dogma, nor even necessarily as an explanatory model, but as an immensely powerful prescriptive model. Financial markets are *highly* efficient, and it is exceptionally difficult to identify opportunities for arbitrage (riskless profit) within them. For the individual, retail investor the best course by far is to accept that investing is what Ellis calls "a loser's game". By this he means that - in his own analogy - successful investing is more like amateur tennis than professional tennis: in professional tennis the winner is the one who has the best technique and the greatest skill; in amateur tennis, the winner is the one who makes fewest mistakes. Investing ought to start with the axiom that managing risk (which is what drives investment returns) is immeasurably more important than seeking market inefficiencies (if such exist), while trading on 'tips' is an almost guaranteed way to make yourself poorer. Ellis explains in non-technical but never simplistic language the essentials of a rational approach to portfolio construction and management. He has a particular gift for explaining highly abstruse notions in modern portfolio theory and making them sound like common sense. This is a necessary and important book in a field plagued by charlatans. I recommend to anyone seeking to maximise his wealth over the long run.

I found this book to be very helpful-one of the best financial books I have ever read. The book is written so that someone who has recently begun investing can pick up the majority of the concepts, while not boring the more seasoned investor. One of the more interesting topics that this book covered was the discussion on risk. Mr. Ellis' opinion is that most investors should focus most on risk instead of historical returns-as it is more useful yardstick for measuring your portfolio. As in many other books, he focusing on minimizing expense ratios, investing in index mutual funds, and focusing on long-term goals. Includes an excellent section on the impact of inflation on your portfolio. In the era of day trading and individual investors expecting 25% rates of return I found this book refreshing and realistic.

This book is based on a famous article written by Mr. Ellis in 1975, "The Loser's Game," that showed why professional money managers are unable to beat the market averages in 90 percent of the cases. In fact, the harder they try, the more likely they are to lose by increasing trading costs and mistiming their trades. The first two editions of this book were aimed at providing solutions to that dilemma for professional money managers. Mr. Ellis provides consulting advice to such professional money managers, and is in a good position to know what he is talking about. This edition is aimed at the needs of the neophyte individual investor. It is especially timely as we near the end of 2 decades of almost continual bull markets for equities.The beauty of this book is that it is simple and easy to understand. Ellis designed it for anyone who has a genuine interest in getting good investment results, is willing to develop an appreciation for market fundamental, and has the discipline to pick an approach and stick to it. In various chapters, the book describes why professionals do so poorly, and how the individual can have the same problems if not careful. The key points of the book are that you need to establish your long-term investment objectives in writing, and with the expert advice of professionals, determine a well-reasoned and realistic set of investment plans that can help you achieve your objectives. You should set your asset mix at the highest ratio of equities you can afford financially and emotionally for the long-term. However you do this, don't try to beat the market. That's a loser's game. He emphasizes not making mistakes, not losing money relative to the market, staying in the market, and realizing that your real problem is beating inflation rather than the market. In general, doing less will be doing more. Avoid speculations, shifting funds continuously, and paying too much attention to near-term performance.A good companion book for this one is John Bogle's recent one, Common Sense on Mutual Funds, that articulates many of Ellis' points in more detail and more graphically. As a historical note, Bogle writes in his preface to Ellis' book that he was inspired by Ellis' original article to make Vanguard's first indexed mutual fund in 1975.In thinking about the advice here, I'm not sure that everyone needs professional advice to come out in the right direction. If you decide that you primarily want to pursue indexed mutual funds, there is little need for advice, for example. But if you do opt for advice, be sure you watch out for vested interests in the person giving the advice. Also, the book doesn't do enough to address the conflicted feelings that people have about money. If you don't address those, you won't carry through on your discipline. I suggest that you read any of the excellent books on that subject and do the exercises in them. I also suggest you find the calmest, san

This book stresses one of the most important "secrets" to long term investing success, that of not losing money on a particular investment. Warren Buffet also stresses this with his two rules of investing (rule number one, never lose money, rule number two, never forget rule number one). Many people think that's a big joke. They don't believe it can be done, and they believe it's worth losing money in search of a huge gain on an investment. Well, it can be done by buying and holding index funds, keeping the self-managed part of your portfolio down to a minimum, and staying away from speculative investments, though what's speculative is in the eye of the beholder. Permanent loss of capital is the single worst thing that can happen to your portfolio. It should be avoided at all costs. Just figure out what that capital could have grown to in an index fund for 20-30 years and you'll see what I mean. This book will help you see that, and contains much other useful information. It really will improve your results, and actually will reduce your time and effort you put into investing, as well as your stress level.