Review On Investing

Review by L. Masonson:

When I first came across the first edition of this book in my local library in 1959, I was a teenager. Back in those days there were only a handful of books about the stock market. And I’ve read all of them during my junior high and high school years.This latest updated 623-page paperback (the index alone is 33 pages) version updated by Jason Zweig is a welcome addition to this classic. The original chapters are intact, but with footnoted comments by Zweig. Moreover, he provides his own commentary on each chapter contents in a separate chapter following each original chapter. He provides extensive research, charts, tables and commentary that updates the book to the present years. He is not afraid to take on the big guns of Wall Street and show how wrong they were in some of their extremely bullish predictions during January-March 2000, when the market was at its peak.The first nine chapters cover investing basics that all investors could benefit from. There are many truisms spouted on Wall Street that are not really true. These chapters provide the investor with a realistic picture of how Wall Street works and what investors need to do to come out ahead. Chapters 10-20 focus strictly on fundamental analysis, stock selection, convertible issues and warrants, and other subjects. Investors who plan to invest directly in stocks should make sure to read these chapters. However, for readers more interested in investing in mutual funds, and in particular index funds, they need not concern themselves with all the detail in these chapters unless they have the time or interest in the subject matter presented.In conclusion, the combination of pioneer Ben Graham?s original work coupled with Zweig?s meticulous and enjoyable update, make this a remarkable book about investments and investor behavior that every new and experienced investor should read. Of the 500 investing books that I?ve read, this one certainly is one of the greats of all time.

Review by Scott Allen:

This book is light reading compared to Ben Graham’s seminal tome, Security Analysis. It’s easier to read, and shorter. It’s also more up to date. Highly recommended for investors of any stripe, value or growth. The appendix, from Warren Buffett’s speech at Columbia University is particularly entertaining, as he debunks academia’s love affair with efficient market theory. Jason Zweig, an obvious Graham disciple, does a fantastic job bringing the book’s principles to life through modern examples. The only grating thing is his constant derision of brokers or anyone that actually gets paid to manage money. (full disclosure: I’m an analyst now and was a broker for 10 years).

Ben Graham clearly invested in the stock market during a period of hustlers, crooks, crashes, and frauds. Brokers, investment bankers and analysts back then were not much more than fast-talking salesmen. Wait a minute, that sounds just like the way things are today on Wall Street! Things may not have changed as much as we would like to think. Due to his travails as an investor in difficult markets, Ben Graham’s investment style evolved into a systematic, logical approach which became the basis for value investing. In “The Intelligent Investor”, Graham lays out the foundation of value investing by three introducing key principles: the idea of “Mr. Market”, a value-oriented disciplined approach to investing, and the “margin of safety” concept.

“Mr. Market.”

The stock market on a daily basis resembles a casino, only without the comfort of free cocktails. Watching the stock ticker is like having a business partner that is totally schizophrenic; Graham calls him “Mr. Market.” One day he loves the business and wants to pay a ridiculous price to buy out your half. The next day, all hope is lost, and he wants to sell you his portion for pennies on the dollar. Graham argues that this daily liquidity is an advantage that most investors turn against themselves: (p. 203) “But note this important fact: The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all; for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.” This is profound. It’s not a question of whether our stocks will drop; they will: the trick is how we respond to that eventuality.

Ben Graham’s Stock selection for the defensive investor.

Graham lays out some important characteristics of “value” stocks. (p. 348). Some of the metrics are dated, but the principles are still valid. Even deep value investing today would seem like GARP investing to Ben Graham. Investors are now more focused on future earnings than they were in his day, and valuations reflect that. Graham recommends:

a. Adequate size of the enterprise (>0M revenue, old figure)

b. Sufficiently strong financial condition (2:1 current ratio)

c. Earnings stability (some earnings every year last 10 years)

d. Dividend record (uninterrupted payments for at least 20 years)

e. Earnings growth (1/3 increase in per share EPS past 10 years)

f. Moderate price/earnings ratio (P/E < 15x average last 3 years EPS)

g. Moderate ratio of price to assets (price/book < 1 1/2 times)

h. Overall stock portfolio, when acquired, should have an overall earnings /price ratio- the reverse of the P/E ratio – at least as high as the current high-grade bond rate. A P/E no higher than 13.3 against an AA bond yield of 7.5%

Margin of Safety as the central concept of value investing.

This is an investment rule that was written by a man who had been deeply bruised by bear markets. I believe he came up with this by learning from his losses. When the market turns into a storm of feces, like it inevitably will, if the stock has no earnings to rely on, you have nothing to grab onto. You can’t make yourself stay in the stock when the price is down. Graham says: (p. 515) “The margin of safety is the difference between the percentage rate of the earnings on the stock at the price you pay for it and the rate of interest on bonds, and that is to absorb unsatisfactory developments”. Furthermore he writes: (p. 518) “The buyer of bargain issues places particular emphasis on the ability of the investment to withstand adverse developments. ” You can and will still lose money in the market with value-oriented investing, but according to Graham: (p. 518) “The margin guarantees only that he has a better chance of profit than for loss-not that loss is impossible.”

Conclusion

So that’s it, those are the three basic points of the book, but you should still buy it and read it, it’s a very enjoyable experience, Shakespeare for the investing crowd. Despite being a realist, Ben Graham wasn’t a total pessimist. Late in the book Graham makes a point that is one of my favorites: (p. 524) “A fourth business rule is more positive: “Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it- even though others may hesitate or differ. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right. Similarly, in the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand. ”

Review by Ken Winters:

Kelly has put together an excellent book here. In 7 chapters, he covers a breadth of knowledge that every serious or potential stock investor should be familiar with. I learned more in the week I spent reading this book, than in 6 months of listening to tips from co-workers, on-line discussions, and self-directed research.In chapter 1, he defines all the terminology you’ll encounter in stocks. In a very readable manner, he quickly covers EPS, P/E, PSR, ROE, Beta, and numerous other concepts that are useful.In chapter 2, he describes the methods of 6 all-time top investors (including: Buffett, Lynch, O’Neil, etc.) comparing and contrasting there methods.In chapter 3, he explores what some historic evaluations of stock growth show. This is great stuff, especially during a down market.In chapter 4, he explains in detail the Dow Dividend Strategy. Anyone can understand this and with only 30 minutes of work per year have a relatively successful investment plan.In chapter 5, he covers the process of choosing a broker and placing orders.In chapter 6, he covers some of the many methods you can use to research stocks. With a ton of web-sites, newsletters, and books, Kelly’s advice can save you countless hours wasting time looking for information from the wrong source.In chapter 7, he explains his own strategy. With easy to understand worksheets and using the knowledge gained earlier in the book, he guides you into an investment plan that will suit you.Not only is this book full of good information, but it’s written in a very readable manner. I highly recommend reading this book BEFORE making another investment decision. Even if you have a broker that you like, you owe it to yourself to educate yourself with this book.

Review by Nicholas E. Johansen:

I presume the majority of the glowing reviews on this site are from novice investors. Afterall, that’s what this book is aimed towards. While it contains many useful bits of information, some of the things mentioned by Mr. Kelly would most certainly be detrimental to a new investor. Allow me to explain.

First, the good. Kelly does an excellent job of defining various stock terms — everything from P/E ratio to beta — and doing it in simple language. As a side note, his writing style and prose is significantly better than that featured in most investing books, since he was an English major. Additionally, Kelly provides excellent research resources, including ones that I had not found in my extensive internet searches. More information and more sources is never a bad thing, and Kelly provides the latter in spades. Finally, his introduction to such investment greats as Warren Buffett and Peter Lynch — while rudimentary — are very helpful for the new investor. I find it particularly good that he utilizes Lynch extensively in his own strategy, because Lynch is (arguably) the best fund manager that has ever lived.

Unfortunately, Mr. Kelly adds a bit of his own intuition and thoughts into the strategies he presents in this book. First and foremost, his notion that investing in the UltraDow mutual fund is sound is beyond ludicrous. Not only is this an ineffective use of money, but its volatility and risk far outweighs its gains. Secondly, Kelly seems to be a bit full of himself, calling Wall Street professionals “gurus” who know as much about the stock market as YOU do. In the preface, he states that using this book “always works” — a pretty bold statement from someone who is A) not a business major and B) not really even a market professional. Only later, towards the very end of the book, does Kelly admit that he has “limited experience” in the area of stocks. Er…what was this about “this book always works”? Kelly’s strategy is, in essence, based upon filling out a worksheet and setting arbitrary numbers as “good” or “bad” — i.e. when X ratio outweighs Y number, this stock is a good buy. Get enough of these “good buy” signs together, and you have a stock to buy. Not only does this show his lack of knowledge on the subject, but worse, he makes these statements as if they are guaranteed to make you money. Interestingly enough, Kelly almost always talks about buying shares in the HUNDREDS. That’s right, as in 200 shares of Microsoft. Almost anyone who knows something about the market will tell you that investing ,000 or even ,000 will yield underwhelming results. The # of shares Kelly is dealing with proves to show that he is not only small time (re: has not made a lot of money off trading) but probably hasn’t been at investing for very long. Remember, the market has returned an average of about 9%. Even if you’re the worst stock picker ever, by probability, you will earn 9% on your picks over your lifetime. The question really isn’t whether you’ll make money, but how much will you make? If you follow Kelly’s advice, prepare to be underwhelmed.

By far the worst part of the book is Kelly’s complete and utter dismissal that short term trading works. Essentially, the strategies outlined in his book — which you shouldn’t use, if you value your cash very much — are all for very long term investing. While that’s a valid strategy, somepeople are exceptionally successful owning a stock for three months, six months or a year. You don’t have to be in a stock for three years to see wild gains, and you can perform sound technical analysis on a stock you plan to hold for three months. Kelly makes it seem as if short term investing is not only impossible, but not profitable. For some, though — even those who do it part time — it may prove more effective.

As a glossary of investing terms, list of investing resources and a quick overview of how the market works, “The Neatest Little Guide…” is a winner. Unfortunately, Kelly’s strategies are inherently flawed, and while they may appear to be solid to a new investor, they should not be trusted. Kelly’s view is a narrow-minded one and a rudimentary one at best. In some instances, this reads like a “Fisher Price” version of meatier, more substantial investment books. While it is worth the — for the definitions and list of investment companies, research sites, newspapers, magazines et al — you should take Mr. Kelly’s strategies with a grain of salt.

A better book for the novice investor — which isn’t bogged down too much with technical terms/complex numbers — is Jack D. Schwager’s “Stock Market Wizards” book of interviews with market professionals (fund managers, independent traders etc.). This should prove to give you an overview of many different strategies and things to look for. It was the first thing I read before I started buying stocks, and it was a tremendous resource.

Review by :

Wow…this book was (and still is) such a great help to me.I really do not like money-talk. But let’s face it: in our world, you’d better be somewhat savvy in money management if you want to be able to retire on your own terms.I do not find all the “Dummies” series books useful. However, this one by Tyson was indeed a gem. It took me a week to read through it, and in that time I was educated on all the different kinds of investments, debt reduction, and stock evaluation.If you have debts, you need this book. If you want to be financially secure on only a modest salary, Tyson is full of all sorts of common-sense strategy. Like I said, I do not particularily enjoy money talk, but this book presents the essentials in a surprisingly interesting-to-read format. Even now that I have read it, I know that I’ll still go back and refer to it for many years to come.If you are thinking of investing, invest in this book first. It’s a wealth of investing info. A tremendous bargain!(Also very helpful is Tyson’s book on Mutual Funds, also in the “Dummies” series)

Review by :

I bought this book after reading Mr Tysons first book on Personal Finance. This investing segment in the dummies serial takes the guesswork out of how to start investing. Like Personal Finance for dummies, this edition is also a easy read. I also strongly recommend “More Wealth without Risk” and “Financial Self Defense” for even more strategies on powerful investing. Read and grow rich!

Review by P. Chu:

I read this book quickly shortly after I got it, and I was blown away. Many reviewers pick this as a book for “beginners”, but I don’t agree with that.

My background: I have read (and own) dozens of investment books. I have subscribed to many newsletters (including Morningstar’s, which is decent but unnecessary after you read this book). I have owned many individual stocks and for the last 2-3 years before I got the Boglehead religion I was lucky and beat the market averages buying individual stocks (although for most of my life I’ve lagged far below the market). I opened my first brokerage account in 1990, and I’ve been self-directed ever since. I’ve had 400%+ years as well as -70% years. I’ve even been in the top 100 virtual mutual funds on Marketocracy (out of 70,000), and I’ve written custom software to analyze the daily performance of the top 1500 stocks.

Having said all that, I wish that I had followed the investment principles laid out in this book from the very beginning. I would have a lot more money than I do now.

Before reading this book, I already had all my retirement money in Vanguard index funds. So you would think, end of story, you’re already a believer. NOT SO! While I started out using the Target Retirement funds, which allocates your money properly for your age, I slowly deviated from those funds into the higher risk emerging markets index fund, because that fund was doing so well. It’s easy to read this book and say, “oh that makes sense”, stay the course for a year or so, then get seduced by the hot performance of a particular sector and lose your way. For these principles to work, you really have to apply them relentlessly, and I think that it takes either someone with an iron discipline or someone who’s acquired “experience” in the market (i.e., losses that hurt) to recognize the wisdom of this book and follow it.

Years ago, I read John Bogle’s book on index funds, and I agreed with the logic of what he was saying. Then I proceeded to ignore it for most of my investing career before I really “got” what he was saying.

Perhaps, if you’re a beginner, you’ll follow this book and avoid the pain and losses. The principles are easy enough to understand. In fact, if you want to save the price of the book, simply go to Vanguard, pick your retirement date, buy a “Target Retirement” fund for that date, and you’re done. That’s pretty much what the book tells you to do.

BUT, you’ll need the book (and, in my opinion, the “experience” of following the 99% of the misleading advice out there) to really understand why this is the real way to go. You almost have to read this book every year as an antidote to the temptation that assaults you nonstop from Wall Street and CNBC and all the financial magazines.

If you’re a beginning investor, this is it. This book is the mother lode. You can stop looking. Unfortunately, it may take you 10-15 years and many large losses to realize this (as I had to do), but take it from me (some random anonymous person on the Internet), this is the REAL DEAL.

Knowing what I do now, if at age 21 I’d had my choice of ,000,000 or the wisdom to understand the concepts in this book, I’d choose wisdom. Here are two examples from this book to illustrate why. On page 13 of this book Jack Bogle relates a letter that he received in early 2005 about someone who’s been investing with Vanguard for about 30 years, and whose portfolio had grown to over .25 million, but he’d never made more than ,000 in any year in his life. Although they knew nothing about his specific investing history (maybe he just got lucky? we don’t know), this figure is attainable investing 0 a month in a Vanguard stock index fund over 30 years.

On the other hand, according to an NBC News report related on page 180 of the book, more than 70 percent of lottery winners exhaust their fortunes within 3 years.

So, clearly, doing the right thing is going to have a huge impact on how much money you end up with.

Even the most experienced investors will benefit from this book (and in fact, may benefit more) by simplifying their portfolio. The chapters on asset allocation and taxes are extremely insightful, even to non-beginners.

After reading this book, I immediately re-balanced my Vanguard portfolio to better fit my age group, and to lower the risk that I was taking.

Even as an “experienced” investor already in Vanguard index funds, I learned something actionable that I was immediately able to apply. If you consider yourself an “experienced” investor, you will also benefit from reading this book. I highly recommend it. My ENTIRE retirement portfolio is in Vanguard index funds, allocated in the recommended amounts, so this is not an idle recommendation.

Read it and live it.

(Just so you know, I have never visited the Boglehead web site, and I have never corresponded with any of the authors. I’m just an uninterested third party who’s a big fan of this book).

Review by Professor Donald Mitchell:

Most people don’t have time to read dozens of books about personal finance and investing. Even if people did have that much time, they would seldom be able to integrate what different authors had to say into a consistent approach.

For several decades, people have been asking me what one book they could read to be more successful with their personal finances. Until now, I’ve been reluctant to pick any one book. Instead, I would usually provide a list of 6-8.

Having read The Bogleheads’ Guide to Investing, I can now safely recommend one book for the first time: This one!

Taylor Larimore, Mel Lindauer and Michael LeBouef have five important advantages over other personal finance authors:

1. They are experienced investors.

2. They are well read on the subject of personal finance.

3. They’ve been answering questions for years from those who want to know what to do on Morningstar Vanguard forum and its related site, diehards.org

4. They are an expert writing team rather than a writer or celebrity trying to be supported by experts.

5. They aren’t trying to sell you anything except their book which makes their advice more independent than usual.

The book’s range is impressive. Part I looks at the essential elements of successful investing and includes looking at your financial lifestyle, how to start investing young and regularly, different types of financial instruments, inflation-protected bonds, investing minimums, avoiding complications that lose you money, asset allocation, reducing costs, minimizing and deferring taxes, diversification, market timing, money for college, employing a windfall and whether to retain a financial advisor.

Part II looks at how to track your progress and rebalance assets, staying immune from daily “news” about investing, being in control of your emotions, building up enough money for retirement, asset protection through insurance and estate planning.

The book tackles head on a lot of the bad advice you get about investing, while also being realistic about how much time and effort most of us want to put into financial planning. The tone is friendly, the advice is good and the warnings are appropriate.

What more can you expect from the only personal finance book you’ll ever need?

Review by ttrenkner:

This book stands head and shoulders above the great bulk of what I’ve read on the subject of stock investing. Much of what’s out there these days seems to have been written either for the gullible, get rich quick types or for those who have completely given up on trying to come out ahead of the pack and have resigned themselves to the boredom of simply buying and holding index funds. But this book’s premise is that the small individual investor actually can beat the market, not through some secret, author-discovered formula, but by applying logic, discipline, and a bit of effort. If you believe, as I do, that knowledge and diligence tend to be rewarded in the Market as in life generally, you’re going to like this book.

The author does a great job of smoothly guiding the reader through a potentially dry and difficult subject, without presuming any particular prior knowledge or experience. In fact, the book could almost serve as a textbook on how the stock market operates if it weren’t such a quick and enjoyable read. The contents are well organized, and the writing is clear and to the point. The author effectively uses two real world portfolios to demonstrate the application of his techniques and at the same time buttress his credibility. There are also several helpful appendices, including forms for valuing companies and reviewing a portfolio, as well as a handy investment calendar.

One other thing that makes this book special is the feeling it conveys throughout that stock investing can and should be approached as an engaging, enjoyable hobby, like, say, belonging to a fantasy football league. I think an investor who maintains such an attitude is the most likely to stick with the sound techniques this book espouses while at the same time he or she reaps an extra dividend of happiness.

Review by A reader:

I have read a variety of books on investing, but have never before come across one which is so uniquely suited to the individual investor. That may be because the author is “one of us.” He appears to be a successful businessman who taught himself to become a successful investor. He is not from the “Wall Street” industry. Instead, he brings the perspective of the “Main Street” individual.

For example, Van Knapp has created easy-to-use tools to rate companies and their stocks–such as a simple point system which allows companies to be graded against each other. Forms like the one he calls the Easy-Rate sheet make for easy recording of the information. He shows you how to create a Shopping List, and how you should take a step back every few months to look at the stocks you own strategically.

This book is only about stock investing, and that is a plus. There is nothing here about how to manage your 401(k), how to allocate your money among asset classes, or whether to buy annuities. With all the space saved by leaving that information out, Van Knapp has written an amazingly informative book about stocks. Such subjects as how indexes (like the Dow) are computed are covered in simple language–things all investors should know, but usually only have a vague idea about.

Another strength of this book is that it covers portfolio management–meaning topics like how many stocks to own, how diversified they should be, when to buy, and (most important) when to sell. Again, topics that individual investors should be thoroughly familiar with, but often aren’t. Taken together, it all comprises a stock-investing system, one that can give you confidence that you are not just shooting in the dark or bouncing from theory to theory without an overall strategy.

Van Knapp writes in a conversational style that is suitable for beginners or experienced stock investors. He does not talk down. This is the kind of book that you read once and then keep referring to again and again, because the information is so accessible.

Highly recommended.

Review by Thomas Mongle:

William Bernstein, market historian, scholar, and strategist, writes this new book with the confidence of his experience and the courage of his convictions, just as he did in his earlier “The Intelligent Asset Allocator.” The work is an expansion on the theme that you cannot beat the market by timing or hiring active professional fund managers, so allocate, sit back, and enjoy the long-term ride. His advice is equally applicable to the novice as well as the veteran investor. You get a short course on what market returns you should expect, why you cannot beat the market, why the professionals can’t help you, and how to set up your own portfolio using index funds. In other words, he has no use for the investment business other than the index funds it produces.
Chapter 5 on Manias is an excellent history of economic progress, and obviously the groundwork that led to his soon-to-be-published “The Birth of Plenty” (mid-2004) on the origins of the West’s affluence. I particularly appreciated his credit to Hyman Minsky on the pattern of bubbles. Although Kindleberger has covered much of the same ground and with greater visibility in the press, Minsky’s contributions are more insightful to understanding the distinct nature of economic manias.
Another interesting tidbit is his portrayal of technology as being, in general, a bad business endeavor. Bill Fleckenstein has made this point frequently that technology, unlike Buffett’s desired “consumer monopoly,” is easily outmoded and supplanted with the new, new thing. Let’s just be thankful that earlier entrepreneurs took the time and the risk to create progress.
The true worth of the book comes under the heading of “Why investors lose money.” This is the cornerstone of Bernstein’s philosophy stating that if you can keep from losing, you will win:
(1) Instead of joining the herd mentality, get out when “everybody” knows that something is a good thing. It only means that everyone who wanted to buy already has; there are no buyers left. Prices can only fall.
(2) Overcome overconfidence by checking the performance figures. Few professionals ever “beat the market.” Why do you think you can?
(3) Understand that all investments return to the mean, thus past performance is no indication of future performance.
(4) Don’t trade for excitement. Look elsewhere for entertainment.
(5) Keep your eye on the long term and don’t be panicked out by emotional short term swings.
(6) Realize that there are no “great companies.” The 1000+% returns are few and far between.
(7) Accept that the market is random. Therefore don’t get fooled into believing patterns repeat. Index funds are the only way to go.
(8) Check your accounting carefully. Don’t overstate your successes while forgetting your losses. Keep track of the portfolio’s total return.
(9) Don’t get taken for a ride by the investment industry. Trust no one.
It gets a little trickier when he begins building portfolios. Using representative stereotypes, he sets up hypothetical investments using US stock index funds made up of large caps, small caps, large value, small value, REITs, plus Foreign securities. The remaining assets should be split up between cash and bonds (long and short). Your results will be dependent on how well you can approximate this theories. Another catch comes with “rebalancing.” Bernstein’s advice here is also well taken. Sell out a portion of the superior performers to bring your percentages back in line to their desired weigh in the portfolio and re-allocate those funds into the underperformers to bring their numbers up to desired percentages. Regardless of his distain for decision making, this does require skill and action on your part, but Bernstein has given you enough help to get the job done correctly.

Review by R. Love:

Right up front, I read Bernstein’s first book and thought it was a classic. However, it wasn’t a huge market success which the author admits for many reasons but it was/is still a fine book (The Intelligent Asset Allocator). Now Bernstein comes back with an even better book from the standpoint of being readable for just about any kind or type of investor, experienced or inexperienced. The math and the charts are still there but with less rigorous emphasis. …The Four Pillars of Investing is both a historical review of investment success and failure with a very honest discussion of risk and reward. The pillars are the theory of investing, the history of investing, the psychology of investing (which is now recognized as a critical component in understanding why we invest the way we do) and finally, the business of investing. BTW, the humor in many of these chapters has not been lost either. I don’t think your favorite stock broker or investment pro is necessarily going to enthusiastically recommend that you read this book.Much of what is in the new book should be almost automatic wisdom/rules for investors but as we all know, we usually stray far and wide from good advice and common sense. In this post high-tech bubble collapse period, some solid review of investment principles is necessary. Call it back to basics if you will. It’s just that Bernstein backs it up with the data to prove his points.What really makes this book different from the first book (for me personally) is that Bernstein has finally put the portfolio construction recipe on paper in Chapter 13 called Defining Your Mix. And now a special message to parents of high school and college graduates: buy them a copy of this book. Don’t worry if they don’t read it now. Or if they look at you strangely. For those that do read it, they’ll be ten to twenty years ahead of their peers in investment wisdom and hopefully, financial security. And that’s really what this book is all about; not how to trade or gamble on market timing but rather on how to use sound principles of investing to manage/understand risk while builiding a solid foundation of assets for the longer term.

Review by J. Thomas French:

I couldn’t wait to get my hands on a copy of this groundbreaking, new, investment book from two of most respected marketwatchers around today! Princeton economics professor, Burton G. Malkiel, and influential non-profit chairman, Charles D. Ellis, have put their brains together to come up with one of the most surefire investment strategies out there. The Elements of Investing is intelligently written in a pared-down-to-the-absolute-basics sort of way. It’s one of the rare books written in this vein that actually takes the reader’s ambitions seriously. It’s a pleasure to read, because it is peppered with real life examples of people exhibiting good and bad investment behavior and the twists and turns their lives take as a result.

Right off the bat, Malkiel and Ellis admonish readers to start saving as early as possible and continue saving regularly throughout their lives. Granted, in a runaway consumerist culture like ours, characterized by its easy credit and debt-addicted millions, this task is so often easier said than done. But a prudent, evenhanded approach to spending and saving is possible–and Malkiel and Ellis show you how with smart suggestions that range from the banal, to the downright devious. The real plus to becoming a habitual saver, the authors explain, is that it helps you keep your real priorities in perspective. According to Malkiel and Ellis, your number-one priority, along with that of every other, gainfully employed, taxpaying American, should be to gradually grow your net worth so that your safety net’s intact when your finally reach retirement age. Think of saving, they say, as investing in your future self!

Next, Malkiel and Ellis explore some innovative ways to grow your asset pool, focusing specifically on index funds because they are affordable, intelligently managed and because their unique formulations allow for risk to parsed out over a wide, representative swatch of the market. The authors inform readers about various other index products they may not have considered before, including index bonds and international index funds.

Malkiel and Ellis use statistics and compelling anecdotal evidence to reiterate the time-honored benefits of diversification for a new generation of investors. The authors emphasize the singular importance of diversifying across asset classes (stocks, bonds, money market instruments, commodities, etc.), across markets and over time. They explain how having a diversified portfolio gives the savvy investor a leg up as the market undergoes the upsetting process of rebalancing in the wake of a serious stumble like the one which followed the housing bubble burst of last spring.

In a final, bonus section, Malkiel and Ellis offer an insightfully rendered and detailed menu of IRA’s and other tax-deferred, savings options available to investors.

The Elements of Investing is a veritable goldmine of investing wisdom backed by two of the most trusted names in the investment industry. Malkiel and Ellis’ clear goal is to inspire readers to believe in their basic competency as investors and to chase their dream of financial independence and security!

For those interested in further, reliable reading on the subjects of developing good money habits, investing and personal finance, check out Thomas C. Scott’s Fasten Your Financial Seatbelt: What A Fatal Plane Crash Taught Me About Retirement Planning and John E. Girouard’s The Ten Truths of Wealth Creation.

Review by W. Strauss:

I was looking forward to the authors coming out with a new book to give their investment advice after the 2008 and early 2009 stock market crash. Their fundamentals appears to be the same with the use of broad based index funds, but their stock allocations have shifted to having more money invested globally outside of the United States. You’ll have to purchase the book to read their recommendations. Also, they have given their opinion about Vanguard’s new Total World index fund and both have given their individual asset allocations based on a person’s age with Burton Malkiel’s being more conservative and Charles Ellis’ being more aggressive. They both also give a list of recommended index funds along with a surprise for us regarding their individual stock picking. It’s not what your thinking like day trading. Trust me.

The authors’ do say that the book will help 90% of all investors, with the remaining 10% of investors seeking professional help with complicated situations.

All around very good book and a quick read. Its good for those relatively new to investing because they give personal finance advice also, and the book is also good for experienced investors for their expert advice regarding investing after the 2008/early 2009 stock market crash.

I highly recommend the book.

Review by Matthew Paolini:

As a novice investor, I wanted a book that covered all of the basics in detail. This book was exactly that! I wasn’t looking for a book that was loaded with ratios and technical data; This book covered everything from determing your risk factor by analyzing your current financial situation, approach, analyzing markets and companies. The basic fundamentals were discussed in detail and also included the important technical aspects of investing with very basic and straight forward examples that were very easy to understand.

I would and have recommended this book to anyone who is looking to invest in the stock market. I liked the book so much I’m going to read it over again.

I would also recommend that seasoned investors read this book just to reinforce the basics of investing that they might have forgotten over the years. Review of the basics is very important in any industry.

Review by DJ:

Solid, solid, solid. This book is very resourceful. I have never picked up one of these “Dummies” books before but got this one as a gift. It covers enough about investing in stocks and the securities industry in general so as to ease the befuddled neophyte. For the rudiments, start here. Then afterwards, you can move on to that other junk promising you the secrets of Wall Street.