com crash let alone the GFC.
However it does contain a great deal of investing truths and as such is a valuable read, just don t think as I erroneously did that because it has an Aug 2017 publication date that it is up to date.
Indeed the author comments in his latest publication Rational Expectations Asset Allocation for Investing Adults that the range of investible assets which are useful to retail investors has changed beyond recognition.
Neurologist William Bernstein is an unlikely guide to experienced investors with both this comprehensive book and his excellent efficientfrontier website, but he succeeds admirably, perhaps in part because he is a Wall Street outsider with a keen eye for data viewed through a skeptic s lens.
The Intelligent Asset Allocator than a dozen years old now is very well organized, building logically from broad foundational concepts to practical advice for investors, with an helpful concluding section on further investment resources Bernstein starts with a clear discussion of risk and return, and then outlines the theoretical in particular the work of Fama French and actual behaviour of multi asset portfolios He then covers market efficiency and concludes with practical and precise he prefers Vanguard whenever possible recommendations of how best to invest.
Bernstein s premise is clear from the opening pages, Asset allocation is the only factor affecting your investments that you can actually influence He cites asset classes such as money market, short term bonds, long term bonds, emerging market stocks, and the value and growth options within domestic, foreign, and small company stocks He notes both the unpredictability of their returns and that past performance is not necessarily a predictor of future performance at least not over an investor s time horizon , but nonetheless recommends different asset mixes based on these historic returns and their correlations How can he not it s the central point of his book though as Bruno Solnik observed diversification fails us when we need it most i.
e in a market crash.
Though Bernstein is careful to highlight the inherent uncertainty in markets and that some of his analysis or recommendations are based on probabilities rather than facts, the book may still leave readers with the unrealistic impression of a paved road to financial success In fact, it s closer to sailing to a destination, unsure of the winds and weather, and of our ability to withstand them As financial weatherman Nassim Taleb has noted, one hundred year storms seem to appear in markets with surprising frequency To Bernstein, who is very comfortable with a spreadsheet, the forecast is perhaps too analytical and not philosophical enough.
Though much has changed since the book s publication it was written before the advent of fundamental indexing, and the number of Exchange Traded Funds ETFs available today is as large as the number of individual stocks its principled approach ensures it stands the test of time well Mr Bernstein s recent publications are philosophical and thought provoking, but knowledgeable investors would be hard pressed to find a better, practical and comprehensive guide than The Intelligent Asset Allocator An updated edition to include his recent work would be very welcome.
I would have to agree with John Bogle s endorsement This is a great book While Malkiel s Random Walk covers Modern Portfolio Theory, Bogle covers the virtues of index investing, and Graham, Lynch and Fisher cover individual stock selection, studies show that asset allocation alone is responsible for over 90% of a portfolio s performance in the long run Yet asset allocation theory seems to me to be under represented in the investment literature for non professionals.
Bernstein s book goes a long way to correct this gap He starts out almost too simply Bernstein takes the reader step by step through a discussion of basic financial math and statistics hitting variance and correlation coefficients in particular as he builds the case and explanation behind asset diversification He writes to an intelligent audience but does not assume a mathematical or financial background I like that he encourages the reader to take a chapter at a time He instructs the reader to finish the chapter, and then put the book down and get back to life This adds to the methodical tone of the book a step at a time.
In the final chapter Odds and Ends the author changes gears Suddenly we are in the world of well odds and ends, the finer points of portfolio management This was the most interesting part of the book for me Here Bernstein reviews the case for index investing and of special interest to me value investing What is the premium in returns for small vs large caps, value vs growth Which MPT stat, P E or P B is the better predictor of future performance Why is value averaging so important and yet so counter intuitive This chapter alone was worth the price of the book.
Finally, Bernstein shares the wealth The bibliography and recommending reading sections are terrific This alone might be worth twice the price of the book.
In a time when we are all intimately involved with the management of our retirement accounts, I cannot recommend this book highly enough to anyone and everyone You cannot afford not to be familiar with the contents of this book Highly recommended.
Arrived exactly as described Would absolutely use again.
The paperback copy of this book is a reprint of the original 2000 hardback with a new preface The stats and references are thus about 18 years out of date The book is very good but readers who have the hardback version have no need to buy this paperback.