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P**R
You Can Beat The Experts By Following Relatively Simple Rules
Looking back, I don't know what made me buy this book but I'm very glad that I did.The book argues that the best way to invest is for you and me, as non-financial advisors - to invest our money ourselves following some relatively simple rules that help to identify the shape of the portfolio, the selections within the portfolio and provide risk management to avoid large financial losses in crashes like 2000 and 2008.The part one of the book starts by explaining that experts are subject to the same cognitive biases and irrationalities as a lay-person and sometimes worse because they suffer from over-confidence. It goes on to show how simple investments models can beat experts most of the times and even if the experts are given the model, they are still outperformed by the model.Part 2 of the book goes on to use empirical testing of many years of stock market results to test various suggested portfolio allocations and ideas. It then goes on to look at the way investors can be guided on when they should be in or out of the market. Finally it looks at how using the two proven winning investment strategies of value and momentum can be used to provide superior returns over more general investments.In the past, I have raved about The Permanent Portfolio: Harry Browne's Long-Term Investment Strategy and how it has shaped my thoughts on diversification. However in my review of this buy and hold investment strategy with annual rebalancing, I expressed my concern about investing when the market was close to a top. This is a particular concern when central banks have engaged in unconventional policies of zero interest rates and quantitative easing to destroy honest price discovery in the financial markets.This book with its risk management strategies provides that answer with two methods and one of these is available on popular financial advisor websites for free.Here are the reasons why I haven't given it five stars despite it helping to clarify my thoughts on investment strategy:1) The fact that the authors have tested the ideas against the market actuals for many years means that there are a scary number of statistical tables that may make the book feel too complicated if you're not mathematically bent. The authors recognise the issue in one chapter where they've written a simplified version that focuses on the results of the tests and a more detailed version which goes deeper into the methodology that I happily skipped.2) As you get your ideas straight and buy into one method of investing, the book comes along and says "this one is even better"... and then "this one is even better". I felt like I was on a big dipper when I was reading it, thinking I'd reached the top and then another peak arrived which was a bit more complicated and scary.3) The book is written for the American market so some of the comments regarding tax issues aren't true and the portfolios suggested were more biased to the American market than I think is appropriate for people living in the UK.4) The book doesn't make any reference to the current investment climate where prices are distorted and where bonds and the stock markets have lost their negation correlations with them both recently at historic peaks.This is quite a difficult book to read. The first section on why you can't trust experts is fascinating and is what you'll see in the Kindle sample. Part 2 is more daunting but together, they will guide you to have confidence that you can manage an investment portfolio without it taking too much of your time each month.
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