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The Only Guide to a Winning Investment Strategy You'll Ever Need: The Way Smart Money Invests Today
Investment professional Larry E. Swedroe describes the crucial difference between "active" and "passive" mutual funds, and tells you how you can win the investment game through long-term investments in such indexes as the S&P 500 instead of through the active buying and selling of stocks.
A revised and updated edition of an investment classic, The Only Guide to a Winning Investment Strategy You'll Ever Need remains clear, understandable, and effective. This edition contains a new chapter comparing index funds, ETFs, and passive asset class funds, an expanded section on portfolio care and maintenance, the addition of Swedroe's 15 Rules of Prudent Investing, and much more.
In clear language, Swedroe shows how the newer index mutual funds out-earn, out-perform, and out-compound the older funds, and how to select a balance "passive" portfolio for the long hail that will repay you many times over. This indispensable book also provides you with valuable information about:
- The efficiency of markets today
- The five factors that determine expected returns of a balanced equity and fixed income portfolio
- Important facts about volatility, return, and risk
- Six steps to building a diversified portfolio using Modern Portfolio Theory
- Implementing the winning strategy
- and more.
A revised and updated edition of an investment classic, The Only Guide to a Winning Investment Strategy You'll Ever Need remains clear, understandable, and effective. This edition contains a new chapter comparing index funds, ETFs, and passive asset class funds, an expanded section on portfolio care and maintenance, the addition of Swedroe's 15 Rules of Prudent Investing, and much more.
In clear language, Swedroe shows how the newer index mutual funds out-earn, out-perform, and out-compound the older funds, and how to select a balance "passive" portfolio for the long hail that will repay you many times over. This indispensable book also provides you with valuable information about:
- The efficiency of markets today
- The five factors that determine expected returns of a balanced equity and fixed income portfolio
- Important facts about volatility, return, and risk
- Six steps to building a diversified portfolio using Modern Portfolio Theory
- Implementing the winning strategy
- and more.
352 pages, Hardcover
First published May 1, 1998
43 people are currently reading
710 people want to read
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Displaying 1 - 18 of 18 reviews
February 14, 2008
The main point of this book is that you should be following Modern Portfolio Theory, which, as is mentioned a few dozen times, earned a Nobel Prize for the economists that came up with it.
This book was too long and was highly repetitive, but the two main points I took away were to invest in index funds and to focus on asset allocation for performance over trying to pick a winning fund or sector.
We are told to invest in index funds since the fees are lower and since, in the long run, actively managed funds perform worse. This is backed up by a bunch of various studies that he quotes. Of course, we know that if you picked the best activae funds while they were the best, you'd have outperformed the market, but picking a winner is close to impossible and the top performers one year can literally be with worst the following yar.
Regarding asset allocation, the book provides a couple reference portfolios and shows how, mathematically, how it's possible to lower your overall portfolio risk while increasing your possible return.
I think this book could have been half the size.
This book was too long and was highly repetitive, but the two main points I took away were to invest in index funds and to focus on asset allocation for performance over trying to pick a winning fund or sector.
We are told to invest in index funds since the fees are lower and since, in the long run, actively managed funds perform worse. This is backed up by a bunch of various studies that he quotes. Of course, we know that if you picked the best activae funds while they were the best, you'd have outperformed the market, but picking a winner is close to impossible and the top performers one year can literally be with worst the following yar.
Regarding asset allocation, the book provides a couple reference portfolios and shows how, mathematically, how it's possible to lower your overall portfolio risk while increasing your possible return.
I think this book could have been half the size.
October 26, 2021
Swedroe makes a compelling case for using diversified, global, passive asset class investing, based on Modern Portfolio Theory. He explains to the average investor how markets work, why they work that way, and how to make them work for you. He shows how to construct a portfolio based on academic theory and statistical evidence compiled from many studies covering several decades. I don’t agree that this is the only investment guide you’ll ever need, but it’s a good part of your knowledgebase.
Swedroe says that the question of market efficiency is irrelevant. The real question is: can active management overcome its expenses and add value over passive investing? The evidence says no. Neither fundamental nor technical analysis has proven to outperform the market.
Swedroe strongly advocates overweighting asset classes with higher risk premiums, such as small caps and value stocks. My investment philosophy is largely based on John Bogle’s, founder of Vanguard. In his The Little Book Of Common Sense Investing (my review) he says he’s skeptical that small and value stocks outperform the broad market over the long-term. He says that even if they do outperform, they carry so much additional risk that investors would be better served by a portfolio based on market cap weighting. See also the Bogleheads entry Value Tilting - Stock and Bogle’s 2002 talk “The Telltale Chart”.
I read this book because it was recommended by The Index Investing Show, an investing podcast I used to listen to regularly. Below are my notes from the book.
Efficient Markets Theory and Modern Portfolio Theory
Q: If markets are efficient, why do valuations fluctuate so much?
A: The market has expectations. When it receives new info, it revalues securities. The volatility is evidence that the unexpected frequently fails to occur. Market efficiency isn’t about valuation; it’s about how quickly prices incorporate available info.
• Small cap and emerging markets are as efficient as large cap markets. Active managers of small caps and emerging markets do no better than active managers of large caps.
• The higher the risk, the higher the reward. Value outperforms growth, even though value has lower volatility. The smaller the market cap, the greater the return.
• Compound growth rate matters more than average annual return.
• Volatility decreases returns.
Bond Investing
• Active bond investing is as foolish as active stock investing; interest rates are as unpredictable as stock prices.
• Don’t invest in bonds with maturities beyond 5 years. After 5 years, higher risk isn’t compensated by higher returns.
• Invest in only government-issue and investment grade (AA+) corporate bonds. Riskier bonds don’t provide enough compensation to be worthwhile.
Five-Factor Model Risk Premiums
large cap: 5%
small cap: 10%
value: 10%
small cap value: 15%
short-term fixed: 0%
long-term fixed: 1.5%
Building a Portfolio using Modern Portfolio Theory
• Limit international stocks to 30% of portfolio and emerging markets to 6% to reduce event risk of foreign political or economic instability.
• Any cash not needed for 10+ years should be in equities.
• Tax-exempt securities are usually better than taxable ones above the 28% tax bracket.
• Small cap funds should have an average market cap of $100-150 million.
• An advisor can be worth more than their fee by providing access to institutional-style funds, and by providing advice.
Swedroe says that the question of market efficiency is irrelevant. The real question is: can active management overcome its expenses and add value over passive investing? The evidence says no. Neither fundamental nor technical analysis has proven to outperform the market.
Swedroe strongly advocates overweighting asset classes with higher risk premiums, such as small caps and value stocks. My investment philosophy is largely based on John Bogle’s, founder of Vanguard. In his The Little Book Of Common Sense Investing (my review) he says he’s skeptical that small and value stocks outperform the broad market over the long-term. He says that even if they do outperform, they carry so much additional risk that investors would be better served by a portfolio based on market cap weighting. See also the Bogleheads entry Value Tilting - Stock and Bogle’s 2002 talk “The Telltale Chart”.
I read this book because it was recommended by The Index Investing Show, an investing podcast I used to listen to regularly. Below are my notes from the book.
Efficient Markets Theory and Modern Portfolio Theory
Q: If markets are efficient, why do valuations fluctuate so much?
A: The market has expectations. When it receives new info, it revalues securities. The volatility is evidence that the unexpected frequently fails to occur. Market efficiency isn’t about valuation; it’s about how quickly prices incorporate available info.
• Small cap and emerging markets are as efficient as large cap markets. Active managers of small caps and emerging markets do no better than active managers of large caps.
• The higher the risk, the higher the reward. Value outperforms growth, even though value has lower volatility. The smaller the market cap, the greater the return.
• Compound growth rate matters more than average annual return.
• Volatility decreases returns.
Bond Investing
• Active bond investing is as foolish as active stock investing; interest rates are as unpredictable as stock prices.
• Don’t invest in bonds with maturities beyond 5 years. After 5 years, higher risk isn’t compensated by higher returns.
• Invest in only government-issue and investment grade (AA+) corporate bonds. Riskier bonds don’t provide enough compensation to be worthwhile.
Five-Factor Model Risk Premiums
large cap: 5%
small cap: 10%
value: 10%
small cap value: 15%
short-term fixed: 0%
long-term fixed: 1.5%
Building a Portfolio using Modern Portfolio Theory
• Limit international stocks to 30% of portfolio and emerging markets to 6% to reduce event risk of foreign political or economic instability.
• Any cash not needed for 10+ years should be in equities.
• Tax-exempt securities are usually better than taxable ones above the 28% tax bracket.
• Small cap funds should have an average market cap of $100-150 million.
• An advisor can be worth more than their fee by providing access to institutional-style funds, and by providing advice.
January 2, 2019
http://imeducatingmyself.com/the-only...
If you’re someone who finds attractive the passive way of investing, and you want to learn more about it – then this books will be helpful for you. Content of this book is all about passive investing for retirement; investing in index funds, ETFs, passive asset classes etc. The book is great for beginners and someone who doesn’t know much about passive investing. Although this book is fairly old it will be helpful. I wouldn’t recommend it if you’re someone who is looking exact passive or index funds to invest in – this book doesn’t offer that sort of information.
I gave this book a three stars rating because I disagree with some of the tips in this book – and that is when it comes timing the market and deciding when to invest. Okay, I do understand that I’m fairly young and I can afford to wait for the market to pull back and then to start investing. There are parts which focuses a lot on how you should avoid timing the market and just invest when ever you have spare money in your pocket. I simply can’t agree with that, and that’s the only thing I don’t like about this book.
Overall for beginners it’s solid book to read and learn more about passive investing.
If you’re someone who finds attractive the passive way of investing, and you want to learn more about it – then this books will be helpful for you. Content of this book is all about passive investing for retirement; investing in index funds, ETFs, passive asset classes etc. The book is great for beginners and someone who doesn’t know much about passive investing. Although this book is fairly old it will be helpful. I wouldn’t recommend it if you’re someone who is looking exact passive or index funds to invest in – this book doesn’t offer that sort of information.
I gave this book a three stars rating because I disagree with some of the tips in this book – and that is when it comes timing the market and deciding when to invest. Okay, I do understand that I’m fairly young and I can afford to wait for the market to pull back and then to start investing. There are parts which focuses a lot on how you should avoid timing the market and just invest when ever you have spare money in your pocket. I simply can’t agree with that, and that’s the only thing I don’t like about this book.
Overall for beginners it’s solid book to read and learn more about passive investing.
April 8, 2018
Fine book on investment. Presented a strong case for passive investment. Would be great if there are more actual implementation strategies.
May 7, 2018
Great book
Great and funny book . It really gave a perspective with investment and how to be intelligent about it !!
Great and funny book . It really gave a perspective with investment and how to be intelligent about it !!
February 3, 2026
An older book, but still relevant to date.
June 7, 2016
If you ever wondered how to invest your money simply and effectively, you ought to read Larry Swedroe's excellent book "The Only Guide to a Winning Investment Strategy." With wit and insight, Swedroe explains how active fund management is the looser's game of investing and passive fund investing is the way to best maximize returns. He contends that because markets are extremely efficient at pricing - it takes less than a second for the NYSE to price news into a stock's price - it is very unlikely that any given individual can beat the market at determining the correct price. Consequently, smart money invests by buying index funds for long periods of time regardless of what the market is doing. After explaining the theory, Swedroe breaks down the steps by which each individual investor should determine their portfolio and how to maintain it without going insane. Such straightforward advice from Swedroe made the book interesting and well worth the time invested.
August 24, 2008
Hard back. If you don't know much about investing then I suggest this book. It is a very data rich book (which makes it a little dry at times) but I always love empirical research and guidance based off of evidence and not speculation. It is very basic in it's teachings but it really makes you think about your investments and/or the need to invest wisely. Probably the best investment content related books that I've read.
November 11, 2009
I really liked how he taught the Efficient Market Theory. He keeps it to the basics and doesn't get bogged down in the details of the theory. The data that he presents is very convincing that "indexing" is the way to go. In fact, I have reorganized my Roth IRA to be more consistent with the indexing principles and the Efficient Market Theory. A must read for those interested in managing your own retirement funds.
May 30, 2012
I was bored at the redundancy of the first chapters as the author was making a case for the efficiency of the markets and the inefficiency of managed funds but overall I feel like I gained a good knowledge on investing and a better understanding on how to allocate assets accordingly using the modern portfolio theory. I would highly recommend it to anyone looking to understand and learn about investing. In fact, it might be the only book you need to learn how to invest your money.
October 10, 2008
I read this while I was bored at work. It had a lot of basic investment knowledge that is important to know but I don't think many people would want to read this just for fun. He hammered in the point that passive investing is by far better than active (which I agree with) but it was a little overdone. It influenced me to change a couple of small things on my personal investment plan.
December 28, 2007
An honest look at why financial advisers, finance magazines and the financial shows are lying to you. See what real wall streeters invest in and why it's not the latest "tips." Also has portfolios that will beat 90% of all fund managers each year.
June 11, 2009
Very eye-opening. I'm just entering into the industry and have had a problem with the way we get paid (i.e., commissions, etc). I had a feeling that passive investing is the way to go for the bulk of your assets, especially for those with a long-term horizon.
June 16, 2010
Excellent book. Gives a very practical advice of constructing asset allocation mix depending on your risk tolerance and how to keep it updated with the life events. Good advice in line with the Modern Portfolio Theory. Highly Recommended!
September 20, 2012
A convincing exposition of the advantages of "passive investing" -- investing in broad classes of assets without trying to predict market timing or select individual securities. Presentation is a little repetitive and dry.
August 15, 2011
An in-depth look into the world of investing. Very educational…a must-read for any serious investor. The content and knowledge base is incredible.
May 16, 2013
Author argues that it's virtually impossible to beat the market and that the best strategy is to invest in index funds.
January 10, 2024
Intereating thouths on long and short term for passive investmenets, useful ideas about tax efficiency of different asset claases
Displaying 1 - 18 of 18 reviews