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The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk
“Bernstein has become a guru to a peculiarly ’90s group: well-educated, Internet-powered people intent on investing well—and with minimal ‘help’ from professional Wall Street.”
--Robert Barker, BusinessWeek
Learn the risk/reward characteristics of
various investment types
Understand and apply portfolio theory for an improved risk/reward ratio
Sharpen their focus, and take control of their investment programs
William Bernstein runs a website—www.efficientfrontier.com—known for its quarterly journal of asset allocation and portfolio theory, Efficient Frontier.
--Robert Barker, BusinessWeek
William Bernstein is one of today’s most unlikely financial heroes. A practicing neurologist, he used his self-taught investment knowledge and research to build a popular investor’s website. Now, in the plain-spoken The Intelligent Asset Allocator, he shows independent investors how to build a diversified portfolio—without the help of a financial advisor. A breath of fresh air for investors tired of overly technical investment tomes, this book will help investors:
Learn the risk/reward characteristics of
various investment types
Understand and apply portfolio theory for an improved risk/reward ratio
Sharpen their focus, and take control of their investment programs
William Bernstein runs a website—www.efficientfrontier.com—known for its quarterly journal of asset allocation and portfolio theory, Efficient Frontier.
301 pages, Kindle Edition
First published September 22, 2000
238 people are currently reading
3841 people want to read
About the author
William J. Bernstein
25 books459 followersWilliam J. Bernstein is an American financial theorist and neurologist. His research is in the field of modern portfolio theory and he has published books for individual investors who wish to manage their own equity portfolios. He lives in Portland, Oregon.
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Displaying 1 - 30 of 120 reviews
February 5, 2009
For investors, if there is one book you should read, it is "Four Pillars of Investing," by William Bernstein. "Four Pillars" is geared toward a general audience and explains four key investing concepts that every investor should be aware of. Prior to writing "Four Pillars," Dr. Bernstein wrote "The Intelligent Asset Allocator," but eventually realized this book fell short of his goals and then refined his ideas in developing the classic, "Four Pillars." While "The Intelligent Asset Allocator" remains on a lot of investing reading lists, in truth, it does not make for essential reading if you have already read "Four Pillars." Nonetheless, it does help to reinforce certain key ideas, which are valuable to keep in mind during rough bear markets like we are currently experiencing.
The key ideas reinforced in "The Intelligent Asset Allocator" include the following:
*Asset allocation is the only factor affecting your portfolio that you can actually control. Thus, it is the most important factor for investors to worry about – e.g., how much to invest in bonds versus stocks, how much to put into international stocks, etc.
*The essence of effective portfolio construction is the use of or a large number of poorly correlated assets. In other words, you want asset classes that move in opposite directions. For example, typically, when stock prices go down, bond prices go up. Also, foreign stocks and value stocks are not perfectly correlated with U.S. stocks, so during a bear market, owning these types of stocks may reduce risk.
*Foreign stocks belong in every investor’s portfolio. In his most basic model portfolio, Dr. Bernstein recommends investors own U.S. large stocks, U.S. small stocks, foreign stocks, and U.S. short-term bonds.
*Good companies are generally bad stocks, and bad companies are generally good stocks. Dr. Bernstein’s discussion of buying bad companies, or "value stocks," is the most persuasive of any investing book I have read in convincing me of the bonus of owning a mutual fund of "value stocks." Not only have their stocks outperformed "good companies’" stock, but there is also research supporting that these stocks are "less risky" in bear markets.
One other benefit of "The Intelligent Asset Allocator" is that it does get more specific than "Four Pillars" in terms of telling investors which mutual funds he recommends (most are with Vanguard) and also where these funds should be held (in taxable or non-taxable accounts). So, while this book is not essential reading, it is worth a read if you are looking for additional reading material to reassure you that you are on the right track during these trying times.
The key ideas reinforced in "The Intelligent Asset Allocator" include the following:
*Asset allocation is the only factor affecting your portfolio that you can actually control. Thus, it is the most important factor for investors to worry about – e.g., how much to invest in bonds versus stocks, how much to put into international stocks, etc.
*The essence of effective portfolio construction is the use of or a large number of poorly correlated assets. In other words, you want asset classes that move in opposite directions. For example, typically, when stock prices go down, bond prices go up. Also, foreign stocks and value stocks are not perfectly correlated with U.S. stocks, so during a bear market, owning these types of stocks may reduce risk.
*Foreign stocks belong in every investor’s portfolio. In his most basic model portfolio, Dr. Bernstein recommends investors own U.S. large stocks, U.S. small stocks, foreign stocks, and U.S. short-term bonds.
*Good companies are generally bad stocks, and bad companies are generally good stocks. Dr. Bernstein’s discussion of buying bad companies, or "value stocks," is the most persuasive of any investing book I have read in convincing me of the bonus of owning a mutual fund of "value stocks." Not only have their stocks outperformed "good companies’" stock, but there is also research supporting that these stocks are "less risky" in bear markets.
One other benefit of "The Intelligent Asset Allocator" is that it does get more specific than "Four Pillars" in terms of telling investors which mutual funds he recommends (most are with Vanguard) and also where these funds should be held (in taxable or non-taxable accounts). So, while this book is not essential reading, it is worth a read if you are looking for additional reading material to reassure you that you are on the right track during these trying times.
June 8, 2016
The Intelligent Asset Allocator started out as a real winner, explaining the theory and principles behind effective asset allocation, using just enough math to understand the process without getting bogged down by it. Halfway through the book, the "efficient frontier" concept was well-established and I was looking forward to discussions of different portfolios for different investor types, how different allocations affected performance and other detailed information about "how to build your portfolio," as suggested by the title.
Instead, the 200-page book devotes less than 15 pages to actually building portfolios, providing little more than a simple, moderate and complex example of generic allocations between a few core asset classes (primarily US large and small stocks, international stocks and short-term bonds).
Most of the book is devoted to typical investment topics like psychological biases that affect investments, the difficulty of beating the market (Bernstein is a shamelessly unabashed "Boglehead") and retirement withdrawal strategies. He doesn't give bad advice on any of these topics, and is downright prescient in touting the superiority of index funds in 1998, long before they became widely popular, predicting that ETFs would gain popularity, and noting that internet stocks were wildly overpriced while ridiculing the prevailing notion that "this time is different." However, I got the book because I wanted to learn more about asset allocation, and found it lacking on this topic, considering that the whole book was supposed to be devoted to it.
Also, the book is going on 18 years old, and could definitely use an update. Internet resources suggested are no longer operating and we have had two decades of additional asset performance date since it was published that would bolster the numerical support for proposed allocations (in the 1990s, reliable international stock performance data apparently only went back about 25 years, so there is significantly more history today).
To summarize, the first half of the book was novel and informative. The second half is mostly a shill for Vanguard funds and an opportunity to marvel with the benefit of hindsight at someone who anticipated where the investment world was headed.
Instead, the 200-page book devotes less than 15 pages to actually building portfolios, providing little more than a simple, moderate and complex example of generic allocations between a few core asset classes (primarily US large and small stocks, international stocks and short-term bonds).
Most of the book is devoted to typical investment topics like psychological biases that affect investments, the difficulty of beating the market (Bernstein is a shamelessly unabashed "Boglehead") and retirement withdrawal strategies. He doesn't give bad advice on any of these topics, and is downright prescient in touting the superiority of index funds in 1998, long before they became widely popular, predicting that ETFs would gain popularity, and noting that internet stocks were wildly overpriced while ridiculing the prevailing notion that "this time is different." However, I got the book because I wanted to learn more about asset allocation, and found it lacking on this topic, considering that the whole book was supposed to be devoted to it.
Also, the book is going on 18 years old, and could definitely use an update. Internet resources suggested are no longer operating and we have had two decades of additional asset performance date since it was published that would bolster the numerical support for proposed allocations (in the 1990s, reliable international stock performance data apparently only went back about 25 years, so there is significantly more history today).
To summarize, the first half of the book was novel and informative. The second half is mostly a shill for Vanguard funds and an opportunity to marvel with the benefit of hindsight at someone who anticipated where the investment world was headed.
March 13, 2009
The main thesis of this book is that the mix of various asset classes (stocks, bonds, REITs, precious metals, etc.) are the main determinant of risk that an investor actually has control over. Therefore determining the right mix using correlations between the asset classes and an understanding of the history of their behaviors.
There is a bit of math in this book, which I found very helpful. If math-- especially stats -- is not your thing, then you should read his Four Pillars of Investing. Actually it's probably a good idea to read that book anyway.
This book is a bit more condensed than the average investing book. It's a good idea to read it a chapter or two at a time and then set it down for a while. Highly recommended.
There is a bit of math in this book, which I found very helpful. If math-- especially stats -- is not your thing, then you should read his Four Pillars of Investing. Actually it's probably a good idea to read that book anyway.
This book is a bit more condensed than the average investing book. It's a good idea to read it a chapter or two at a time and then set it down for a while. Highly recommended.
January 12, 2014
You can go into excruciating mathematical detail about a hypothesis and attempt to apply it to many situations, but none of that proves the hypothesis. In the end, standard deviation of market prices is not a measurement of risk with any real value. The fact that it is easily calculated and used by many financial sales people does not validate it. For an actual long term investor in a business, I prefer the idea that what matters are whether your investment is safe and will it make money. If you were investing in your brother-in-law's laundromat, would you care about a) the changing perceptions of how valuable it is to other laundromat owners (as Bernstein apparently would) or b) how much money will your share of the business make and will it go out of business. You might consider risks such as competition, changing customer habits and mismanagement. You might be willing to take a high offer to sell the business but, in general, others' opinions of the business would not be one of the risks you assess. If you are investing in a company in, for example, an IRA that you will not access for 30 years why would the periodic fluctuations in the company's perceived value to others affect your investment decision making. You should be considering whether it will still be in business, how much will it pay out in dividends to owners, how much and how successfully will it reinvest earnings to produce more earnings and dividends, and so on.
The point here is that measuring long term risks by short term market fluctuations does not match any useful or intuitive assessment of risk. I encourage readers of this book to read the super investors of graham and doddsville, a scathing critique of the whole efficient market school based on actual historical data.
The point here is that measuring long term risks by short term market fluctuations does not match any useful or intuitive assessment of risk. I encourage readers of this book to read the super investors of graham and doddsville, a scathing critique of the whole efficient market school based on actual historical data.
December 31, 2016
Sensible investment management is not the stuff of great genius. By grasping the simple concept of risk vs. reward and the fundamental elements of portfolio theory, you can build an investment portfolio that will exceed the performance of almost any broker or mutual fund manager anywhere. Bernstein's The Intelligent Asset Allocator: How to Build Your Portfolio is a solid common sense guide without the statistical "mumbo jumbo" that often renders such books unintelligible to the average investor. Read this book and act on it, then you too may implement a "coherent, effective, and dependable investment strategy" at much lower cost than those who rely on so-called investment specialists.
January 3, 2015
A fascinating description of the advantages of diversification. The author looks at lots of historical data about different asset classes to proove his point that diversification lowers risk and increases returns.
If you have to decide exactly how to diversify your portfolio, say wheather to hold 10% or 15% foreign stocks, you won't find the answer in this book. The author makes all his conclusions based solely on historical data. Even the children know how reliable is historical data regarding future returns. Stock picking and market timing are stigmatized, but the author was not very convincing about it.
If you have to decide exactly how to diversify your portfolio, say wheather to hold 10% or 15% foreign stocks, you won't find the answer in this book. The author makes all his conclusions based solely on historical data. Even the children know how reliable is historical data regarding future returns. Stock picking and market timing are stigmatized, but the author was not very convincing about it.
June 8, 2020
Another excellent investment book from William Bernstein - this time about asset allocation; a critical consideration for any portfolio. Due to the mathematical nature of asset allocation optimization, some understanding of math and statistics is required to make the most of this book, but it should be readable and immediately practical for most investors. The author's descriptions of complicated concepts such as the efficient frontier and risk optimization auto-correlation of stock returns are the clearest and the best I have read so far. Many of the lessons from the book are counterintuitive at first (i.e. portfolios behave differently from their constituent parts), but definitely eye-opening.
Anything written by Bernstein is required reading for any serious investor; especially his masterpieces "Four Pillars of Investing" and "The Investor's Manifesto" (I re-read the latter every year almost as a quasi-religious ritual , to keep myself on the true path :-) ) It happens that this book was written before Four Pillars; and there is some overlap between the two books.
If you have not read "Four Pillars of Investing", this is a great book on asset allocation and probably the only one you need to read on the subject. Highly recommended for anyone interested in improving their investment skills.
Anything written by Bernstein is required reading for any serious investor; especially his masterpieces "Four Pillars of Investing" and "The Investor's Manifesto" (I re-read the latter every year almost as a quasi-religious ritual , to keep myself on the true path :-) ) It happens that this book was written before Four Pillars; and there is some overlap between the two books.
If you have not read "Four Pillars of Investing", this is a great book on asset allocation and probably the only one you need to read on the subject. Highly recommended for anyone interested in improving their investment skills.
August 21, 2019
There is substantial, concrete evidence and great information the authors mentions and reiterates, and hits hard on to drive his point. However, that same information is dragged on and on. Reading this book is like reading a textbook for your Math class (and I don’t mean that in a good way). William Bernstein is no doubt an intellectual on the art of portfolio diversification, no doubt! This book’s prose is much like his personal memoir and not much enjoyable.
April 21, 2024
I felt like the first third of the book was really helpful, and I could follow the plan of reassessment and reallocating funds, but then the author really got bogged down in the details. For example, just touching on foreign market options would have been enough, but he dug deeper and I'm pretty sure my eyes glossed over at some point. However this did get me thinking a bit about diversifying more, so I guess reading it was a win.
April 23, 2024
The first half of this book is great and basic enough for most people to understand why diversified investments are a good idea. This book is a little old at this point, but it still stands up. We went through a housing meltdown and a recession since this book was published. It would be interesting to see the updated numbers.
January 2, 2025
Lots of alpha if you read this when it was written in 2000. On index funds, portfolio diversification, etc.
Not too helpful today.
Instead, just go to r/bogleheads or Mr. Money Mustache and invest in a three-fund portfolio, weighed by age.
//
I did enjoy reading about the benefits to rebalancing though. Trains you to work opposite the market.
Not too helpful today.
Instead, just go to r/bogleheads or Mr. Money Mustache and invest in a three-fund portfolio, weighed by age.
//
I did enjoy reading about the benefits to rebalancing though. Trains you to work opposite the market.
December 24, 2019
Great book to understand asset allocation. Easy to understand for non finance folks.
March 16, 2023
Dry and specific. Diversify.
November 25, 2018
Must read for anyone who wants to understand investment risk concepts. I am now a believer!
March 13, 2019
A good book to understand asset allocation when building a portfolio. It lacks, however, a broader view and more thorough global asset allocation explanation since the book is written mainly for US reader.
December 27, 2014
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 - more 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 more recent publications are more philosophical and thought provoking, but knowledgeable investors would be hard pressed to find a better, more practical and comprehensive guide than The Intelligent Asset Allocator. An updated edition to include his recent work would be very welcome.
The Intelligent Asset Allocator - more 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 more recent publications are more philosophical and thought provoking, but knowledgeable investors would be hard pressed to find a better, more practical and comprehensive guide than The Intelligent Asset Allocator. An updated edition to include his recent work would be very welcome.
September 22, 2013
rebalancing
asset allocation policy is more important than stock picking and market timing.
when being told the return, ALWAYS ASK THE RISK OF IT. THEY ARE INTERTWINED.
Most important concept:
dividing your portfolio between assets with uncorrelated results (imperfect correlation) increases return while decreasing risk
Adding a small amount of stock decreases the risk of a bond portfolio (efficient frontier)
Use a large number of poorly correlated assets.
something that everyone knows isn't worth knowing
The purpose of portfolio analysis is to find a portfolio mix that is not too far off the efficient frontier.
advantages of being an individual investor:
can aggressively rebalance a portfolio without annoying a client
can invest in small stocks
will not be fired after a bad quarter
asset returns have a tendency to mean revert
get a habit of contrarian investing
asset allocation depends on: tolerance to s&p 500 tracking error, the number of assets to own, tolerance to risk.
good companies are generally bad stocks; vice versa
value investing / growth investing
asset allocation policy is more important than stock picking and market timing.
when being told the return, ALWAYS ASK THE RISK OF IT. THEY ARE INTERTWINED.
Most important concept:
dividing your portfolio between assets with uncorrelated results (imperfect correlation) increases return while decreasing risk
Adding a small amount of stock decreases the risk of a bond portfolio (efficient frontier)
Use a large number of poorly correlated assets.
something that everyone knows isn't worth knowing
The purpose of portfolio analysis is to find a portfolio mix that is not too far off the efficient frontier.
advantages of being an individual investor:
can aggressively rebalance a portfolio without annoying a client
can invest in small stocks
will not be fired after a bad quarter
asset returns have a tendency to mean revert
get a habit of contrarian investing
asset allocation depends on: tolerance to s&p 500 tracking error, the number of assets to own, tolerance to risk.
good companies are generally bad stocks; vice versa
value investing / growth investing
This entire review has been hidden because of spoilers.
February 19, 2016
For long term investors with the willingness to accept straightforward quantitative arguments (or skim over them for the arguments about what the stats mean) this is simply the best book I have found in a long search for theory on asset allocation. It boils down modern portfolio theory into very digestible and convincing forms for the intelligent/diligent lay reader. Now, the one criticism: inevitably there are the "times when theory doesn't appear to work." He acknowledges these, but gives them short shrift vs the patience they deserve, sweeping them near but not fully under the rug. I wish'd he'd do them the justice he's done other parts of the book to round out what is a work that stands every test of structural integrity otherwise. Very well worth the time.
January 28, 2019
Although this is a standard practitioner level guide to the "modern portfolio theory" perspective of investing (the more risk you take, the more reward, broad market index funds are king, build a portfolio based in uncorrelated asset classes etc), and the material could be found anywhere, it's well written and easy to apply for those who are starting the process. There's even a small section on behavioural finance, but not really anything more than a summary.
Not really much to say on it, pretty much the same material as found in "A Random Walk Down Wall Street" or some other such book, just less than 50% the run time.
Not really much to say on it, pretty much the same material as found in "A Random Walk Down Wall Street" or some other such book, just less than 50% the run time.
May 27, 2014
Interesting book. A bit of the math was beyond what I could follow while reading in the back yard, but I got the gist of it. I just wish there was a more current version of it that used stats from the last 15 years to reconfirm the asset class correlations. Also, bond yields ain't what they used to be.
January 11, 2016
Great practical book for learning about investing. The book is a bit dated since it was written in ~15 years ago.
July 20, 2025
*Asset allocation is the only factor affecting your portfolio that you can actually control. Thus, it is the most important factor for investors to worry about – e.g., how much to invest in bonds versus stocks, how much to put into international stocks, etc.
*The essence of effective portfolio construction is the use of or a large number of poorly correlated assets. In other words, you want asset classes that move in opposite directions. For example, typically, when stock prices go down, bond prices go up. Also, foreign stocks and value stocks are not perfectly correlated with U.S. stocks, so during a bear market, owning these types of stocks may reduce risk.
*Foreign stocks belong in every investor’s portfolio. In his most basic model portfolio, Dr. Bernstein recommends investors own U.S. large stocks, U.S. small stocks, foreign stocks, and U.S. short-term bonds.
*Good companies are generally bad stocks, and bad companies are generally good stocks. Dr. Bernstein’s discussion of buying bad companies, or "value stocks," is the most persuasive of any investing book I have read in convincing me of the bonus of owning a mutual fund of "value stocks." Not only have their stocks outperformed "good companies’" stock, but there is also research supporting that these stocks are "less risky" in bear markets.
One other benefit of "The Intelligent Asset Allocator" is that it does get more specific than "Four Pillars" in terms of telling investors which mutual funds he recommends (most are with Vanguard) and also where these funds should be held (in taxable or non-taxable accounts). So, while this book is not essential reading, it is worth a read if you are looking for additional reading material to reassure you that you are on the right track during these trying times.
*The essence of effective portfolio construction is the use of or a large number of poorly correlated assets. In other words, you want asset classes that move in opposite directions. For example, typically, when stock prices go down, bond prices go up. Also, foreign stocks and value stocks are not perfectly correlated with U.S. stocks, so during a bear market, owning these types of stocks may reduce risk.
*Foreign stocks belong in every investor’s portfolio. In his most basic model portfolio, Dr. Bernstein recommends investors own U.S. large stocks, U.S. small stocks, foreign stocks, and U.S. short-term bonds.
*Good companies are generally bad stocks, and bad companies are generally good stocks. Dr. Bernstein’s discussion of buying bad companies, or "value stocks," is the most persuasive of any investing book I have read in convincing me of the bonus of owning a mutual fund of "value stocks." Not only have their stocks outperformed "good companies’" stock, but there is also research supporting that these stocks are "less risky" in bear markets.
One other benefit of "The Intelligent Asset Allocator" is that it does get more specific than "Four Pillars" in terms of telling investors which mutual funds he recommends (most are with Vanguard) and also where these funds should be held (in taxable or non-taxable accounts). So, while this book is not essential reading, it is worth a read if you are looking for additional reading material to reassure you that you are on the right track during these trying times.
February 16, 2022
William J. Bernstein takes the reader through a well-paced primer into how to manage your own money. It is for beginners and veterans alike (you'll be surprised to see how many finance professionals don't invest their own money and just blow it off on Lamborghinis and champagne with zero savings).
It extols the virtues of infrequent portfolio rebalancing, utilizing low-cost indexing, and sticking to your own financial policy through thick and thin. You need nerves of steel (crazy amounts of discipline) to stick to your portfolio allocation. Bernstein guides you through the theory, statistics, examples from the beginning of recorded financial history, to show you that as lock as you develop as uncorrelated a portfolio as possible and rebalance (sell low and buy high), and close your eyes from the financial pundits on TV pumping up stocks and industries, then you will likely have a healthy retirement.
I enjoyed how he paces the reader to read a chapter a day to digest the info - it's best to read in the morning and when on vacation. He even suggests you have a margarita after the first chapter to enjoy your vacation.
It extols the virtues of infrequent portfolio rebalancing, utilizing low-cost indexing, and sticking to your own financial policy through thick and thin. You need nerves of steel (crazy amounts of discipline) to stick to your portfolio allocation. Bernstein guides you through the theory, statistics, examples from the beginning of recorded financial history, to show you that as lock as you develop as uncorrelated a portfolio as possible and rebalance (sell low and buy high), and close your eyes from the financial pundits on TV pumping up stocks and industries, then you will likely have a healthy retirement.
I enjoyed how he paces the reader to read a chapter a day to digest the info - it's best to read in the morning and when on vacation. He even suggests you have a margarita after the first chapter to enjoy your vacation.
November 13, 2023
4.5/5
Por un lado, Bernstein explica excelentemente conceptos básicos y sus aplicaciones prácticas, y aún mejor conceptos más complicados simplificandolos y regresandolos al interés práctico del inversor pasivo. Tiene muy pocas lagunas, quizás solo en la explicación y defensa de Dynamic asset allocation le flaquea un poco la lógica y es una de las pocas cosas que defiende sin data o modelos en el libro.
También el tipo predice con bastante genialidad la explosión de las ETFs y su análisis de los internet stocks es extremadamente sobrio y terminó por estar en lo correcto en retrospectiva. Leí la versión del 2000.
Por el otro lado, el libro está bastante desactualizado y pasa a ser en gran medida un libro de historia más que una guía práctica. También le falta justificar sobre todo las proporciones que recomienda para sus portafolios más complejos y cómo prepararse para un bear market en la etapa de distribución del portafolio. En sus palabras: "pray for a bull market", y cuando analiza este escenario: "results are highly disturbing". Bro.
Los principios del libro siguen tan vigentes como nunca, eso sí.
Por un lado, Bernstein explica excelentemente conceptos básicos y sus aplicaciones prácticas, y aún mejor conceptos más complicados simplificandolos y regresandolos al interés práctico del inversor pasivo. Tiene muy pocas lagunas, quizás solo en la explicación y defensa de Dynamic asset allocation le flaquea un poco la lógica y es una de las pocas cosas que defiende sin data o modelos en el libro.
También el tipo predice con bastante genialidad la explosión de las ETFs y su análisis de los internet stocks es extremadamente sobrio y terminó por estar en lo correcto en retrospectiva. Leí la versión del 2000.
Por el otro lado, el libro está bastante desactualizado y pasa a ser en gran medida un libro de historia más que una guía práctica. También le falta justificar sobre todo las proporciones que recomienda para sus portafolios más complejos y cómo prepararse para un bear market en la etapa de distribución del portafolio. En sus palabras: "pray for a bull market", y cuando analiza este escenario: "results are highly disturbing". Bro.
Los principios del libro siguen tan vigentes como nunca, eso sí.
January 3, 2020
First couple of chapters may seem daunting since they include a lot of numbers and calculations, but it gets lighter after that. I liked the separate sections for more in-depth math details; you can skip them if not interested, and you will still gain value.
As the title says, the objective of this book is to teach you how to maximize returns and minimize risk and for this same reason I don't recommend this book as one of your firsts reads for investing. However, I do suggest that you give it a read once you know a little bit of portfolio theory and once you already have some investments going on.
As the title says, the objective of this book is to teach you how to maximize returns and minimize risk and for this same reason I don't recommend this book as one of your firsts reads for investing. However, I do suggest that you give it a read once you know a little bit of portfolio theory and once you already have some investments going on.
April 4, 2019
O livro é bom, mas acho melhor ler The Four Pillars of Investing do que esse aqui, já que o outro é mais completo. Gostei dos primeiros 5 capítulos foram muito úteis porque explica bem a parte de alocação de ativos. Como tinha acabado de ler o outro livro dele, achei muitas ideais repetitivas, além de ter frases quase totalmente iguais.
January 31, 2020
An accessible introduction to theory of asset allocation. Three important important take aways:
1) Portfolios behave differently than their constituent parts.
2) Re-balancing has both market benefits and psychological benefits.
3) Portfolios on the “efficient frontier” can only be known in retrospect. The goal is to find a portfolio mix that will come close to the frontier under a wide range of market circumstances.
1) Portfolios behave differently than their constituent parts.
2) Re-balancing has both market benefits and psychological benefits.
3) Portfolios on the “efficient frontier” can only be known in retrospect. The goal is to find a portfolio mix that will come close to the frontier under a wide range of market circumstances.
June 22, 2020
This book is a solid introduction to the idea of asset management and the logic behind it. If you wan’t to invest, but don’t really know where to start, this book is the perfect place. It is formative and also accurately detailed for someone who is starting his investing journey. In my opinion this is a book to avoid many of the pitfalls in the investing world and will point you in the right direction to build a sustainable and secure portfolio of assets.
February 14, 2021
Theories are backed by historical data and context, which is always appreciated. Investment philosophy is very similar to "All About Asset Allocation," which I think is a good book. May not be the best book for beginners as even the concepts explained in a simplified way are sometimes still confusing. I read the 2000 version, and a lot of the tools and resources mentioned are outdated. There might be an updated version.
August 15, 2025
Great overview of investing fundamentals. A bit dated now, but the core message remains useful.
Here's the big question I'm puzzling over today: will small cap value ever again offer a long run premium to the broader market? Or, have structural changes in equity markets (e.g., private equity capital buying up potentially successful companies before they go public) permanently devalued the once-substantial benefits of SCV investments?
Here's the big question I'm puzzling over today: will small cap value ever again offer a long run premium to the broader market? Or, have structural changes in equity markets (e.g., private equity capital buying up potentially successful companies before they go public) permanently devalued the once-substantial benefits of SCV investments?
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