Mebane Faber’s New e-Book – Shareholder Yield

Those reader’s who have read Faber & Richardson’s book “The Ivy Portfolio” might be interested in downloading Faber’s new book – “Shareholder Yield”.  It’s a bit of a marketing tool for his new ETF but the price is right – it’s free for the next 5 days - and there’s some interesting information in it.

Top Ten Investment Books: A Revised List


Education is a crucial step toward financial success.

Where does one begin when trying to come up with the top ten investment books?  Here is my revised list, but be forewarned, this is not a list of books that focus on either fundamental analysis of stocks, nor is it a list of books explaining technical analysis.  In fact, the list below is the antithesis of stock picking.  My recommendation of the top ten investment books focus on index investing and a passive approach to portfolio management. When I use the term passive, I do not mean that in the tightest definition of that term.


Here is my revised recommended list.

  1. Four Pillars of Investing – William J. Bernstein
  2. The Investor’s Manifesto – William J. Bernstein
  3. Think, Act, and Invest Like Warren Buffett* – Larry E. Swedroe
  4. The Little Book of Common Sense Investing – John C. Bogle
  5. The Elements of Investing* – Burton G. Malkiel and Charles D. Ellis
  6. The Intelligent Asset Allocator – William J. Bernstein
  7. The Power of Passive Investing* – Richard A. Ferri
  8. Asset Allocation – Roger C. Gibson
  9. Wise Investing Made Simpler* – Larry E. Swedroe
  10. Unconventional Success – David F. Swensen

It was not easy to pick which of Bogle’s books to recommend. His First 50 Years is definitely one to substitute for my number 4.  In this blog post I added several new books.  Numbers 3 and 5 take about two hours each to read and both include all the fundamentals of passive investing.

There are several ways to read these books. 1) Read them from start to finish as one reads most books. This looks like a daunting task if one is going to commit to reading all ten. 2) An alternative approach is to have, say the first seven or eight on your book shelf and you pick themes to read. For example, you might check the index of each and read all about asset allocation or rebalancing. Use them as reference books. If you take this approach, I highly recommend you read Bernstein’s second book, “Four Pillars” from start to finish so you have a sound base from which to begin developing your portfolio plan and eventually a strategy for portfolio management and tracking.  Another excellent starter is The Investor’s Manifesto.  It may be a little easier to read, so take that into consideration. Make the investment of time in a number of these books and it will reward you over the course of your investing life.

None of the above books go into sufficient detail about maintenance and monitoring portfolio and benchmark performance.  To fill in that gap take the time to examine and learn how to use the TLH Spreadsheet, available on this blog.

* New additions



Taylor Larimore’s Investment Gems

New Baby

Are you searching for new investment information?  Here is a link not to be missed.  Taylor Larimore is an investment writer, and one of the brains behind the Boglehead’s Forum site.  Even if you do not have time to read a lot of investment books, click on the Gems for links to the salient points contained in each book.  This is an extremely valuable resource for readers of ITA Wealth Management as the Gems reinforce many of the principles espoused on this blog.

As mentioned elsewhere on this blog, the basic principles of investing are not all that complicated, although many investors wish to make it so.  Since good investing requires patience, it is also rather boring.  Investing challenges begin to rise when one delves into portfolio management and measurement.  This is where the TLH Spreadsheet kicks into action.

Retirement Rule #3: Educate Yourself

Now that you have a savings plan in place and have accessed your retirement needs, it is time to continue to educate yourself.  The place I would begin is by reading a few of my top ten or best twelve investment books.  The books I recommend definitely have a bias toward using index or non-managed investment instruments.  My personal preference is non-managed index ETFs.  This viewpoint does not mean one should never sprinkle in a few individual stocks, but before you become a 100% stock picker, examine the evidence and check the odds against being successful.

Among some of the books I recommend you will find the authors advocating professional management.  Again, check the evidence and see if their fees add alpha to the portfolio.  The cost of professional management is extremely high and that is why I come back to the thesis of this post – Educate Yourself.  If you want to know the real cost of professional management, study this article.  It is not a trivial expense.

With a small amount of education (provided here at ITA Wealth Management) and the benefits of index ETFs, one can put together a simple portfolio that will serve you well as you continue your investment education.

Another starting point for your investment education is to read all Level 100 material found on this blog.  If you need help, you only need ask.

The Bogleheads’ Guide to Investing

Bogleheads' Guide to Investing was missed by far too many ITA readers when first published back on July 21, 2010 and for that reason I am bringing it forward so newer members will pick it up. 

Another investing book that should rank high on your reading list is "The Bogleheads' Guide to Investing," written by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf.  I first read this book over three years ago and at that time I did not appreciate all the gems of investing truth that are housed in this 291 page volume.  If nothing else, my second read is cementing the core ideas of investing in low cost index vehicles.  The emphasis of this book is to:

  • Live simply
  • Save frequently and early
  • Populate the portfolio with index mutual funds
  • Hold down costs
  • Watch taxes 

Over the past two years I've expanded on key ideas from this book.  This book recently made my Top Twelve Investment Books on Seeking Alpha.

If you are not aware of the Bogleheads Investment Forum, you will find it at this URL.  I placed a link to this forum over on Interesting Sites.  Of the different areas on the Bogleheads Investment Forum, my favorite is Investing – Theory, News & General


Photograph: Mykonos, Greece

Top 12 Investment Books: A Revised List

Are you looking for high quality investment books?  If so, I have a new list of twelve (12) books to read.  Platinum members are familiar with many of these books as they show up on several lists by going to All Categories and clicking on Books.

It is always difficult to hone down the list to as few as 12 books.  There are at least three more I could have easily listed.

Other books that came close to making the list were:

1. A Random Walk Down Wall Street – Burton G. Malkiel

2. The Smartest Portfolio You'll Ever Own – Daniel R. Solin

3. Millionaire Teacher – Andrew Hallam

4. The Fundamental Index – Robert D. Arnott, Jason C. Huse & John M. West

5. All About Asset Allocation – Richard A. Ferri

William Bernstein’s Reading List

Checking out a recent Efficient Frontier post by William Bernstein, I ran across his recommended reading list of ten books.  If I may brag just a tiny bit, I've read #'s 1, 2, 5, 9, and 10.  Instead of #7, I read parts of Security Analysis.  Unless you are into stock picking, it can be eliminated.

If you want to learn about kurtosis (mentioned in the EF article), may I suggest including Harold R. Evensky's book, Wealth Management  In addition to kurtosis you will also learn about log normal distribution, first and second central moment, skewness, leptokurtic kurtosis and platykurtic kurtosis.  Never ask me to explain these at a dinner party or any other time I don't have Evensky's book handy.  None of these esoteric investing terms are a requirement to being a smart investor.

In place of #6 I recommend Michael Edesess' book, The Big Investment LieThen add in a few of my Top Ten Investment Books.  Bernstein is correct in advocating some reading as a requirement to "getting it right." 

Oh, yes.  Keep reading this blog.

Actively Managed Mutual Funds: Stay Away Despite This Article

In the July 2011 issue of the AAII Journal is an article titled, "The Truth About Top-Performing Mutual Fund Managers."  The title is an attention grabber as 'top-performing mutual fund managers' is an oxymoron.  Here are the article highlights.

  • It is virtually certain that all top-performing managers will go through periods where they underperform.
  • Most high-performing managers can and do make up lost ground and produce excess return.
  • Managers should be evaluated over periods of time long enough for them to prove their worth.

While there is useful advice in the article about the futility of chasing "hot funds," the underlying thesis is that with careful analysis, one can ferret out active managers who will, over the long-run, outperform their benchmark.  How does one square these three highlights, particularly the second one, with recent research by Richard A. Ferri in his book, " The Power of Passive Investing?" Let me quote extensively from Chapter 6 of Ferri. 

"Finding an actively managed mutual fund that delivers alpha is a challenge for any investor.  Trying to select a portfolio of active funds that outperforms a portfolio of index funds is another matter entirely.  The odds of a portfolio using actively managed funds outperforming an all index fund portfolio is much lower than a single fund, and the odds drop with each additional active fund added to a portfolio, and the longer the funds are held.  A portfolio holding several active funds for several years has only a negligible chance of beating an all index fund portfolio."

I've written on the subject of active vs. passive management before.  Here are a few links.  Search for the words, Passive or Active, and you will find additional material on this subject.

  1. Active Management: A Mistake
  2. Active, Passive, and Mosaic Investing
  3. Why Doesn't Everyone Use Passive Investing

To read all about the analysis conducted by Ferri as well as other research references to Larry Martin, Allan Roth, and Fama-French, acquire Ferri's book.  It is well worth the expense.

Edited former blog post.

The Top Five Investment Books On Asset Allocation

Investors interested in digging deeper into the nuances of asset allocation will find the following five books of interest. Here is my revised list of the five best books on asset allocation.  Elsewhere on this blog you will find my Top Ten list of investment books.

  • The Four Pillars of Investing: Lessons for Building a Winning Portfolio – William J. Bernstein
  • Asset Allocation: Balancing Financial Risk – Roger C. Gibson
  • The Investor's Manifesto – William J. Bernstein
  • The Power of Passive Investing – Richard A. Ferri
  • What Wall Street Doesn't Want You To Know – Larry E. Swedroe

William Bernstein, of Oregon, is the author of my number one and number three picks. Actually, The Intelligent Asset Allocator, his first book, is my favorite (not on this list), but I would not recommend it as the first to read.  The five listed here are easier to read.  If you are unfamiliar with the language of asset allocation the Top Five will get you started.  Begin your journey with The Four Pillars. Roger C. Gibson, in his Asset Allocation (number two pick) book does a remarkable job of showing why one should build a diversified portfolio. However, I am still waiting for an author who will provide compelling data for using over ten different asset classes. Ferri's book, The Power of Passive Investing replaces his Asset Allocation book. 

Since I first wrote up this list of five books, Bernstein came out with his third book, Investor's Manifesto, and that book replaced Mark T. Hebner's book.  Hebner provides one of the best overviews for passive or index investing. In his Index Funds book, Hebner goes into the history and research for this approach to investing. If cost is an issue, this book is a best buy as it is online for free.  I also recommend visiting the IFA web site as it is one of the very best available. I provide a link off to the right under “Links.” Larry Swedroe fills out this list of outstanding Asset Allocation books.  My one complaint about Swedroe's book is that it does not have an index. If anyone has a favorite book on asset allocation, please add it to this list under the comments section. Your contributions are most welcome.

Lowell Herr Photograph: Lima, Peru students taking a snack break.

What Is Missing In The Best Investment Books?

I have several meters of investment books on my shelves and many of them are the best in the business.  What do they do well and what is missing?  The top investment books do a very good job with the following topics.

  • The importance of saving for retirement.
  • Pointing out the differences in passive and active investing.
  • Describing the importance of constructing an investment plan, particularly a Strategic Asset Allocation plan.
  • Articulating the advantages of diversifying all over the globe.
  • Defining the differences between using index funds and selecting individual stocks for a portfolio.
  • Listing how to avoid investing mistakes.
  • Describing what portfolio rebalancing is all about.
  • Inclusion of sample portfolios or asset allocation plans.

To fill out the requisite number of pages, there is abundant "collateral reading" in almost all investment books.

What is missing in even the best investment books?  A lot of the nuts of bolts of investing is absent.  Once one has the basic ideas (listed above) mastered, how does one go about constructing a portfolio that is designed to fit the individual investor?  How does one monitor and maintain a portfolio?  To many investors, this is tedious work, yet it need not take all that much time each year, depending on the complexity of the portfolio.

What the portfolio monitoring and maintaining does require, if one uses the TLH Spreadsheet, is some knowledge of how spreadsheets work.  Understanding spreadsheets should be an integral skill set of every high school graduate.

ITA Wealth Management is designed to help investors with the material not included in the very best investment books. So start by asking questions.