Other Writing Worth Reading
These books have left a lasting impact on us and many to whom we've recommended them. The book tile is a link to Amazon.com where you can buy the book. Rest assured we make no money from these links. They are merely there for your convenience.
Investments and Investing
- The Four Pillars of Investing - William Bernstein
- The Investment Answer—Dan Goldie and Gordon Murray
- Winning the Loser’s Game: Timeless Strategies for Successful Investing
by Charles D. Ellis
- What Works on Wall Street—Jim O’Shaughnessy
- A Different Way to Invest - Dimensional Fund Advisors (Pdf here)
- The Signal and the Noise: Why so many predictions fail but some don't- Nate Silver
- The Misbehaviour of Markets - Benoit Mandlebrot
- The Art of Possibility- Rosamund Stone Zander and Benjamin Zander
- Your Money or Your Life—Joe Dominguez, Vicki Robin and Monique Tilford
- The Number - Lee Eisenberg
- Not for Bread Alone - Konosuke Matsushita
- Money and the Meaning of Life—Jacob Needleman
- Money Harmony: Resolving Money Conflicts in Your Life and Relationships—Olivia Mellan
- The Seven Stages of Money Maturity—George Kinder
- It’s Not About the Money: Unlock Your Money Type to Achieve Spiritual and Financial Abundance—Brent Kessel
- The Cure for Money Madness: Break Your Bad Money Habits, Live Without Financial Stress—and Make More Money!—Spencer Sherman
- Against The Gods: The Remarkable Story of Risk - Peter L. Bernstein
- When Genius Failed - Roger Lowenstein
- Extraordinary Popular Delusions and the Madness of Crowds - Charles Mackay
- The Big Short - Michael Lewis
- Liar's Poker - Michael Lewis
Affluence, Philanthropy and Inheritances
- Silver Spoon Kids—Jon and Eileen Gallo
- The First National Bank of Dad—David Owen
- Wealthy and Wise—Claude Rosenberg, Jr.
Recent Articles on Passive vs. Active Investing
2014 may just be a tipping point year in the trend from active to passive management. Here are some good articles that may help convince you of this idea.
Will Invest for Food (The Economist, 5/3/2014)
This insightful article compares the outlook for active managers with that of “newspapers, record labels, and taxi companies.” The days of packaging up luck and selling it as skill are over.
Who Routinely Trounces the Stock Market? Try 2 Out of 2,862 Funds (Jeff Sommer, New York Times, 7/19/2014)
The title pretty much tells the story of how only a miniscule number of active managers were consistently able to score in the top quartile of their peers in every year for a five year period.
The Decline and Fall of Fund Managers (Jason Zweig, Wall Street Journal, 8/22/2014)
Jason Zweig summarizes a Financial Analysts Journal article by Charles Ellis which essentially declares the end of active fund management. As Ellis says, “The costs of active investment are so high and the incremental returns so low that, for clients, the money game is no longer a game worth playing.” We see no reason for this trend to reverse in the coming years.
The Triumph of Index Funds (Bill Saporito, Time Magazine, 9/18/2014)
Bill Saporito notes two big decisions from the pension fund behemoth CalPERS. The first is its increased use of indexing at the expense of active fund managers, and the second is its abandonment of hedge funds.
Investors Losing Faith in Active Fund Managers (Proinsias O'Mahony, The Irish Times, 1/21/2015)
While this article was published in 2015, it is focused on 2014 results such as the withdrawal of $92 billion from U.S.-domiciled active funds compared to inflows of $156 billion for passive funds. The author notes similar results in Europe
Warren Buffett's announcement that he will utilize index funds for his heirs. Here is what he said on page 20 of the shareholder letter: "I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals - who employ high-fee managers."
Here are a couple of other choice Buffett quotes over the years.
"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) of the great majority of investment professionals." - 1996 Shareholder Letter
"The American economy is going to do fine. But it won't do fine every year and every week and every month. I mean, if you don't believe that, forget about buying stocks anyway... It's a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market." - 2008 Shareholder Letter
"the active investors will have their returns diminished by a far greater percentage than will their inactive brethren. That means that the passive group – the "know-nothings" – must win." - 2007 Shareholder Letter
"The best way in my view is to just buy a low-cost index fund and keep buying it regularly over time, because you'll be buying into a wonderful industry, which in effect is all of American industry...People ought to sit back and relax and keep accumulating over time." - CNBC Interview 5/7/2007