11-09-2006, 9:21 PM | Post #187100 |
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I have just finished "The Smartest Investment Book You'll Ever Read" by Daniel Solan. Mr. Solin is a leading securities arbitration lawyer and financial advisor. We can learn from his hands-on experience by reading these important excerpts:
"You don't have to sift through mountains of often-conflicting and confusing information from self-styled experts."
"The vast majority of investors do not need any advisor or broker."
"There is little independent, peer-reviewed scientifically valid evidence that anyone can successfully engage in either market time or stock picking consistently over the long term."
"The securities industry adds costs. It subtracts value."
"The odds against a hyperactively managed portfolio beating the comparable market returns over an extended period are very, very long.--There are hundreds of academic studies that demonstrate this fact conclusively."
"It is of great significance (and a deep, dark secret rarely discussed by hyperactive brokers and advisors), that in excess of 90 percent of actively managed mutual funds fail to equal or beat the benchmark indexes over the long term."
"There are exhaustive studies demonstrating that technical analysis has absolutely no validity, yet it continues to be used by many hyperactive investors and their brokers."
"Trading is hazardous to your wealth."
"Trading does only one thing for investors--it transfers money from their accounts to their hyperactive brokers' and advisors' pockets in the form of commissions and fees."
"What's wrong with trying to beat the markets? Just about everything."
"One study looked at the analyst ratings of 50 banking and brokerage firms as they related to 19 companies that went bankrupt in 2002. 47 of the 50 firms continued to advise investors to buy or hold shares in the companies up to the date the companies filed for bankruptcy."
"Asset allocation is the big decision you need to make. All the other decisions are small."
"Once you accept the premise that asset allocation is far more important than stock picking or market timing, your financial life becoe a stress-free walk in the park."
"Investors should own the entire market. By 'the entire market' I mean a broadly diversified portfolio of investments in domestic and international markets."
Mr. Solin recommends the following Vanguard Portfolios:
Total Stock Mkt................14%......28%.....42%.....56%
Total Bond Mkt.................80%......60%.....40%.....20%
"It should only take you 45 minutes or so, twice a year, to (rebalance) since you will only be dealing with three or four mutual funds or ETFs."
"If you choose one of the four portfolios I have described, and invest in the funds or ETFs I have specified, you are likely to beat the returns of 95% of actively managed mutual funds over the long term."
"If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what's going to happen in the stock market." (Benjamin Graham quote)
"Smart investors never engage in market timing because they know it is a sham."
"It would be hard to find anyone who does not agree that Morningstar has more data about mutual funds than anyone else in the world."
"An exhaustive study of the performance record of funds rated 'five stars' by Morningstar failed to find reliable statistical evidence that these funds performed any better than funds rated four stars or even three stars."
"Another study noted that funds selected by Morningstar for its own 401(k) plan significantly underperformed a broad U.S. market index for the period 1991 to 1999."
"No one has the ability to predict the next 'hot' manager. All we know is that is is unlikely that he or she will be 'hot' for long."
"Brokerage firms are paid for 'shelf space' so they will recommend some mutual funds and not others."
"(Wrap account) fund managers have no more ability to pick stocks or to time the markets than a 'financial astrologer'."
"The bottom line is that the combination of higher costs, lower performance, and greater tax consequences make all investment touted as being able to beat the markets worse than a zero-sum game."
"When you have two asset classes in your portfolio that do not correlate highly with each other, you minimize yur risk significantly."
"I still don't believe anyone should be invested 100% in stocks."
"One study compared the performance of the house funds of American Express, Smith Barney, Prudential, Merrill Lynch and Morgan Stanley for a 10-year period with similar funds managed by well-known independent fund families. The house funds got trounced."
"Most investors should not invest in a hedge fund."
"The average life of a hedge fund is only about three years."
"Investing all of your assets in any one sector of the market--especially a volatile sector--is foolhardy."
Originally posted in thread: 54472