The Four Pillars of Investing

[Sam]

William Bernstein's book pops up several times a week on this forum since I joined this board. Yet, I haven't read it. Before I commit myself to spending $20, I have a few questions:

1) Isn't there a single thing wrong about his theory? What didn't you like about this book?

2) Sounds like he's saying that there's no chance of beating the market. Did he mention Warren Buffet at all in his book?

3) Do you follow his method to the letter?

Should I spend TWENTY dollars on this book? Thanks.

 

[CCdaCE]

I think it's the best book I've ever read, out of about 20-30 I've read.

1. What do you propose his theory is? I think it's just a good foundation of information and how to think. I don't think he's saying concrete vs. wood basement for a foundation. He's saying "here's what your foundation should do". Bad analogy perhaps.

2. He's not saying there's no chance... he's saying you don't have very good odds.

3. Again, he proposes several methods, not just one "theory" or "method".

See Book Report - Four Pillars if you haven't already.

-CC

 

[lswswein]

http://early-retirement.org/forums/index.php?topic=661.0

Great book - also get the Intelligent Investor; Btw you might find them in your library system

-h
p.s: I think you are an engineer so you should not have too much problem with the math

 

[lswswein]

Btw I would also recommend Bernstien's website: It is not updated as frequently as before.

http://www.efficientfrontier.com/ef/index.shtml

-h

 

[lazygood4nothinbum]

i'm reading this based on nords' recommendation. i am on my 2nd time through it. having never studied much finance before, i feel it is giving me a good understanding of how money works.

 

[justin]

How do you invest currently? If you are paying high expense ratios, sales loads, or 12b-1 fees, you could probably save much more than $20 in a single month by implementing some of the suggestions outlined in Four Pillars.

If you already are primarily invested in index funds and paying 0.2-0.3% expense ratios, then this book may not benefit you very much. It is a good "fundamentals of investing" book.

 

[cute fuzzy bunny]

Get it from the library...free! If yours doesnt have it, ask them to order it from another larger nearby library.

 

[DRiP Guy]

1) a) Isn't there a single thing wrong about his theory?

He does not propose any single and unique theory. He amalgamates the wisdom of many sources and presents the naturally occurring consequences in plain language for your consideration.

1) b) What didn't you like about this book?

It did not include a magic formula to beat the market

2) a) Sounds like he's saying that there's no chance of beating the market.

Yup, on average. If that is your criteria for buying an investment book, keep shopping.

2) b) Did he mention Warren Buffet at all in his book?

Yup.

3) a) Do you follow his method to the letter?

I am not sure what his 'method' is. Please see answer to 1) a)

3) b) Should I spend TWENTY dollars on this book? Thanks.

Not unless you want to. I did. I can't imagine a better use of twenty dollars from my own budget.



If you are interested, you should be able to go to Amazon, and browse the inner and outer jacket, as well as about five random pages all in pdf format for free. I would hazard that should clarify your decision for you, as it's prose style and advice is quite consistent.

 

[Sam]

Thank you all, guys/gals. I just ordered it from Amazon.

I was kidding about the $20. I was more concerned about the book's worth as far as time spent reading it.

 

[DRiP Guy]

Thank you all, guys/gals. I just ordered it from Amazon.

I was kidding about the $20. I was more concerned about the book's worth as far as time spent reading it.

Seriously, you will enjoy it.

8)

 

[W2R]

1) Isn't there a single thing wrong about his theory? What didn't you like about this book?

His ideas are sensible and logical. I picked up a lot of it from reading the diehards forum before I got the book, though. Still, reading it helped me to "think it through", and I still pick it up and read sections now and then. If you aren't convinced when you buy the book, you will be when you finish it.

As to what is wrong with the book.... to tell the truth, parts of it are really slow reading. He goes on and on about stock market event after event out of history to prove his points. I kept thinking, "OK, already, got it, agreed, duh, ANYTHING ELSE to say?" And really, his basic ideas are not that complex because they don't need to be. So he goes on and on demonstrating ideas that seem clear to begin with, and the tedium builds.

Still, it is the only book on investing that I have recommended to my dear friend Frank, despite how tedious it is in certain chapters. I can't give it any higher praise than that.

(I didn't really have anything to say regarding your other questions)

ETA: Oops, just read that you ordered it. Good decision! Even the tedious parts just drive home his points, which is not a bad thing.

 

[mb]

Should I spend TWENTY dollars on this book? Thanks.

No, you should get it from the library!

 

[Sam]

As to what is wrong with the book.... to tell the truth, parts of it are really slow reading. He goes on and on about stock market event after event out of history to prove his points. I kept thinking, "OK, already, got it, agreed, duh, ANYTHING ELSE to say?" And really, his basic ideas are not that complex because they don't need to be. So he goes on and on demonstrating ideas that seem clear to begin with, and the tedium builds.

Still, it is the only book on investing that I have recommended to my dear friend Frank, despite how tedious it is in certain chapters. I can't give it any higher praise than that.

(I didn't really have anything to say regarding your other questions)

ETA: Oops, just read that you ordered it. Good decision! Even the tedious parts just drive home his points, which is not a bad thing.

Thanks. I look forward to reading it.

 

[cute fuzzy bunny]

As to what is wrong with the book.... to tell the truth, parts of it are really slow reading. He goes on and on about stock market event after event out of history to prove his points. I kept thinking, "OK, already, got it, agreed, duh, ANYTHING ELSE to say?" And really, his basic ideas are not that complex because they don't need to be. So he goes on and on demonstrating ideas that seem clear to begin with, and the tedium builds.

This was the same problem I noted, and the same issues with "the millionaire next door" or any business presentation I ever received from an academic/phd type. Apparently you must be beaten into submission with data until the inexorable conclusion is presented.

I'm more of a "tell me what you found out and want to do, and if I dont believe or understand some piece of that, explain that little part to me" sort of guy.

What I did with several of these books was read the conclusions/chapter summaries, then skimmed the rest, mostly looking for pretty pictures!

 

[runchman]

Apparently you must be beaten into submission with data until the inexorable conclusion is presented.

kinda like 'the automatic millionaire' that I browsed through at the bookstore one day - an entire book wrapped around the concept of investing via automatic debit.

as we would have said as kids, "Well no duh!"

- John

 

[Sam]

... and the same issues with "the millionaire next door"

Agreed. I finished the "millionaire next door" a few months ago. It took a lot of effort to not skip the repetitive stuffs.

BTW, I totally disagree with the chapter on cars. Those millionaires could have saved a lot more if they stayed away from used american cars.

 

[heebygeeby]

Seeing that a few of us are recommending books, I'm going to go ahead and mention this one: http://www.amazon.com/Index-Funds-12-Step-Program-Investors/dp/0976802309

And, if you don't want to purchase it, you can read it online here: http://www.ifa.com/12steps/

 

[Sam]

Dumb question: Does William Bernstein has any thing to do with AllianceBernstein?

www.alliancebernstein.com

 

[lswswein]

Dumb question: Does William Bernstein has any thing to do with AllianceBernstein?

www.alliancebernstein.com

absolutely nothing at all

 

[cute fuzzy bunny]

Those millionaires could have saved a lot more if they stayed away from used american cars.

Cracked me up. For those who didnt read it, they suggested buying the class of car you wanted (compact, mid size sedan, whatever) based on price per pound. Even provided a chart/graph of the best options.

 

[martyb]

I bought the book through Amazon laST week, just barely cracked the first few pages so far. I'll devote some time to it this weekend. So far so good.

 

[DRiP Guy]

I'm a little pooped out to do this all right now, but I will say this as a place-holder:

1. "Four Pillars" is great. Bernstein is both wise and a good author. That said, he is NOT perfect.

2. I have had some misgivings with some of his stories used to support ideas. The ideas may be sound, but a few of the illustrations just seem like old saws that may not hold up to either fact-checking or statistical rigor. I am NOT saying anything other than he may have made the all-too human mistake of being attached to some old war stories and useful examples that might not all pass a 'Snopes check'.

3. Sure enough, his use of the example of Bayesian statistics to find a sunken sub, USS Scorpion, seemed unlikely, and I thought the numbers seemed artificial, and the story highly improbable. (The technique was used, has validity, but the story was a bit TOO pat).

4. My intuition appears correct. Here are a couple of clips directly in contravention of Bernstein's colorful story. As is usual with accidents involving aircraft, ships, and other intricate technology, the real story is MORE intriguing, less certain, and far more subtle than the short chestnut would make it out to be.

5. So is his point wrong? No. But this (IMHO) is likely just one of many places where loose use of 'stories' or 'common knowledge' might mar otherwise excellent insight and advice.

Many might think it unworthy of me making this criticism, but to me anything that gets us closer to the ground truth is good. Hopefully some will be interested.

I am going to link to three or four small blurbs out of a book available on Amazon, and can't imagine this would be an issue because 1) It ought to generate eyeballs and interest for book (I have no $ interest), 2) "Fair Use" Law indemnifies those who are not for profit, doing critical assessment, using in limited way, extended use, etc. I am doing all of that.


Cover:
http://i17.tinypic.com/2rhxwu0.png

Intro to Gordon Hamilton and SOFAR:
http://i16.tinypic.com/2wq5uu0.png

SOSUS:
http://i15.tinypic.com/2afa8e9.png

La Palma:
http://i16.tinypic.com/2i7vj44.png

Recordings & concept:
http://i17.tinypic.com/4fxgg8l.png

3 months of searching...:
http://i15.tinypic.com/4hl70qh.png

The sled finds it:
http://i16.tinypic.com/33farr6.png

Bottom line? Well, this is how Gordon Hamilton (and many others) saw it:

At the Bermuda SOFAR Station the initial SOSUS research was done (with Joe Worzel), the first Precision Depth Recorder was developed (by Bernie Luskin) and my research, data and analysis led to finding the lost USS Scorpion debris field in 1967.

http://www.ldeo.columbia.edu/ldeo/alum/stories/Hamilton_Gordon_Reminiscences_2.htm

 

[sgeeeee]

William Bernstein's book pops up several times a week on this forum since I joined this board. Yet, I haven't read it. Before I commit myself to spending $20, I have a few questions:

1) Isn't there a single thing wrong about his theory? What didn't you like about this book?

Bernstein does not really provide a prescriptive theory. He provides a lot of data about what has and what hasn't worked in the past. I don't find Berstein as compelling as many posters on this board. He does collect and present a great deal of academic and financial literature in a well-organized fashion. But I also think he sometimes gets lost in mathematical space and fails completely to couple the mathematics to reality. This results if a few mistakes.

2) Sounds like he's saying that there's no chance of beating the market. Did he mention Warren Buffet at all in his book?

I think he builds a strong case that beating the market over the long term is very rare. He does discuss Warren Buffet. I have to add, that investors need to understand that Warren Buffet achieves his results as much through his management skills as through his investment skills.

3) Do you follow his method to the letter?

there really isn't a prescriptive method to follow. I don't agree with all of his conclusions.

Should I spend TWENTY dollars on this book?

No. Check it out from the library. That's what I did.

 

[clifp]

Sadly Pillars is not only not available in the Barnes & Noble, but the only copy in the Hawaii library system is an downloadable audio book.

Of course, the audio book software isn't compatible with an iPod (thank you Apple and RIA) so I am listening to it while surfing the web.

Frankly without the charts I am not sure it is all that great.

 

[ERD50]

Of course, the audio book software isn't compatible with an iPod (thank you Apple and RIA) so I am listening to it while surfing the web.

Don't blame Apple. Blame the audio book publisher - they chose the DRM. iPods will play any DRM free audio.

The music labels forced the DRM on the music that they sell through the Apple iTunes Music Store.


Steve Jobs statement: http://www.apple.com/hotnews/thoughtsonmusic/

Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free. ...... Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.

-ERD50