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Active managers persistently lag the returns of benchmarks and index funds that track them, with the excuses for underperformance recycled every year. This comprehensive book is the antidote for the active managers’ siren song. If you understand the benefits of indexing, or systematic investing, it will reinforce your commitment while increasing your knowledge.
If you don’t yet believe, Swedroe and Berkin provide a compelling case that you’re playing the loser’s game of active management. Alpha, or outperformance against appropriate risk-adjusted benchmarks, is shrinking as it gets converted into beta, or factor exposures. They demonstrate that even for the most talented managers, their ability to add value is waning because: the amount of alpha available is declining; it must be split among an increasing amount of investment dollars; and the competition is getting tougher.
In this greatly expanded second edition, Swedroe and Berkin show you how to develop an investment plan that focuses on what risks to take, and how much of them, as well as how to build a diversified portfolio. They present a list of vehicles to consider when implementing your plan and provide guidance on the care and maintenance of your portfolio. As a bonus they add appendices that will make you a more informed and, therefore, better investor.
This makes The Incredible Shrinking Alpha a complete guide to successful investment strategy.
Publisher : Harriman House; 2 edition (Aug. 25 2020)
Language : English
Paperback : 220 pages
ISBN-10 : 0857198246
ISBN-13 : 978-0857198242
Item weight : 1.05 kg
Dimensions : 16 x 1.24 x 21.23 cm
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Sailor Dunc –
Among the Incredibly Shrinking worthy in this field.
In the vast pulp of the investment and trading advice space very few articles, posts, blogs and books are worthy keepers. But this book is one of them. Why? Not because it is Alpha. Really its a pretty Beta rehash of available research, “nothin but the facts mam”. But popular access to objective facts are a shrinking commodity. Delusional or promotional fake news abounds in this genre. Nor does it lack shortcomings. In its relentless explanations of the impossibly of Active Management consistently beating the market, it would have been more powerful to explicitly include most individual trader activity as a form of active management. Readers can at least draw the lesson, if the Yale dudes and other brightest and best with unlimited fire power can’t persistently foretell tomorrow how much am I kidding myself about my prowess? As the authors point out, the Protestant work ethic of “if you just “try hard enough” does not suffice in predicting capital markets at the tradable level.Despite its rare candor, its lightness in specific guidance and over faith in finding alpha after all via exotic hedge funds and high MER ETFS that promise the usual “proprietary” elixirs only that theirs are based on FACTORS! Oh my then! Pretty objective. Alas the fashionably hip word describes comes down to screeners and indicators available fo free and that sill involve the devilish details of subjective decisions and ones own timing. But don’t worry about bad spells, hang in there, they implore. Some of these better bets take up to “67 years” the come through in your favor. Oh great that sounds just peachy! No its a great discussion but the answers found here won’t do for most mortals. What pushes it back to a high 4 is the appendixes. There one finds the extraordinarily uncommon truth about the reality of what dividends are: Divisions of capital cleaved off share price and distributed to holder. Share prices are subtly automatically adjusted downward. There is nothing sinister about this reality. Receiving a dividend stream may be a cornerstone of cost effective (zero commission) steady little drawdowns of ones capital when at that phase. But hyping it as if it was interest or a magical way to make the gyrations of price next to irrelevant one of the most lucrative lies of the hype machine. Dividends may still have a very big role to play in wise passive investing, so much more deserves to be expanded on this topic. The authors help lift the veil on some of the obscured issues.There is also so much more to be gained by pursuing the logic of the passive/active beta/alpha realities deeper. Authors that do so won’t get many Talking Head gigs, so reward their efforts to expand such rare education in this space. At the incredibly shrunk price there is no excuse not to press BUY NOW. Sail on!
a –
This book is very similar in both content and format to John Bogle’s writing. A seemingly endless stream of reiteration of a few key points (mainly choose passive funds over active management.) There was a lot of very good information and I was especially interested in learning about how to compare and evaluate different funds that offer similar products (such as an emerging market or a small cap value fund), but a LOT of the book is spent restating the point that active management has historically underperformed passively structured funds fair a vast majority of the time. There are a million references to articles, books, and studies, but this could have been just as effectively compressed into one chapter. The same points are often made in multiple chapters, then referenced almost verbatim, THEN summarized at the end of the chapter. These things, along with the multiple pages of testimonials at the beginning made this feel too padded out to justify its length.Having said that, I would still recommend the book to anyone who wants to build a sustainable, long term portfolio. Especially a retirement portfolio. I do think the asset allocation options described will help most people develop a plan based on their risk tolerance, situation, and time horizon. I also appreciate the guidance on minimizing expenses and even the mental preparation for how to handle fluctuations in the market without panicking.
Scott Phillips –
This book makes a compelling case that managers generating alpha is going to get harder and harder. Therefore the best plan is to decide which factors you want to be exposed to and do it in the lowest cost way you can. Brilliant concept, argued well.
Jocelyne –
I spent a ton of time trying to beat the market, trying to select the best stocks, and this book gives a great deal of evidence that such an approach is a waste of time. Far better to just buy the market by buying index etfs, and give up on beating the market or trying to time the market. This book is one of the most important investment books you will ever read.
tipton eyler –
While the level of research cited to confirm the writer’s view is impressive, it also makes for a long slog through the first five chapters for the lay person. Overall, though, it is an important book for all investor’s to read. Well worth the slog.
WJC –
I found the first edition of this book eye-opening when it came out several years ago, so I was delighted to see this second edition released. Given how much has happened in the world, one can’t help but wonder whether older insights still apply. Swedroe & Berkin did not disappoint in this update, revisiting what they’ve built, adding new references and citations when available, and generally connecting their past work to investor’s latest challenges.Recently, on Twitter, a follower commented: “Having trouble finding books at this intermediate level that take me further than beginner books do, into understanding why things are so, without being too dry or academic.” I promptly recommended this book to him. I recommend it to you, too.