My most recent free book was Wealth Without Worry by James Whiddon and Lance Alston both from JWA Financial in Dallas.
I write a lot about trying to hone process. I believe that the building blocks for starting out is a thorough education of how markets work. The authors devote a lot of space to market history and how the numbers work. This is done to set up their conclusions about portfolio management which I'll get to.
Combining market history with current events to build a forward looking analysis is how I describe my process. Wealth Without Worry goes a long way toward building a solid foundation to understanding market history from a numbers standpoint.
This alone makes the book worth owning. Once a do-it-yourselfer has the basics of understanding down they can then better challenge what they read and hear from other people. It is this filtering that actually creates investment process.
The book also gives a very detailed blueprint for novice investors about how to construct a portfolio that captures the stock market, in the broadest sense, without making a full time job out of it.
It is these attributes that make the book a good read (I knocked it out as my wife watched Moving Up and Trading Spaces on Saturday night).
The authors also share their conclusions about how they manage money based on the historical data they study in the first couple of chapters. I disagree with most of their conclusions.
The authors do not believe in market timing of any sort, ever. They know their market history. History has many episodes where some moderate defensive action is the right thing to do, inverted yield curves as an example. Long time readers know I am not talking about going 100% cash, but just a few tweaks that could make a noticeable difference and help miss a portion of nasty declines. Keep in mind history bares this out and these guys clearly know their history (repeated on purpose).
They only use open end index funds. Actually a very specific type index funds from DFA which are purer than other index funds. I do believe in letting the market do its thing and making sure you are there to capture the effect but there are many important slices of the investment world that won't be captured with their approach.
There was also something important missing. Capital market continually evolve, industries continually evolve, countries continually evolve, there is more I could list but you get the idea. I cannot recall one reference to any type of forward looking analysis. Again I think a combination of understanding history plus current events can create a reasonable forward looking analysis.
I could not look a client in the eye and give them a portfolio that relies so heavily on the rearview mirror. It is the solid foundation built early in this book that makes the isolating the flaws possible. So you don't think I am being too harsh, every approach to portfolio management has flaws. No exceptions.
Apologies because this review may not be what they had in mind but this is my honest assessment. The numbers, history and interpretation of both are awesome. The application of the information is not.
1 comments:
There's alot of pitching out there from folks using the DFA funds. Most of the "historical data" is suspect. A lot of the "past performance" is hypothetical. Also, the DFA funds are the opposite of pure. They market themselves as "Enhanced Indexes".....meaning they are managed somewhat. If you look at some of the holdings, say, in large cap value, you will see names that are also in the S&P Large Cap Growth portfolio. Lot of wiggle room.
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