Preface xi
Acknowledgments xiii
About the Author xv
Introduction The Market Wants to Be Your Friend xvii
Mistake #1 Market Timing 1
The Idiots 5
The Liars 5
Why Is It So Hard to Beat the Market? 7
The Masses Get It Wrong, Over and Over Again 8
The Media Get It Wrong, Over and Over Again 9
Economists Get It Wrong, Over and Over Again 9
Investment Managers Get It Wrong, Over and Over Again 14
Newsletters Get It Wrong, Over and Over Again 17
Your Buddy 18
Strategies That Dont Sound Like Market Timing but Are Market Timing'Oh, and They Dont Work, Either 19
What Smart Investors Have to Say on Market Timing 21
Knowing All This, Why Would Anyone Market Time? 21
Corrections 22
Bear Markets: An Overview 26
When Bear Markets 'Turn,' They Make People on the Sidelines Look Silly 30
The Market Is Volatile'Get Used to It 30
You Cant Wait for Consumers to Feel Good 31
Learning to Accept the Bear Markets 33
Miscalculating the Risk of Market Timing 34
But What If I Am Perfect? 35
Lump Sum Investing versus Dollar Cost Averaging 36
Learning to Fly 40
Avoiding Mistake #1'Market Timing 42
Mistake #2 Active Trading 43
The History of Active Trading 44
Active Investment Managers Lose to Indexing 45
Fisher Investments 46
Legg Mason Value 46
Jim Cramer 48
Newsletters Lose to Indexing 50
Active Mutual Funds Lose to Indexing 50
Survivor Bias (a.k.a. Mutual Funds Perform Even Worse Than the Data Suggests) 52
What About the Winners, Huh? What About the Winners?! 53
Hedge Funds Lose to Indexing 56
Endowments'Misperception of Performance 60
Venture Capital (Sounds Sexy but Usually a Dog) 62
The Taxman Commeth (a.k.a. Dear Goodness, It Gets Worse) 64
Portfolio Activity Hurts Performance 64
But Doesnt Active Management Work in a Down Market? 65
Why Indexes Win 65
S&P 500, Here I Come! 67
Avoiding Mistake #2'Active Trading 69
Mistake #3 Misunderstanding Performance and Financial Information 71
Misunderstanding #1'Judging Performance in a Vacuum 71
Misunderstanding #2'Believing the Financial Media Exists to Help You Make Smart Decisions
(a.k.a. the Media Is Killing You) 73
Misunderstanding #3'Believing the Market Cares about Today 77
Misunderstanding #4'Believing an All-Time High Means the Market Is Due for a Pullback 80
Misunderstanding #5'Believing Correlation Equals Causation 83
October Is the Worst Month to Invest 84
Sell in May and Go Away 85
Misunderstanding #6'Believing Financial News Is Actionable 86
Misunderstanding #7'Believing Republicans Are Better for the Market Than Democrats 87
Misunderstanding #8'Overestimating the Impact of a Manager 89
Misunderstanding #9'Believing Market Drops Are the Time to Get Defensive 90
Avoiding Mistake #3'Misunderstanding Performance and Financial Information 91
Mistake #4 Letting Yourself Get in the Way 93
Fear, Greed, and Herding 93
The Overconfidence Effect 97
Confirmation Bias 101
Anchoring 103
Loss Aversion 105
Mental Accounting 106
Recency Bias 108
Negativity Bias 111
The Gambler 113
Avoiding Mistake #4'Letting Yourself Get in the Way 114
Mistake #5 Working with the Wrong Advisor 117
Most Advisors Will Do Far More Harm Than Good 118
Advisor Selection Issue #1'Custody 118
Advisor Selection Issue #2'Conflict 123
Advisor Selection Issue #3'Competence 129
A Final Thought on Advisors'Principles 132
Avoiding Mistake #5'Choosing the Wrong Advisor 132
Mistake #6 Getting It Right 135
Rule #1: Have a Clearly Defined Plan 135
Rule #2'Avoid Asset Classes That Diminish Results 137
Rule #3'Use Stocks and Bonds as the Core
Building Blocks of Your Intelligently Constructed Portfolio 141
Putting It All Together 144
Rule #4'Take a Global Approach 145
Rule #5'Use Primarily Index-Based Positions 147
Rule #6'Dont Blow Out Your Existing Holdings 147
Rule #7'Asset Location Matters 149
Rule #8'Be Sure You Can Live with Your Allocation 150
Rule #9'Rebalance 151
Rule #10'Revisit the Plan 152
The Ultimate Rule'Dont Mess It Up! 153
Portfolio Examples 154
A Path to Success'Intelligent Portfolio Construction 158
The Ultimate Mistake 161
Conclusion Lets Roll! 165
References 167
Index 175
(0 Comentarios)
