The Intelligent Portfolio: Practical Wisdom on Personal Investing from Financial Engines | 
 enlarge | Author: Christopher L. Jones
Creator: William F. Sharpe
Publisher: Wiley
Category: Book
List Price: $27.95
Buy New: $13.97
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Avg. Customer Rating:  7 reviews
Sales Rank: 39214
Media: Hardcover
Number Of Items: 1
Pages: 364
Shipping Weight (lbs): 1.5
Dimensions (in): 9 x 6.3 x 1.3
ISBN: 0470228040
Dewey Decimal Number: 332.6
EAN: 9780470228043
ASIN: 0470228040
Publication Date: May 2, 2008
Availability: Usually ships in 1-2 business days
Shipping: Expedited shipping available
Shipping: International shipping available
Condition: Brand New. 100% money back guarantee. All books shipped from Strand Bookstore, New York City, USA.
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Product Description
The Intelligent Portfolio draws upon the extensive insights of Financial Engines—a leading provider of investment advisory and management services founded by Nobel Prize-winning economist William F. Sharpe—to reveal the time-tested institutional investing techniques that you can use to help improve your investment performance. Throughout these pages, Financial Engines’ CIO, Christopher Jones, uses state-of-the-art simulation and optimization methods to demonstrate the often-surprising results of applying modern financial economics to personal investment decisions.
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| Customer Reviews: Read 2 more reviews...
Perfect for judging personal investments August 13, 2008
1 out of 1 found this review helpful
Chris Jones covers all the bases related to investment choices based upon what's best for the personal investor rather than the financial advisor. Great examples, clear concise terminology, a perfect book for anyone interested in well grounded wealth accummulation over glitz!
Passive investing is the way to go...... July 9, 2008
2 out of 2 found this review helpful
This book does a number of things well.
1) it offers a great overview of the basics of personal investing (historical and future market performance factors, the roles of risk attitudes and time horizon when determining one's asset allocation, the value of diversification, tax issues, etc.)
2) it shows, mathematically, the perils of individual stock picking, and the negative impact this will likely have on your portfolio
3) most importantly, in my view, is the detailed examination of how and why a passive indexed approach will likely beat an active managed approach, unless the managers get lucky. No wonder John Bogle likes this book!
The book is heavy on concepts and examples, light on tough math. Not a super-light read, but far from a technical manual. Good for most readers, I would think.
In conclusion, if you implement what this author suggests, you can't go wrong.
Easy read with great investment advice June 30, 2008
5 out of 5 found this review helpful
This book was well written and easy to read.
The author makes the case that we would need about 1500 years of stock market return data to be able to predict stock market returns within +/- 1% with high confidence. Since we only have about 100 years of reliable data, we can predict within +/- 4% of the long term historical average. Over long 25 year time periods, stock market returns can vary by a factor of 6X or 6 times.
The author discusses the current world asset allocation of about 63:37 stocks:bonds. Interestingly enough, this is not far from the age old pension plan asset allocation of 60:40. The ratio of U.S. to foreign stocks is also about 60:40.
This author has a different opinion about periodically rebalancing a portfolio. He says rebalancing is really a market timing bet.........because you are betting against the consensus of market participants when the market asset allocation changes. He recommends rebalancing to changes in the over-all market allocation versus to a fixed stock:bond asset allocation ratio.
While conducting research for Financial Engines, they found that investors preferred having risk expressed in dollars versus percentages or sigma.
The author correctly focuses on using funds with low expenses, and he says most mutual funds have total expenses over 2% per year. He recommends adjusting your asset allocation around low expense funds...........if you are in a 401K with very limited choices. His work suggests that not investing in an asset class only costs you about 0.5% in return. If it costs you more than 1% in additional fees to get into a new asset class, then skip this asset class.
The author suggests having a maximum of 10% invested in REITs. He argues that if you own your home, you probably have no need for REITs as a separate investment.
The author also argues that commodities have a 0% expected return, so skip this asset class.
Over-all, this book is easy to read with very sound advice for investors.
Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pro's
The Richest Man in Babylon
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
The Millionaire Next Door
The Four Pillars of Investing: Lessons for Building a Winning Portfolio
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life
The Bogleheads' Guide to Investing
The Intelligent Portfolio June 18, 2008
2 out of 2 found this review helpful
We have used Financial Engines for tracking and planning since the initial article about it in Wall Street Journal many years ago. This book explains very clearly about how their data-based system actually works and the statistical information they use to make their recommendations. Very clear writing style and easy to read in several gulps. I have bought extra copies for my kids to use.
Unconventional, smart advice June 3, 2008
12 out of 12 found this review helpful
In the crowded space of personal investment books, this one distinguishes itself with some unconventional and intriguing advice. Here are some highlights I found eye-opening:
- Rebalancing is a bad idea! Rebalancing back to your 'target allocations' is effectively making a contrarian 'bet' that some assets have become overvalued and others undervalued. Such a bet against the market doesn't fit with the EMH.
- Small/value tilt isn't worth it; Midcap growth may be better! This was a shocker, as almost every asset allocation book out there advises tilting toward small/value, in keeping with the Fama/French research. But if you believe that overall market risk is the only kind worth taking, then the only 'tilt' worth making is toward asset classes with high correlation to the market and higher volatility than the market (e.g., higher 'beta'). Which, as it turns out, is Midcap growth! (and smallcap growth too, to a lesser extent)
- REITS, emerging markets, commodities -- not worth it. Again, some surprising advice. Emerging markets aren't well correlated with the overall market, so why bother with higher expenses when you can get your beta elsewhere? Ditto for REITs, which are really 1) a sector bet 2) a sector which is implicitly included in equities (all companies own real estate) and 3) a sector you're already overexposed to if you own a home. Finally, commodities -- I hardly need convincing there -- they're not a return-generating asset class at all.
So what should you focus on? Expenses, for one! The author makes a powerful case for choosing your asset classes with full awareness of the expenses of each. Again, get your beta the cheapest way you can, even if it means dropping an asset class. The foregone diversification benefit pales in comparison to the difference in expenses, in most cases. The author demonstrates this numerically.
Bottom line: this is probably the smartest book I've read in personal investing space. Although it's left me with plenty of questions to ponder, the final advice given is hard to beat.
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