Tradeless Nirvana

What Wall Street Doesn't Want You to Know: How You Can Profit from the Indexing Revolution

Tradeless Nirvana

This book is an excellent follow-up to Larry’s first successful title on index investing, The Only Guide to a Winning Investment Strategy You’ll Ever Need. As in his first book, the author copiously quotes and analyzes the tenants of Modern Portfolio Theory and debunks, in clear and crisp prose, many of the myths perpetuated daily by the financial media. The systematic, academic approach to dissembling the myth that active managers can outperform the market leaves little doubt that Wall Street’s success is not perpetuated by financial truths, but rather through marketing savvy. Practices which highlight to this point include selection of the index that makes the manager’s returns look the best over time, regardless of whether the index is an appropriate comparison of the manager’s holdings; depiction of returns on a “gross” basis as opposed to showing the same returns net of management fees, trading costs, cost of cash, and market impact; and perhaps the largest and least-discussed factor inhibiting real returns – taxes. See if you can find any of these factors mentioned or accounted for the next time you see Peter Lynch chatting you up in a 30-second sound bite!

The book goes on to provide many useful morsels of investment wisdom such as explaining risk and how risk figures into asset allocation. It concludes with some sample allocations for readers to consider. One criticism would be that we would like to see more index product examples quoted from sources other than Dimensional Fund Advisors (DFA) and their proprietary products that can only be purchased through Registered Investment Advisors (RIA) such as the author’s firm. If you can keep this in mind as you study the author’s superior research and analysis of the benefits of passive investment over stock picking, you will come away with the unquestionable conclusion that it is certainly time to raise the petard against the drivel that is fed to the American mutual fund investor on a daily basis through television and the financial press.