The Four Pillars of Investing: Lessons for Building a Winning Portfolio
by William J. Bernstein

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Book Reviews of The Four Pillars of Investing: Lessons for Building a Winning Portfolio

Book Review: Bernstein hits the mark
Summary: 5 Stars

Bernstein's 4 pillars are Theory, History, Psychology and Business (in this case, the business of investment management).

His points are fairly clear. Most fundamentally, that the efficient nature of markets means the average retail investor is better off in a portfolio of tracker or indexed mutual funds rather than trying to seek the hot 'active' manager (whose future performance will most likely deteriorate back down to the median).

The value an indvidual investor can add is via asset allocation (the proportion of his portfolio in stocks, bonds, property etc.) and by an awareness of the historic tendency of markets to form valuation 'bubbles' (of the kind the stock market has been deflating since March 2000).

Bernstein covers all this ground and more (for example the whole issue of portfolio rebalancing, and the likely future returns from different asset classes) in a breezy, entertaining non-technical style...

I am a former City fund manager and Chartered Financial Analyst, and I wish I had known half of what Bernstein teaches so easily when I started out. I was at one of the City's largest houses, and we created so little value for our retail clients (after fees) that it is laughable.

If there is one major criticism of the book, it is that it is entirely American focused. There is no Vanguard equivalent in the UK, that offers a wide range of index funds for very low fees. So the UK reader will find himself frustrated that he cannot readily duplicate Bernstein's ideas. Also much of the advice about taxes, etc., requires translation into the UK milieu (it helps to know a 401k is a personal pension, for example).

This book should sit alongside classics like Burton Malkiel's 'A Random Walk Down Wall Street' as well as UK books like 'No Monkey Business' by Stuart Fowler, as a much read and reread, non technical survey of best practice in personal investment.

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