Archive for the 'Books' Category

Favourite Financial Magazines, Books, or Websites

I got tagged by Canadian Money Advisor in hist article, “What are your favourite financial magazines, books, or websites?!!” Here are mine:

The Wealthy Barber by David Chilton: One of the first financial books I ever read. I read some of it when I was really young and first learned about compounding and RRSPs and other simple stuff. I’ve read some of the chapters again over the last few years and it has some great financial advice in it.

The Intelligent Investor (revised edition) by Benjamin Graham: Read this a couple years ago and it really changed the way I think of investing. Mainly it made me realize that being a successful stock picker is really hard and unless you have all day to spend doing it, don’t do it. Great historical recounts of the tech boom (and bust) of not only the 90s but the 60s as well, and other famous bubbles (and bursts). It also taught me to not worry about the daily goings-on in the market.

Efficient Market Canada website by Marting Gale: The writings on this site greatly influenced my decision to go with an all-passive portfolio and to use ETFs to achive that. It has lots of great articles and recommendations.

A Random Walk Down Wall Street (ninth edition) by Burton Malkiel: Since I have an all-passive portfolio, I figure I better learn more about the theory behind this in detail. This famous book is a good start. I am not almost half-way through it and I definitely recommend it for all investors.

Unfortuntely I cannot recomend any magazine, newspaper, or other media publication. Some have decent articles once in a while but not usually. If anyone has any recommendations, please let me know.

Popularity: 9% [?]

Malkiel, Bogle Argue Against Non-Market Capitalization Weighted ETFs

I found this little nugget from June 2006 from a link I saw (not a very interesting read) on Canadian Capitalist’s blog. It’s an article called “Turn on a Paradigm?” (very interesting read) and it was written by Burton Malkiel (author of a Random Walk Down Wall Street) and John C. Bogle (Founder of The Vanguard Group). It attacks the idea that fundamental-weighted indexes can beat the market capitalization weighted indexes. Or, at least, challenges the idea that the former can beat the latter with the same risk. (I thought that’s what they were getting at near the end when they mentioned that fundamental-weighted indexes often hold more small caps which have performed well lately, albeit at higher risk. Although they seem to argue more along the lines that due to the reversion to the mean principle, those equities that recently did well since 2000 will not be doing necessarily so well in the future.)

It’s a great little introduction to the concepts in A Random Walk Down Wall Street (a book that I am reading right now). In case some of you are not interested enough to read it (the article, not the book), I will quote my favourite two paragraphs for you here:

First let us put to rest the canard that the remarkable success of traditional market weighted indexing rests on the notion that markets must be efficient. Even if our stock markets were inefficient, capitalization-weighted indexing would still be — must be — an optimal investment strategy. All the stocks in the market must be held by someone. Thus, investors as a whole must earn the market return when that return is measured by a capitalization-weighted total stock market index. We can not live in Garrison Keillor’s
Lake Wobegon, where all the children are above average. For every investor who outperforms the market, there must be another investor who underperforms. Beating the
market, in principle, must be a zero-sum game.

But only before the deduction of investment management costs. In practice, investors as a group will fail to earn the market return after these costs, and as a group, they will fall far short of the low-expense index funds. For the typical actively managed equity mutual fund, annual operating expense ratios are well over 100 basis points (one percentage point). Add in the hidden costs of portfolio turnover and sales loads, where applicable, and effective annual costs are undoubtedly considerably higher, perhaps as much as 200 to 250 basis points. In total, simply because the average actively managed fund must underperform the capitalization-weighted market as a whole by the amount of financial intermediation costs that are deducted from the gross return achieved, active investing must be, and is, a loser’s game.

Wow! I can’t wait to get into the meat of Malkiel’s book. I’ll give them the last word — “Intelligent investors should approach with extreme caution any claim that a ‘new paradigm’ is here to stay.”

Popularity: 12% [?]

Recommended Personal Finance Books

Here is a decent list of personal finance books. The list was compiled from the recommendations of over 20 personal finance bloggers. I have only read one of those books, the Wealthy Barber, but I have read a bit of a Random Walk down Wall Street and I would like to read all of it. I was so thrilled to see that there were no Kiyosaki books in that list. That gives me some hope for the future of human kind. I am interested in checking out some of the books in the top 5, if anyone has any opinion on them, please let me know.

The one comment on that blog article that is written by someone who is clearly craving some Kiyosaki!

I must say that I’m suprised at the list. Most of these books tend to focus entirely on “spend less than you earn” philosophy. I was hoping someone would recommend a good real estate investing book; good precious metals or commodities book; and other tactical investment books on how to generate wealth and/or create successful businesses.

I recommended a conservative options trading book which (in my opinion) has some real potential for teaching people how to make money from stocks they may already own or may eventually own.

Real estate, precious metals, “generating wealth”, “conservative” options trading? Kiyosaki is that you? (The commenter has a website called “Get Rich Slick.” The first blog post I see is rant about the 10-minute delay he is experiencing on e-trade and how it “always works against him.” Wacko.)

Popularity: 6% [?]