Book review: The four pillars of investing by William Bernstein

The four pillars of investing: Lessons for building a winning portfolio – William Bernstein

Synopsis:
This book explains how to build an effective portfolio in plain English. The book is split into four parts (pillars): Theory of investing, History of investing, Psychology of investing and the Business of investing. The book explains why an understanding of these four key areas is crucial to achieve good returns. Examples are given for different people and how they would allocate their capital to different assets and why.
Many areas are discussed such as the history of bubbles and collapses, behavioural finance, the pitfalls of mutual funds and why your broker is not your buddy.

What I gained from reading this book:
I can easily say that this is the best investment book I have read to date. This is a big statement because I have read many investment books during my time at university studying finance. If I had to choose between reading four finance books that I read during university or this book, I would read this book. There is so much insight and valuable wisdom.
The great thing about this book is that you don’t have to be an experienced investor to follow these principles. The author clearly explains the process and why each point is important. So many other books fail to cover both aspects. The advice given in this book is top class and even top investors such as Warren Buffett recommend people do the same. Not only does this book explain why the advice is sensible, but it explains why the advice given by journalists, brokers and mutual funds shouldn’t be followed.
The overall gain I received from this book was a clear understanding of the industry, the markets and exactly what I should do to achieve the best results.

Positives:
Fantastic advice for all investors. The entire book is written in a very logical way and is very easy to understand. Important insight into the investment industry and why the advice given by brokers and advisors should be ignored.

Negatives:
I wish this book was longer and more in depth.

Recommended for: Everybody
I whole heartedly recommend this book for everybody. Not only is it easy to understand, but everybody can follow the advice and construct an effective portfolio from it.

Genre: Investments

Overall rating: 10 out of 10 stars

Australians can buy the book by clicking the picture below:

Where to from here:
If you are interested to hear from a different viewpoint on investing try this book:
Five key lessons from top money managers by Scott Kays

Book review: The Millionaire Next Door by Thomas Stanley and William Danko

The Millionaire Next Door: The surprising secrets of America’s wealthy – Thomas Stanley and William Danko

Synopsis:
This book is basically an analysis of the millionaires and their habits. The book looks at a wide range of aspects such as how much they spend on cars, watches and suits, whether they give cash gifts to their children or not, what type of jobs they hold, and how they became rich in the first place. The authors have surveyed countless millionaires and found patterns among them. They compare high income individuals with low net worth (non-millionaires) to millionaires with low income to see how somebody can become a millionaire despite having lower income than others.
The authors try to get a feel for the mindset that millionaires have and try to give a clear picture on how anybody could do the same. The authors even provide a simple formula for the reader to look at their own situation and see whether they are above or below the average in terms of net worth.

What I gained from reading this book:
This book goes into incredible detail on millionaire habits. The book is full of statistics and analysis of a wide range of topics. I found the results very interesting. So much is revealed that many people would never consider being possible. Before reading this book I had a picture of how the typical millionaire lives, but after finishing the book I realised how wrong I was. The detail in the book allowed me to compare my own situation with the case studies to see how I perform.
The major gain I received from this book was the confidence that if I follow the principles in the book, I have a better chance of being financially independent in the future. Not only that, I know what things I should avoid doing that will reduce my chances of becoming financially free. My hyper-spending friends could learn a lot from this book but I know that they would never bother reading it.

Positives:
Very detailed and insightful analysis on millionaires and their attitudes. Great comparison between millionaires and non-millionaires. Provides very informative case studies that are seen in real life all the time.

Negatives:
The analysis is very detailed which some people may not like. At times I even had trouble staying focused because of all the statistics.

Recommended for: Everybody
I recommend this book for everybody because everybody can learn how to make better use of their money. Those who wish to be financially independent in the future should have a read to see what it takes to get there. On the other hand, those not concerned with becoming millionaires should still read the book. Those not concerned with how they spend their money have higher risks as explained in the book.

Genre: Wealth

Overall rating: 7 out of 10 stars

Australians can buy the book by clicking the picture below:



Where to from here:
If you are interested in reading more on how people become rich, have a read on:
Ten roads to riches by Ken Fisher