Unconventional Success: A Fundamental Approach to Personal Investment
by David F. Swensen
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Book Summary Information
Author: David F. SwensenEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2005-08-02
ISBN: 0743228383
Number of pages: 403
Publisher: Free Press
Accessories:
- Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, Fully Revised and Updated
- Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment
Book Reviews of Unconventional Success: A Fundamental Approach to Personal Investment
Book Review: Insight From a Legendary Institutional Investor
Summary: 5 Stars
David Swenson explains that, as the leader of a sophisticated team of full-time investment professionals, he produced an unparalleled 20-year annual return of 16.1% for Yale University's endowment fund. The high returns are achieved, in large part, because of the endowment's tax-exempt status which enables the investment team to engage in frequent trading necessary to conduct day-to-day real-time "portfolio rebalancing" while avoiding the adverse tax consequences associated with realization of capital gains. Few institutions and even fewer individuals have the resources necessary to conduct the trading activities which helped achieve these high returns over the long term, but now, ordinary investors have heretofore unavailable access to passively managed index funds and exchange-traded funds which provide them with opportunities to achieve reasonable returns. Index funds have been available to institutional investors for a long time (John Bogle's Vanguard 500 Index Fund was the first; Lee Kranefuss of iShares invented the etf in 1971), but not to most ordinary investors, who are blissfully unaware that nearly all of the actively managed mutual funds available for their defined-contribution retirement plans fail to keep up with benchmark indexes over the long term, ironically because of the funds' trading activities, and because of their tax disadvantages and wide range of parasitic fees, commissions, kickbacks and other assorted rakeoffs, including 401(k) pay-to-play bribes. Most investors don't know the difference between "actively managed" and "passively managed", and many of them are lulled into blissful ignorance by the cult of money-management personalities, brand-name attraction, and investment spin which misleads investors by distracting attention from meaningful details. Swenson recommends that ordinary investors should investigate the opportunities now available by investing in passively managed index funds and etfs, and he provides suggestions for setting up relatively simple, diversified portfolios without any actively managed funds. Investing in just one holding, an S&P500 index fund or etf, provides the equivalent of a 500-stock portfolio, diversified over many sectors. Actively managed fund real returns are, for the most part, pathetic, especially when considering the high compensation paid to the managers, the fund companies` profits, management failure to beat the benchmarks, and the investor's potential tax consequences. The book is easy to read and understand, and there are plenty of tables and charts which help to illustrate the concepts. Highly recommended, especially for those who want a realistic view of the mutual fund industry.
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Summary of Unconventional Success: A Fundamental Approach to Personal Investment
The bestselling author of Pioneering Portfolio Management, the definitive template for institutional fund management, returns with a book that shows individual investors how to manage their financial assets.In Unconventional Success, investment legend David F. Swensen offers incontrovertible evidence that the for-profit mutual-fund industry consistently fails the average investor. From excessive management fees to the frequent "churning" of portfolios, the relentless pursuit of profits by mutual-fund management companies harms individual clients. Perhaps most destructive of all are the hidden schemes that limit investor choice and reduce returns, including "pay-to-play" product-placement fees, stale-price trading scams, soft-dollar kickbacks, and 12b-1 distribution charges.
Even if investors manage to emerge unscathed from an encounter with the profit-seeking mutual-fund industry, individuals face the likelihood of self-inflicted pain. The common practice of selling losers and buying winners (and doing both too often) damages portfolio returns and increases tax liabilities, delivering a one-two punch to investor aspirations.
In short: Nearly insurmountable hurdles confront ordinary investors.
Swensen's solution? A contrarian investment alternative that promotes well-diversified, equity-oriented, "market-mimicking" portfolios that reward investors who exhibit the courage to stay the course. Swensen suggests implementing his nonconformist proposal with investor-friendly, not-for-profit investment companies such as Vanguard and TIAA-CREF. By avoiding actively managed funds and employing client-oriented mutual-fund managers, investors create the preconditions for investment success.
Bottom line? Unconventional Success provides the guidance and financial know-how for improving the personal investor's financial future.
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