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"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. "
- Investor Wins, Wall Street Loses
Thank you Mr. Swensen for giving us Unconventional Success. This is a book written for the investor to aid in the creation of wealth and not to enrich the mutual fund management companies. While some of the information is already known to the average investor, much of the book contains a detailed discussion designed to enlighten the individual investor of how management companies, brokers and advisors are dipping into your pocket. He discusses in depth, excess fees, portfolio turnover, excessive brokerage trading fees that fund holders pay, which are then returned to the management companies in the form of soft dollars. The list goes on.
I especially found the the discussion on properly and poorly constructed indexes to be of interest. Mr. Swensen, points out why the S&P indexes are preferre over the Russell indexes and how being in a poorly constructed index fund can be costly to the investor.
In my opinion every individual investor should read Unconventional Success. This book will quickly become a classic....more info
- This book gives excellent advice, but is a bit long winded.
I got this book based on an interview with the author David Swensen in Barron's Magazine. While first thumbing through the book, it seemed like a waste of money because the first few chapters give info that most investors already know, such as the importance of asset allocation, diversification, and the futility of market timing. A little more time spent with the book gave me advice that I think will help increase my investment returns with less worry and portfolio management headaches. The best part of the book for me was Chapter 11 on exchange traded funds (ETFs) which the author explains can be used to create a well diversified, low cost investment portfolio. He names the specific ETFs in that chapter. I give the book 4 stars instead of 5 because the author is long winded and repeats himself, an example is table I.1 and table 3.1 in the book are identical (although the info in the table is one of the key points he has in the book)....more info
- Useful Ideas
The book is useful to those amateur investors that want to become more informed. Some of the terminology (i.e. securitize) takes a bit more background than some readers may have. I'm glad that I read it and will buy his next book due this fall....more info
- Excellent and important personal finance review though a little dry
This is a great book that goes through some fundamental investment choices that all individual investors should know. Swensen has much data to bolster his assertions, though people in the investment industry (other than low cost, investor-friendly firms like TIAA-CREF and Vanguard) would certainly bristle against his overt assertions of greed in the industry. I for one agree with him wholeheartedly, coming to it from years of my own independent, though not necessarily scientific, informal research. Very very worth a read. However, it is not the most exciting read and is a bit dry, unless you are fairly antiestablishment. For those who care enough to spend the time to not get fleeced, it is an important read. There are some new ideas (at least to me) about certain bonds/bond funds, and other "investments" being wholly unsuitable for individual investors that I had not previously appreciated. Swensen knows his stuff and seems to have serious ethics as well as no desire to run for elected office. Good for him. He seems to have the highest intellectiual and ethical standards and cares not for the majority of the financial services industry, which by my interpretation is largely parasitic. ...more info
- Excellent Ideas but I couldn't finish it
Well, the title says it all. Where was the editor on this? The first rule of writing is always to keep your reader's interest. I think major points of the book could be made less often to reduce repetitiveness. And less written on points that are kind of obvious - like "Taxes impair wealth accumulation." I tried reading just the summaries, but the book is more than just that. I got it out of the library, but I ran out of renewals.
Even so, the ideas are VERY important to consider, so everyone should make an attempt at it....more info
Unconventional Success: A Fundamental Approach to Personal Investment This book is a must-read for anyone who is planning to do their own investing whether in a 401k, IRA or taxable account. It gives you a simple but sophisticated approach to allocating your investments among equities (U.S. and foreign), U.S. Treasuries (regular and inflation-protected) and real estate. He shows you how to invest in index mutual funds without paying exorbitant (and unnecessary) investment advisory & management fees. He gives a blisteringly negative review of the mutual fund industry which, based on credible, academic research has failed to beat the market after taking into account the fees charged. The author's "creds" are impeccable as a star investor of one of the largest endowment funds in the U.S. I believe this book is essential reading for any investor. ...more info
- Good Practical Advice
Unconventional Success is well written with logical explantions, good examples and practical advice. The book goes step-by-step through a discussion of recommended types of investments and popular investments that are not receommended, active vs passive investments and market timing. I recommend it for anyone who is interested in investing. It is one of the best investment books I have read. ...more info
- Unconventional and Un-balanced
Lots of folks have covered this already... so I won't go into details,... I enjoyed the book immensly, however:
One of Swensen's premises seems to imply that virtually all managed funds are to be ignored. All of us that have tried to educate ourselves about funds know that there are a few dozens or perhaps a few hundred funds that regularly outperform indexes, especially in down markets. Just keep this in mind when you read the book.
There is a great overview of Longleaf's record and integrity.
Also the soft money section will kick you in the gut... even includes T Rowe Price and Fidelity in this questionable group.
Be aware that one review in a mainstream magazine referred to it as a screed against for-profit (managed?) funds. This may be pretty close to the mark.
Read James Glassman's column in the Jan 2006 edition of Kiplinger Personal Finance for a short alternate view....more info
- Scathing - nobody is spared
Swensen takes aim at EVERYBODY in the money game. Even Vanguard is pilloried.
Agency conflicts are the focus of under-performance, and this can only be reconciled by managers who demonstrate clearly that they choose to act in the interests of their clients, even to the detriment of their own business.
Given this intensely rigid standard, almost no going concern in the money management game would pass the test.
Swensen's disdain for corporate debt is revisted here. With the informational assymetry existing between investor and issuer, it is very hard to win on a risk adjsuted basis, he claims. Ratings more often go down than up, and there is no where to go from AAA.
A worthwile read, but something of a rehash of previous work....more info
- Great Compliment
Great complimentary text along with "Common Sense On Mutual Funds" and "The Intelligent Asset Allocator". Combined, this is a wonderful trio for investing (as opposed to short-term, completely unreliable speculation)....more info
- High Praise
Excellent. The "new" guru of portfolio theory/asset allocation and passive/low-cost/index fund investing for individual investors....more info
- Unconventional Success
Good for a general background for a person entering the investment area to save for their retirement. Has a somewhat critical review of Mutual Funds which, in my experience, is an honest review of the excessive fees related to the Mutual Fund investment....more info
- Good ideas poorly presented.
This book is essentially an insightful and comprehensive trashing of the business of mutual funds, an accurate assessment of a parasitic industry. The author is clearly very intelligent and extremely knowledgeable and the book contains a great deal of useful information for the investor.
Unfortunately, it is so poorly written that it is almost unreadable. In Swensen's world, the unmodified noun is nearly as rare as an honest mutual fund manager. And why use a single sentence when three will do? Despite aggravating redundancy, his explanations are often murky and a couple of times I resorted to another investment text for clarification.
This author desperately needs a hands-on editor - the writing is so callow that a competent high school English teacher would do. ...more info
- A Disappointment
As a personal investor for the better part of 30 years, and having read many of the books on personal investing, I found this book very disappointing and completely lacking in any useful advice or insights. Most of the book is a diatribe against the mutual funds. While interesting and probably correct it was completely unhelpful to an individual interested in navigating this morass. Swensen makes a big point that the ethics and style of the manager of a fund is of critical importance and then goes on to point out that only large institutional investers are able to ferret out who they are. He mentions one fund, LongLeaf Partners, that meets his criteria but, in fact, all of their funds are now closed to new investors. The entire chapter on "Security Selection" has little to nothing to do with security selection but is directed at the failings of mutual funds, and the one chapter on "Winning the Active Management Game" makes the point that the individual investor doesn't have the resources to find the right combination for "winning". That's a big help. Much of the other advice in the book is so general that while it may be of interest to academics interested in financial markets in no way is it "A Fundamental Approach to Personal Investment" - the title is clearly a bait and switch. The book would have been much more appropriately entitled, "What's Wrong With Mutual Funds Today", but then that wouldn't have sold as many books to unsuspecting personal investors....more info
- Cookbook for ETF investing
This was a cookbook for investing in Exchange Traded Funds. The book is a bit repeatative but each chapter has a summery to spare you of some repeated details. However, it is hard to refute the logic and thinking behind the recommendations. And, if this is as indisputable as the author claims, it provides a recipe for investment that requires little effort and little cost overhead....more info
- Unconventional Success: Investment guide
Good grounding in the fundamentals of the stock market, pitfalls, and a safer, less expensive way to invest. Well worth the effort to read thoroughly. Provides guidance as to how to avoid high fees of mutual funds, financial advisors (?) etc. ...more info
- best investment book I've read in a decade
I used to read many investment books. There are many valid approaches to investing. One way, recommended by Peter Lynch and others, is to choose a diversified portfolio of individual stocks. Another way is to choose professional managers, and the easiest way to do this is through mutual funds. I chose a diversified portfolio of mutual funds. It has been a success.
However, there have always been aspects that have made me uncomfortable, and this book has forced me to realize that I have been paying a high price for my active management. And this book has forced me to face the hard question: the people who run my funds are without doubt winners in the game of finance, but I am not at all sure that they are making the 1 or 2 percent above market returns every year that justify that expense.
Some of the excellent points that are made: mutual funds often have hidden fees, such as kickbacks to brokers. And it is the shareholders who pay these fees (of course). Asset backed securities such as GNMAs may seem like conservative income choices, but how will they behave in extreme markets? As a product of complex financial engineering, nobody really knows.
He strongly embraces simplicity and low cost. He recommends the common sense solution of finding a money manager who is working for the client's interest instead of his own interest (which is often completely opposite the client's.) His basic recommendation is plain vanilla market index funds fun by non-profit institutions. It is awfully hard to argue with this reasoning.
At the very least, this book has prompted a look back at how my own funds have done versus how his recommended choices would have done.
No investment approach is right for everyone. But this approach deserves to be considered seriously....more info
- It left me hanging
The author makes a compelling case for an alternative investment strategy that really does, as the title suggests,fly in the face of conventional investment wisdom. He does so by methodically working through the range of alternatives available to the personal investor, looking at risk, performance, fees and potential conflicts of interest that work to the detriment of the investor. Conventional wisdom mainstays like mutual funds, corporate bonds, REITS to name a few are tarred and feathered by the author. The remaining investment vehicles, US Government Securities, foreign and domestic index funds form the basis of his portfolio. He also advocates for a nerves of steel ridged adherence to an asset allocation model where you sell winners on the way up and buy losers on the way down to maintain allocation targets. What is missing is a concluding chapter that summarizes his approach and provides an overview of a plan for action. I was left with a feeling of "Where do I go from here?"...more info
- Mostly wise advice which too few will follow
This book provides some good advice on how an amateur investor can avoid sub-par results with a modest amount of work. It starts by describing why good asset allocation rules should be the primary concern of the typical person.
I found this quote especially wise: "While hot stocks and brilliant timing make wonderful cocktail party chatter, the conversation-stopping policy portfolio proves far more important to investment success." Fortunately for those of us who make a living exploiting the mispricing of fad-chasing investors, the most valuable points of this book aren't in the kind of sound bite that will make them popular at cocktail parties.
But even if you choose investment ideas for cocktail party conversation rather than for building wealth, you should be able to find some value in his explanations of how to avoid being ripped off by fund salesmen and why ETFs are better than most mutual funds.
His attacks on the mutual fund industry are filled with redundant vitriol that may cause some readers to quit in the middle. If you do so, don't miss table 11.3, which gives an excellent list of ETFs that most investors should use. I was surprised at how much I learned about the differences between good and bad ETFs from this book.
His arguments against investing in foreign bond funds are weak. I suspect he overestimates the degree to which foreign equities diversify exposure to currency risks.
He advises investing more in U.S. equities than in equities of the rest of the world combined, even though his reasoning implies more diversification would be better. But I've been slow enough to diversify my own investments this way that I guess I can't fault him too severely.
He has a plausible claim that not-for-profit organizations that provide investment vehicles on average treat customers more fairly than for-profit funds do, but he goes overboard when he claims not-for-profits have no conflict of interest. The desires for job security and large salaries create incentives that would cause many investors to be fleeced if they switched to not-for-profits without becoming more vigilant than they have been.
His faith in the U.S. government is even more naive. He says "U.S. Treasury Inflation-Protected Securities, which provide ironclad assurance against inflation-induced asset erosion", "Treasury ... bondholders face no risk of default", and "The interests of Treasury bond investors and the U.S. government prove to be better aligned than the interests of corporate bond investors and corporate issuers. The government sees little reason to disfavor bondholders." But a close look at the CPI shows that indexing to it provides very imperfect inflation protection (e.g. its focus on rents hides the effects of rising home prices), and the current reckless spending policies combined with large foreign holdings of U.S. bonds can hardly avoid creating a motive for future politicians to inflate wildly or default....more info
- excellent for the intellectually-oriented investor
Swensen provides a excellent analysis of different asset classes and the roles they play (or fail to play) in diversifying portfolios. For example, he clarifies the different diversifying roles of conventional Treasury bonds and TIPS, and explains why corporate, municipal and foreign bonds cannot be substituted. He also demonstrates the advantages of periodic portfolio rebalancing for the disciplined investor.
In what almost amounts to a book within a book, Swensen forcefully chronicles the failure of the mutual fund industry and its regulators to serve the interests of individual investors. This discussion is a must-read for anyone concerned about the implications of the shift towards investor managed defined contribution pension plans as the primary vehicle for retirement savings.
Swensen has not written a practical how-to guide to personal investing or asset allocation; rather, he argues for an approach to personal investing built around core principles. Intellectually-oriented investors will be well served by this book as preparation for developing a personalized investment program....more info
- Wants to be 2 books
This book wants to be at least two different books:
1) A book slamming the mutual fund industry
2) A book giving new investors basic descriptions of different asset classes and the behavior to expect from them.
On the first point, I don't know why he bothered. Anyone who has done any research on mutual funds and how they have been run in recent years will already know all of this. The only addition was the information on some of the newest ETFs and how they aren't so great. This is worthless repetition of common information.
On the second point, it would be OK for some new investors, but I wouldn't recommend it to everyone.
In the end his strongest point seems to be that the investment world is strongly against the small individual investor. Great, thanks a lot. Why not use all of your years of experience to give us some help? Telling us the most available options are worthless and then not giving us anywhere to go isn't useful....more info
- An In-Depth Look for the More-Interested Investor
While this is an excellent book, I knocked off a star for one main reason: I believe it to be a little too advanced to be called "fundamental."
This is the perfect book for a person with two critical attributes:
1) You have already read Burton Malkiel's "A Random Walk Down Wall Street"
2) You are looking to go beyond a employer-sponsored defined contribution plan and would like some help determining who gets your money.
I say read Malkiel first because having an understanding of the Efficient Market Hypothesis will help you get a lot more out of reading this book. While Swensen presents an excellent work, it is a bit dry and academic. If, however, you can commit to reading it carefully, I am confident you will be a better money manager for it.
Since an individual employee has little control over the firm chosen to administer the company 401(k), I believe this book to be less helpful than "A Random Walk" if you are simply seeking guidance for selecting investments in a defined plan. If, however, you are about to open your own IRA or a standard, taxable account, this book will serve as an invaluable guide.
Stick with it, and happy investing!...more info
- Good, but not enough
Unconventional Success is a good primer for those looking to invest their retirement funds prudently, but it doesn't go far enough. Similar advice can be found for free, summarized in two pages, by reading Paul Farrell's Lazy Portfolio columns on the CBS Marketwatch site. The object lesson is simple -- diversify and invest with index funds.
I'm disappointed that the book doesn't delve further into the potential returns realizable by following Swensen's allocation over time. Why 30% total in bonds? What happens if that is 20, or 25%? or 10%? A chapter detailing the impact of potential returns would be highly useful for those of us managing our own IRA's over the long term.
I take issue with his 30% allocation, only because he does not well define how this impacts long term returns. In fact, the rationale for this is poorly described. I say this because before I read his book, I reviewed Yale's Endowment fund allocations, which are publically available (www.yale.edu/investments/Endowment_Update.pdf). Yale's target allocation is 7.5% bonds, because "Yale is not particularly attracted to fixed income assets, as they have the lowest historical and expected returns of the six asset classes that make up the Endowment." So what am I supposed to take from this? 30% is good for me as an individual investor, but not for Yale? If anyone knows of websites that can backtest returns of portfolios that conform to specific asset allocations, please post. Thanks....more info
- Assets Not for Asset Allocation
I was fairly impressed with this book. I would give it an A, but the style of writing was painful to read, so I give it a B.
I recently saw several articles about Harvard's endowment manager leaving Harvard to set up his own firm. I was amazed to see how diversified the Harvard fund was in that it included not just stocks and bonds, but many other asset classes:
U.S. equities 15%
Private Equity 13
Hedge Funds 12
U.S. Bonds 11
Foreign Equities 10
Real Estate 10
Inflation-Indexed Bonds 6
Emerging Markets 5
Foreign Bonds 5
Borrowed Money -5
This info came from 12/27/04 Business Week article. The same article said Harvard's endowment fund grew from $4.7B in 1990 to $22.6B in 2005. This sounds impressive until you calculate the compounded return, which is 11.04%. Simply investing in an S&P 500 index fund over the same time period would have given roughly a 10.91% compounded rate of return.
Swensen seems to have followed a similar very diversified approach at Yale.
I really enjoyed the explanation of why certain asset classes should not be included in investor's portfolios.....specifically foreign bonds.
Since I am an avid Index Fund investor, Swensen was preaching to the choir with regards to blasting the "for profit" mutual fund companies. Being a Vanguard investor, I was disappointed to see Vanguard take one hit for following one type of unsavory practice. Compared to the "for profit" mutual fund companies, Vanguard is a shining angel.
The successes of Harvard's and Yale's endowment fund investments are spreading the gospel of the advantages of asset allocation. Gary Brinson's 1986 famous study can be defined as the birth of asset allocation. He found that over 90% of a portfolio's return can be determined by the asset classes used, not what the individual investments were. Brinson's findings have been relatively slow to flow through the investment community and to individual investors. Dial the time clock ahead from 1986 to 2006, and one of Business Week's cover stories seeks to explain why the S&P 500's profits have increased dramatically over the last 5 years, yet the S&P 500 companies have had very little stock price appreciation. One explanation offered is that more and more investors practice asset allocation and choose other investments besides the S&P 500 for their portfolios. The increased demand for other asset classes like foreign stocks, commodities, and gold has subsequently less to a decrease in demand for large cap stocks in the S&P 500.
This book contains excellent information and guidelines for serious investors. It is very dry and boring to read.
All-in-all, a good book for serious investors. I would suggest companion books to supplement this book including The Richest Man in Babylon, Bogle on Mutual Funds, The Millionaire Next Door, The 4 Pillars of Investing, A Random Walk Down Wall Street, Index Mutual Funds: How to Simplify Your Life and Beat the Pros, and the Coffeehouse Investor....more info
- Unconventional Success-- an opinion
This book is a real contribution to the problem of individual investing. It
requires discipline and patience-- both of which will turn off many
potential users. However, the author is well worth listening to. He has proved his mettle in a superlative way, and has capsulized his advice in a way that can work, but you must do your part, this is not magic or alleged to be.Unconventional Success: A Fundamental Approach to Personal Investment...more info
- Investment advice from a pro
Although for many investors, the stock market is the only game in town, author David F. Swensen, the experienced manager of Yale University's endowment, suggests investing in logical low-cost, fair, nonprofit index funds that track the market closely. He advocates building a carefully balanced portfolio, and strongly recommends regular rebalancing. He comes to these conclusions based on his rigorous analysis of the returns achieved by a host of other investment media, especially mutual funds. In fact, he builds his investment guidebook around a scathing scolding of the mutual-fund industry, even though mutual funds also have strong supporters. getAbstract believes Swensen's counsel will be useful for individual investors who face a bewildering array of choices. In fact, if you had a rich uncle on Wall Street to advise you, he would probably echo much of Swensen's logical advice. ...more info
- A must read for investors
I spend 45 years in the Wall Street enviroment. the book
sheds a refreshing new look at all investment catagories.
Should be required reading in all Business Schools....more info