William Bernstein says that he wrote The Investor’s Manifesto: Preparing for Prosperity, Armageddon and Everything in Between even though he swore he would never write another book after The Four Pillars of Investing (read my review) because, in his view, the dramatic market developments of 2008-09 provided a perfect “teachable” moment to clearly define a set of timeless investment principles. In this book, Mr. Bernstein starts off with an overview of financial theory illustrated with relevant bits of financial history, then takes readers on a tour of the behavioural traps they might stumble into and concludes with the mechanics of building a portfolio. If this synopsis sounds familiar, it is because Four Pillars dealt with similar themes: the theory, history, psychology and business of investing.
As you might expect of a brilliant writer like Mr. Bernstein, his writing is so quotable. Here are some examples:
“Investors cannot earn high returns without occasionally bearing great loss. If the investor desires safety, then he or she is doomed to receive low returns”.
“… the rewards of equity ownership are paid for in the universal currencies of financial risk: stomach acid and sleepless nights.”
“Much has been made lately of “black swans”: rare and supposedly unexpected events that roil society and the financial markets. In the world of finance, the only black swans are the history that investors have not read.”
“You are not as good looking, as charming, or as good a driver as you think you are. The same goes for your investing abilities. In an environment filled with incredibly smart, hard-working, and well-informed participants, the smartest trading strategy is not to trade at all.”
Mr. Bernstein is a wise investor and talented writer and while The Investor’s Manifesto is a very good book, I feel that it doesn’t quite achieve the brilliance that The Four Pillars did. If you’ve read the previous book, you can re-read it and safely skip this one. If you haven’t read Four Pillars, perhaps that’s the Bernstein book you should be reading. The Investor’s Manifesto is published by John Wiley and is listed at $29.95.
