Book Review: The Four Pillars of Investing

William Bernstein, a practising physician, has written an excellent guide to investing (affiliate link) that contains important (as the sub-title says) “lessons for building a winning portfolio”. The four pillars that the title refers to are theory, history, psychology and business of investing.

Often, books on investing are dry and reading them is a bit like working through a dense textbook, but fortunately, this scholarly book is not one of them. Even the driest theoretical concepts are illustrated with historical examples.

In the section on history, Dr. Bernstein tells the tales of bubbles and busts past and present and points out that lack of historical knowledge hurts investors the most. I realized that this is an area I need to learn more about and helpfully, the author provides a list of useful books in Chapter 11 (no pun intended). The book concludes with practical ideas for assembling your portfolio.

I can’t hope to do a better job of summing up the contents of this book than the author himself:

The overarching message of this book is at once powerful and simple: With relatively little effort, you can design and assemble an investment portfolio that, because of its wide diversification and minimal expense, will prove superior to most professionally managed accounts. Great intelligence and good luck are not required. The essential characteristics of the successful investor are the discipline and stamina to, in the words of John Bogle, “stay the course”.

I think this book is worth reading and would also make a nice addition to your bookshelf (I am adding it to my list of recommended books). The Table of Contents, Introduction and Chapter 1 are available on the Efficient Frontier website.