Review and Giveaway: The Intelligent Portfolio

The Intelligent Portfolio does an excellent job of explaining ten basic concepts needed to make good investment decisions in a simple and straightforward manner. The book will be invaluable for a beginning investor and there is plenty to keep sophisticated investors interested as well. I found the discussion of market portfolio, which is composed of asset classes weighted by their proportion of total world market value and real return expectations derived by reverse optimization to be particularly interesting. The book has garnered rave reviews and I couldn’t do better than concurring with Peter L. Bernstein’s praise for the book:

Books on personal investing are a dime a dozen. But if we add them up, all those dimes come to plenty of money. This book is worth all that and lots more. With its strong foundation in theory, the depth of its insights, the power of its message, the clarity of its exposition, and the value of its examples, The Intelligent Portfolio is worth many multiples of anything else in this overcrowded field.

The author, Christopher L. Jones, works for Financial Engines, a firm that puts sophisticated techniques like Monte Carlo simulation, investment analysis and portfolio optimization in the hands of individual investors. The book includes a 1-year subscription to the Personal Online Advisor service from Financial Engines. The service allows you to do retirement planning but it seems to be of limited use for Canadian residents because data for Canadian bonds, mutual funds, tax rates, CPP and OAS are not available. The retirement planner is a nifty tool — if you input a savings rate, the current portfolio holdings, the retirement target date and the desired income in retirement, the planner runs Monte Carlo simulations and displays the probability of achieving the target through icons borrowed from weather forecasting. It would be wonderful if Financial Engines starts offering this service in Canada as well.

Book Giveaway: If you missed Million Dollar Journey’s giveaway of the book, here’s your second chance. The publisher has generously provided an extra copy for our readers. Participation is very simple — just leave a comment to this post and don’t forget to include your email address. Deadline for entries is Friday, July 11, 2008 at 8 p.m. EDT. One entry per person. Canadian residents only. Your email will not be shared with anyone. I’ll pick one entry at random after the deadline. Good luck!