The Quest for Alpha: The Holy Grail of Investing by Larry E. Swedroe (English) H

Description: The Quest for Alpha by Larry E. Swedroe The final word on passive vs. active investing The debate on active investing-stock picking and market timing-versus passive investing-markets are highly efficient and almost impossible to outperform-has raged for decades. Which side is right? In The Quest for Alpha: The Holy Grail of Investing, author Larry E. FORMAT Hardcover LANGUAGE English CONDITION Brand New Publisher Description The final word on passive vs. active investing The debate on active investing-stock picking and market timing-versus passive investing-markets are highly efficient and almost impossible to outperform-has raged for decades. Which side is right? In The Quest for Alpha: The Holy Grail of Investing, author Larry E. Swedroe puts an end to the debate, proving once and for all that active investing is likely to prove futile as the associated expenses-costs, fees, and time spent analyzing individual stocks and the overall market-are likely to exceed any benefits gained. The book Presents research, data, and quotations that reveal its extremely difficult to outperform the marketExplains why investors should focus on asset allocation, fund construction, costs, tax efficiency, and the building of a globally diversified portfolio that minimizes, if not eliminates, the taking of idiosyncratic, uncompensated risksOther titles by Swedroe: The Only Guide to Alternative Investments Youll Ever Need and The Only Guide Youll Ever Need for the Right Financial Plan Investors are on a never-ending search for a money manager who will deliver returns above the appropriate risk-adjusted benchmark, aka the "Holy Grail of Investing." The Quest for Alpha demonstrates that its a losers game-while its possible to win, its so unlikely that you shouldnt try. Back Cover The final word on active vs. passive investing! King Arthur and his court pursued the Holy Grail, the mythical cup or dish used by Jesus at the Last Supper. The financial equivalent of the pursuit of the Holy Grail is the quest for the money managers who will deliver alpha--returns above the appropriate risk-adjusted benchmark. The quest for alpha is based on the theory that the markets are inefficient, and smart people working diligently can discover pricing errors the market makes. But there is a competing theory based on about sixty years of academic research. Its premise is that markets are highly efficient--the market price of a security is the best estimate of the right price. If markets are highly efficient, efforts to outperform are unlikely to prove productive after the expenses of the efforts. So which theory is correct? In The Quest for Alpha , Larry Swedroe presents research, data, and advice from some legendary market gurus to show that it is extremely difficult to outperform the market. Examining the evidence from academic studies on mutual funds, pension plans, hedge funds, private equity/venture capital, individual investors, and behavioral finance, he demonstrates that the markets are indeed highly efficient. Swedroe then explains why investors should instead focus on asset allocation, fund construction, costs, tax efficiency, and the building of a globally diversified portfolio that minimizes, if not eliminates, the taking of idiosyncratic, uncompensated risks. And to those who ask, "But how do you explain Warren Buffett?" Swedroes answer is simple. "I tell them if they see Warren Buffett when they look in the mirror, go ahead and seek the holy grail of alpha," he says. "If they dont, give up the quest and play the winners game." Flap The final word on active vs. passive investing! King Arthur and his court pursued the Holy Grail, the mythical cup or dish used by Jesus at the Last Supper. The financial equivalent of the pursuit of the Holy Grail is the quest for the money managers who will deliver alpha--returns above the appropriate risk-adjusted benchmark. The quest for alpha is based on the theory that the markets are inefficient, and smart people working diligently can discover pricing errors the market makes. But there is a competing theory based on about sixty years of academic research. Its premise is that markets are highly efficient--the market price of a security is the best estimate of the right price. If markets are highly efficient, efforts to outperform are unlikely to prove productive after the expenses of the efforts. So which theory is correct? In The Quest for Alpha , Larry Swedroe presents research, data, and advice from some legendary market gurus to show that it is extremely difficult to outperform the market. Examining the evidence from academic studies on mutual funds, pension plans, hedge funds, private equity/venture capital, individual investors, and behavioral finance, he demonstrates that the markets are indeed highly efficient. Swedroe then explains why investors should instead focus on asset allocation, fund construction, costs, tax efficiency, and the building of a globally diversified portfolio that minimizes, if not eliminates, the taking of idiosyncratic, uncompensated risks. And to those who ask, "But how do you explain Warren Buffett?" Swedroes answer is simple. "I tell them if they see Warren Buffett when they look in the mirror, go ahead and seek the holy grail of alpha," he says. "If they dont, give up the quest and play the winners game." Author Biography LARRY E. SWEDROE is a principal and the Director of Research for the Buckingham Family of Financial Services, which includes Buckingham Asset Management and BAM Advisor Services. He has also held executive-level positions at Prudential Home Mortgage, Citicorp, and CBS. Swedroe frequently speaks at financial conferences throughout the year and writes the blog "Wise Investing" at CBS MoneyWatch.com. Table of Contents Acknowledgments xi Introduction xiii The Holy Grail xiv The Quest Begins xvi Chapter 1 Mutual Funds: The Evidence 1 When You Wish upon a Morningstar 2 Focus Funds 4 Active Management of Bond Funds 6 Skill versus Luck 8 Who Cares about the Average Fund? 12 With Active Managers, How Long Is Long Enough? 12 Advice from Professional Investors and Academics 15 Admissions from Industry Practitioners and the Financial Media 17 Chapter 2 Pension Plans: The Evidence 23 Counterproductive Activity 25 The Value of Consultants 27 The Performance of Funds Offered by 401(k) Plans 27 Fund Selection Skills 29 Please Dont Do Something, Stand There 30 Advice from Professional Investors 30 Admissions from an Industry Practitioner 31 Chapter 3 Hedge Funds: The Evidence 33 The Problems with Hedge Funds 36 Advice from Professional Investors and Academics 40 Chapter 4 Private Equity/Venture Capital: The Evidence 43 Characteristics of Private Equity Returns 46 Bias in the Data 48 Advice from a Professional Investor 49 Chapter 5 Individual Investors: The Evidence 51 Investment Returns versus Investor Returns 54 Advice from Professional Investors and Academics 56 Admissions from Industry Practitioners and the Financial Media 59 Chapter 6 Behavioral Finance: The Evidence 61 There Is Smoke, but No Fire 62 The Tyranny of the Efficient Markets 63 Further Evidence 64 The Failed Quest 65 The Value of Behavioral Finance 66 Even Smart People Make Mistakes 66 Admissions from Industry Practitioners 68 Summary 69 Chapter 7 Why Persistent Outperformance Is Hard to Find 71 The Quest for Alpha Is a Game Played on a Different Field 72 Successful Active Management Sows the Seeds of Its Own Destruction 74 Closet Indexing 76 Concentration and the Role of Trading Costs 77 The Role of Trading Costs 78 Drifting Out of Small Caps 79 Encore Performances 79 Who Gets the Money to Manage? 81 The Value of Economic and Market Forecasts 83 The Value of "Expert" Judgment 86 We All Want to Believe 89 The Value of Security Analysis 90 Buy, Sell, or Hold? 92 The Hurdles Are Getting Higher 93 Advice from Professional Investors and Academics 94 Admissions from Industry Practitioners and Academics 96 Chapter 8 The Prudent Investor Rule 103 The Prudent Investor Rule 106 The American Law Institute 106 The Uniform Prudent Investor Act 108 Chapter 9 Whose Interests Do They Have at Heart? 113 Advice from Professional Investors 114 Admissions from Industry Practitioners and Academics 115 A Triumph of Hope over Experience 120 The Arithmetic of Active Management 121 The Math Is Always the Same 123 The Costs of Active Investing 124 The Cost of Cash 126 An Expensive Quest 127 Summary 129 Chapter 10 How to Play the Winners Game 133 Indexing Is More than the S&P 500 Index 135 Does Passive Investing Produce Average Returns? 140 Enough 141 Needs versus Desires 144 Pascals Wager 145 Conclusion 147 The Yale Endowment Fund 148 The Way to Win Is Not to Play 149 The Quest for the Holy Grail 150 The Winners Game 151 Appendix A: Rules of Prudent Investing 153 Appendix B: Doing It Yourself 159 Notes 165 Sources of Data 176 About the Author 177 Index 179 Review ?As I noted recently, success in investing is somewhat counterintuitive, and requires most investors to set aside their pre-conceived notions of how to build a portfolio that will allow them to reach their goals. The task is made all the harder because the vast majority of the participants in the financial services industry spend hundreds of millions of dollars annually reinforcing the myth of active management. Fortunately for investors, experts like Larry Swedroe are hard at work pointing out the fallacies of those myths, while also detailing the undeniable logic and mathematics that underpin a passive approach. The Quest for Alpha is a wonderful addition to that effort, and investors will be well-rewarded by reading it and acting upon its wisdom.? ? Nathan Hale, moneywatch.com, March 2011 Long Description "In a world where many investment books promise surefire techniques to earn extraordinary returns, it is refreshing to have Larry Swedroe remind us that there are no such techniques in short, there is no holy grail. This delightful book will help investors win by teaching them how to avoid losing." Burton G. Malkiel, author of A Random Walk Down Wall Street "Larry has written an extremely readable book that you will find hard to put down. I find this to be the best book Larry Swedroe has written, both due to its general readability and its content. One thing is certain: this book will not be found on the bookshelves of brokerage houses it puts the lie to just about everything they claim they can do." Edward R. Wolfe, PhD, Professor of Finance, Western Kentucky University "If your crystal ball is working, dont read this book. But if its cloudy and you care about your or your clients investments, you must read The Quest for Alpha. You may not discover the holy grail, but you will be a far better investor." Harold Evensky, President, Evensky && Katz Wealth Management "Over the last forty years, researchers have produced a mountain of evidence documenting the advantages of a simple, lowcost, diversified approach to investing. Larry Swedroe has climbed this mountain and condensed their wisdom into a manageable volume that offers onestop shopping. Anyone setting off on the path of managing their own money would do well to consult this comprehensive guidebook." Weston Wellington, Vice President, Dimensional Fund Advisors "With his entertaining and easytoread writing style, Larry presents a clear and concise message that is supported by decades of research: hold a globally diversified portfolio of lowcost index funds and ETFs; harvest tax losses; and periodically rebalance. This winning strategy is how I manage my money, and it can help you prudently manage your portfolio, too." Dr. William Reichenstein, CFA, Professor of Finance, Baylor University "Larry Swedroe uses his inimitable style with research findings to convey the message most investors do not want to hear and certainly do not want to believe the search for alpha is dominated by the wizards of advertising and, for relatively sophisticated investors, by the wizards of overconfidence." John A. Haslem, Professor Emeritus of Finance, University of Maryl∧ Editor of Mutual Funds: Portfolio Structures, Analysis, Management, and Stewardship "Caution active investors: after reading this book, youll probably never be able to buy another active fund. In The Quest for Alpha, Larry Swedroe provides the most thorough and compelling evidencebased case for passive investing Ive ever read." Mel Lindauer, Forbes.com columnist and coauthor of The Bogleheads Guide to Investing and The Bogleheads Guide to Retirement Planning Review Text ?As I noted recently, success in investing is somewhat counterintuitive, and requires most investors to set aside their pre-conceived notions of how to build a portfolio that will allow them to reach their goals. The task is made all the harder because the vast majority of the participants in the financial services industry spend hundreds of millions of dollars annually reinforcing the myth of active management. Fortunately for investors, experts like Larry Swedroe are hard at work pointing out the fallacies of those myths, while also detailing the undeniable logic and mathematics that underpin a passive approach. The Quest for Alpha is a wonderful addition to that effort, and investors will be well-rewarded by reading it and acting upon its wisdom.? ? Nathan Hale, moneywatch.com, March 2011 Details ISBN0470926546 Series Bloomberg Year 2011 ISBN-10 0470926546 ISBN-13 9780470926543 Format Hardcover Subtitle The Holy Grail of Investing DEWEY 332.6 Media Book Short Title QUEST FOR ALPHA Language English Pages 208 Edition 1st Series Number 130 UK Release Date 2011-02-04 Publication Date 2011-02-04 AU Release Date 2011-02-04 NZ Release Date 2011-02-04 US Release Date 2011-02-04 Author Larry E. Swedroe Publisher Bloomberg Press Imprint Bloomberg Press Place of Publication Princeton Country of Publication United States Audience Professional & Vocational We've got this At The Nile, if you're looking for it, we've got it. With fast shipping, low prices, friendly service and well over a million items - you're bound to find what you want, at a price you'll love! TheNile_Item_ID:33357833;

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