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The Big Investment Lie: What Your Financial Advisor Doesn't Want You to Know
No professional investing advice is good advice. This hard-hitting book proves it with indisputable facts drawn from scientific research and the author’s own thirty-five years of experience in the investment industry. Michael Edesess exposes “The Big Investment Lie”: that an investor will gain by hiring professional advisors to beat the market. He proves that no professional investment advisor or manager has ever consistently and predictably beat market averages, not even Warren Buffett. While The Big Investment Lie allows an entire industry to prosper lavishly, investors invariably lose when they hire professional help.
Once you know the truth, you’ll want to adopt Edesess’s Ten New Commandments for Smart Investing, simple rules you can follow to invest, get a profitable return, and avoid squandering any more of your hard-earned dollars on bogus expertise.
Once you know the truth, you’ll want to adopt Edesess’s Ten New Commandments for Smart Investing, simple rules you can follow to invest, get a profitable return, and avoid squandering any more of your hard-earned dollars on bogus expertise.
312 pages, Hardcover
First published January 1, 2006
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Displaying 1 - 5 of 5 reviews
June 14, 2010
On the whole, this book does a good job of explaining what so many people don't want to understand. The stock market is unpredictable. That means that it's unbeatable.
The book starts out with the author's own story. He had a Ph.d in Math. Although he'd not concentrated on making money, because like so many intellectuals he'd approached his areas of interest based on how much enjoyed the challenge and puzzle solving, not with the idea of marketing himself, after college he needed to work.
He got a job with an investment firm. And he started with an attitude that is familiar to me, because I've had the exact same thought. And I'm sure it's shared by zillions of other people. I see it whenever I got to Yahoo Answers -- many people ask how they can beat the market, as though the secret should be available on one of the world's most visited websites. As though the secret were so little valued that anybody who could truly beat the market long-term would have the time or desire to reveal to an unknown person on Yahoo.
He was smart, he thought to himself. Why not turn his math skills to making lots of money?
He eventually did, but not in the way he originally thought. He worked for a company that sold information to brokers. It had the most extensive database at the time, in the 1970s. He exhaustively tested the data, but could not find any way to beat the market.
Or any other financial adviser who could do so.
In many ways, this book is a complement to A RANDOM WALK DOWN WALL STREET by Burton Malkiel. However, he does not say that the market is "efficient." He realizes that not all market participants have access to all information. But it doesn't matter. Statistically, the market is unpredictable.
I personally like this approach, because the first few times I read Malkiel's book I was thrown off by his terminology. Obviously the market was not efficient. But I finally accepted that, efficient or not, the market is the market. Maybe you don't know everything available about a company when you buy its stock today. It doesn't matter. Tomorrow the stock's price will be less or greater based on what other market participants do, not what they know.
This book is valuable because it focuses more on explaining some of the consequences than Malkiel's book does. After all, if the market is unpredictable, why should so many people make so much money by making predictions.
This includes financial analysts, brokers, mutual fund managers, pension fund managers, hedge fund managers, newsletter editors, market commentators on TV, and so on.
Remember all these people are paid by us, the normal investors. The many millions of dollars these people make comes out of our pockets. It's money that is no longer in our portfolio to reinvest for future profits.
Few people understand the great cost to their investment performance of high fund fees, high commissions, and paying financial advisers a percentage of their portfolios every year. I wish they could see the correlation between investment fees and market under performance.
Unfortunately, the people who most need to read this book never will. That's a sad fact of human nature. There are many people in this world who have substantial amounts of money that either they made from some business or somebody made for them.
The possession of such money does not guarantee that the possessor is savvy about keeping and investing it. However, we presume that if you made a lot of money in a business, you know how to invest your profits.
The Bernie Madoff story should convince us that the truth is the opposite. Many people who are very smart and successful in their own fields are fools when it comes to investing. They believe either that they are smart enough to beat the market, or someone else is.
Many people believe they need a financial adviser. They don't want to spend time reading this book. They won't. They want to believe that professional can help them. They go to doctors when they're sick, right?
However, hopefully some people who are actively researching the investment field to learn how to beat the market will come to understand it's a futile effort. If this book keeps some money out of the hands of the con artists, it's done a good job.
Review by Richard Stooker
Article Source: The Big Investment Lie by Michael Edesess
The book starts out with the author's own story. He had a Ph.d in Math. Although he'd not concentrated on making money, because like so many intellectuals he'd approached his areas of interest based on how much enjoyed the challenge and puzzle solving, not with the idea of marketing himself, after college he needed to work.
He got a job with an investment firm. And he started with an attitude that is familiar to me, because I've had the exact same thought. And I'm sure it's shared by zillions of other people. I see it whenever I got to Yahoo Answers -- many people ask how they can beat the market, as though the secret should be available on one of the world's most visited websites. As though the secret were so little valued that anybody who could truly beat the market long-term would have the time or desire to reveal to an unknown person on Yahoo.
He was smart, he thought to himself. Why not turn his math skills to making lots of money?
He eventually did, but not in the way he originally thought. He worked for a company that sold information to brokers. It had the most extensive database at the time, in the 1970s. He exhaustively tested the data, but could not find any way to beat the market.
Or any other financial adviser who could do so.
In many ways, this book is a complement to A RANDOM WALK DOWN WALL STREET by Burton Malkiel. However, he does not say that the market is "efficient." He realizes that not all market participants have access to all information. But it doesn't matter. Statistically, the market is unpredictable.
I personally like this approach, because the first few times I read Malkiel's book I was thrown off by his terminology. Obviously the market was not efficient. But I finally accepted that, efficient or not, the market is the market. Maybe you don't know everything available about a company when you buy its stock today. It doesn't matter. Tomorrow the stock's price will be less or greater based on what other market participants do, not what they know.
This book is valuable because it focuses more on explaining some of the consequences than Malkiel's book does. After all, if the market is unpredictable, why should so many people make so much money by making predictions.
This includes financial analysts, brokers, mutual fund managers, pension fund managers, hedge fund managers, newsletter editors, market commentators on TV, and so on.
Remember all these people are paid by us, the normal investors. The many millions of dollars these people make comes out of our pockets. It's money that is no longer in our portfolio to reinvest for future profits.
Few people understand the great cost to their investment performance of high fund fees, high commissions, and paying financial advisers a percentage of their portfolios every year. I wish they could see the correlation between investment fees and market under performance.
Unfortunately, the people who most need to read this book never will. That's a sad fact of human nature. There are many people in this world who have substantial amounts of money that either they made from some business or somebody made for them.
The possession of such money does not guarantee that the possessor is savvy about keeping and investing it. However, we presume that if you made a lot of money in a business, you know how to invest your profits.
The Bernie Madoff story should convince us that the truth is the opposite. Many people who are very smart and successful in their own fields are fools when it comes to investing. They believe either that they are smart enough to beat the market, or someone else is.
Many people believe they need a financial adviser. They don't want to spend time reading this book. They won't. They want to believe that professional can help them. They go to doctors when they're sick, right?
However, hopefully some people who are actively researching the investment field to learn how to beat the market will come to understand it's a futile effort. If this book keeps some money out of the hands of the con artists, it's done a good job.
Review by Richard Stooker
Article Source: The Big Investment Lie by Michael Edesess
June 11, 2010
In this riveting book, Michael Edesses tries to show you why people who invest in mutual funds and unit trusts are simply throwing their money away.
The theme of the book is something that resonates very well with me. I have been trying to tell friends and colleagues alike that investments in mutual funds and unit trusts are simply a waste of money with the financial institution as the primary benefactor, not the investor. Worse still are those who engage “financial planners” to help them buy these conniving products.
Many do not realize that financial institutions out there are collaborating in hatching schemes after schemes to strip you off your money. Better still, these schemes have been cleverly disguised as investment products that the public happily laps up.
Michael Edesses holds a Doctorate in Mathematics and through his scientific reasoning by numbers shows you why everyone is better off as a DIY investor. But if you are expecting charts and boring numbers you will be disappointed. The author has a gift in writing that is as profound as his talent in mathematics. Each chapter is a joy to read and will keep you tucked in your seat for a considerable part of your evenings.
Read the book before you buy another mutual fund.
The theme of the book is something that resonates very well with me. I have been trying to tell friends and colleagues alike that investments in mutual funds and unit trusts are simply a waste of money with the financial institution as the primary benefactor, not the investor. Worse still are those who engage “financial planners” to help them buy these conniving products.
Many do not realize that financial institutions out there are collaborating in hatching schemes after schemes to strip you off your money. Better still, these schemes have been cleverly disguised as investment products that the public happily laps up.
Michael Edesses holds a Doctorate in Mathematics and through his scientific reasoning by numbers shows you why everyone is better off as a DIY investor. But if you are expecting charts and boring numbers you will be disappointed. The author has a gift in writing that is as profound as his talent in mathematics. Each chapter is a joy to read and will keep you tucked in your seat for a considerable part of your evenings.
Read the book before you buy another mutual fund.
April 3, 2007
The Big Investment Lie, by Michael Edesess - 3 stars; reinforces my prejudice that index stock funds are best. But still, I think good arguments are made; slightly mathematically slanted.
January 28, 2019
Written by someone with clear conscience. It's very rare that someone forgoes an opportunity to make money out of the knowledge and insider tricks they know and instead sets out to write the truth and risk making some 'enemies' in the process.
This should be a must-read book for everyone planning to invest / hire an advisor.
This should be a must-read book for everyone planning to invest / hire an advisor.
September 6, 2016
Very good expose on the mishandling of the investment industry.
Displaying 1 - 5 of 5 reviews