What Wall Street Doesn't Want You to Know: How You Can Build Real Wealth Investing in Index Funds

by Larry E. Swedroe

Overview

Why do so many actively managed funds underperform? Why do passively managed funds provide superior returns, especially after taxes? What are the true interests of fund managers and the financial press? Most important, what strategy is in your best interest?

What Wall Street Doesn't Want You to Know answers all these questions and more, giving you the inside information you need to become a successful investor who plays the winner's game-creating wealth-instead of the loser's game Wall Street wants you to play, of trying to pick stocks and time the market. In his revolutionary new guide, investment professional Larry Swedroe explains why active managers have rarely been able to add value to your portfolio over time. He dispenses with traditional Wall Street wisdom and experts and shows you how to invest the way really smart money invests today.

What Wall Street Doesn't Want You to Know tells you exactly what Wall Street doesn't want you to know: how to avoid the pitfalls of short-term thinking and to invest so that you can create more wealth-much more wealth-over the long term.

Product Details

ISBN-13:	9781429909341
Publisher:	St. Martin's Press
Publication date:	04/01/2007
Sold by:	Macmillan
Format:	eBook
Pages:	379
Sales rank:	348,095
File size:	400 KB

About the Author

Larry E. Swedroe, a native New Yorker, graduated from New York University with an MBA in finance. He now lives in St. Louis, Missouri, where is a principal in the firm of Buckingham Asset Management. His first book, The Only Guide to a Winning Investment Strategy You'll Ever Need, is now in its fifth printing.

Larry E. Swedroe graduated from New York University with an MBA in finance. The author of books including What Wall Street Doesn't Want You to Know, he lives in St. Louis, Missouri.

Table of Contents

Introduction		1	(5)
Whose Interests Do They Have at Heart?		6	(9)
Past Performance of Fund Managers Is Not a Predictor of Future Performance
Investors Rely on False Premises When Choosing Mutual Funds		15	(4)
Top-Performing Actively Managed Funds and Encores		19	(3)
Beware of Deceptive Performance Claims		22	(1)
Long-Term Funds Will Do Best over Time, or Will They?		23	(2)
Out of Focus		25	(1)
Buffettology or Mythology?		26	(9)
Investment Insights		32	(3)
Markets Are Efficient and Active Managers Are Highly Unlikely to Add Value
Just How Efficient Are the Markets?		35	(5)
The Impact of News Events on Market Prices		40	(2)
Market Efficiency and the Value of Forecasts		42	(2)
Are Active Managers Likely to Add Value?		44	(2)
Value Line Advice Beats Market! Or Does It?		46	(2)
Foreign Market Efficiency		48	(3)
Those Really "Inefficient" Emerging Markets		51	(6)
Profits and False Profits		57	(3)
The Value of Security Analysis		60	(1)
The "Benefit" of Inside Information		61	(2)
In Search of the Holy Grail		63	(7)
The Efficiency of Fixed Income Markets		70	(10)
Investment Insights		73	(7)
Increasingly Investors Are Shifting to Passive Management
The Prudent Investor Rule		80	(2)
Index Funds: Fair-Weather Friends?		82	(5)
The Triumph of Hope over Reason		87	(2)
Active Managers Lose Another Excuse		89	(1)
Diamonds and Spiders and Webs, Oh My!		90	(12)
Investment Insights		96	(6)
Neither Fund Managers nor Individuals Can Consistently Identify Mispriced Securities
Stock-Selection Skills of Brokerage Firms		102	(2)
All the Wrong Moves		104	(4)
Do Hedge Fund Managers Deliver Superior Performance?		108	(3)
"Enhanced" Indexing		111	(3)
The Class of '95, '96...		114	(1)
Another Legend Bites the Dust		115	(3)
Not Worth the Paper on Which They Are Printed		118	(1)
Investors Need Filter to Screen Investment Misinformation		119	(4)
Ten Ways to Beat an Index		123	(12)
Investment Insights		128	(7)
Timing the Market Is a Loser's Game
It Doesn't Take a Genius		135	(2)
"Market Timing: A Perilous Ploy"		137	(2)
We're So Sorry, Mutual Fund Managers, It Still Pays to Be an Index Investor		139	(1)
"Every Time"		140	(2)
Investment Newsletters and Other Fairy Tales		142	(2)
Individual Investors and Market Timing		144	(2)
The Sky Is Falling		146	(7)
Investment Insights		148	(5)
Exposure to Risk Factors Determines Investment Returns
Is the Small-Cap Effect a Myth?		153	(2)
Evidence of the Size Effect in International Markets		155	(3)
Turtle Eggs		158	(2)
The Value Effect: Strong, Persistent, and Global		160	(5)
Are Value Stocks More Risky?		165	(3)
"Come Rain or Come Shine"		168	(1)
Value versus Growth Stocks		169	(2)
Low Price-to-Book Determines Value		171	(2)
The "Black" Box		173	(3)
Technology and Other Sector Funds		176	(4)
Dunn's Law		180	(4)
Defining a Fund's Investment Style Is Hard?		184	(4)
Investment Insights		185	(3)
Investors Should Focus on the Long, Not the Short Term
The Longer the Investment Horizon, the More Likely It Is That the Expected Will Occur		188	(3)
Far Horizons		191	(2)
When You Get What You Wish For, Remember Why You Made the Wish		193	(4)
The "Fifteen-Year Trend" of Large Growth Outperformance		197	(6)
Is the Market Too High? And, What, if Anything, Should I Do About It?		203	(5)
Equity Prices Cannot Grow Faster Than the Economy Forever! (Investor Expectations Are Too High)		208	(7)
Investment Insights		212	(3)
Active Management Imposes a Large Negative Impact on After-Tax Returns
Stealth Attack on Returns		215	(3)
Tax Efficiency: A Major Determinant of Wealth Creation		218	(2)
Tax-Wise Investing		220	(3)
The Tax Man Takes a Big Bite		223	(2)
Tax Hell		225	(1)
Taxes Do Matter		226	(2)
A Conflict of Interest		228	(2)
The Really Dirty Secret		230	(6)
Investment Insights		231	(5)
Understanding and Controlling Human Behavior Is an Important Determinant of Investment Performance
Emotions Impact Fund Returns		236	(2)
Investment Memory		238	(2)
The Reliability of Conclusions		240	(3)
Index Funds May Be Boring, But...		243	(2)
Mutual Funds: Reported versus Realized Returns		245	(2)
Long-Term Earnings Forecasts and the Growth versus Value Conundrum		247	(3)
Confusing Strategy and Outcome		250	(5)
There Is Nothing New--Only the History You Don't Know		255	(3)
Bubble or New Paradigm?		258	(8)
Investment Insights		263	(3)
Play the Winner's Game and Invest the Way "Really Smart Money" Invests Today
Investing Internationally: Risky or Not?		266	(2)
Asset Class Contributions to Incremental Returns from Portfolio Diversification		268	(6)
Why Bond Funds Should Not Be the Vehicle of Choice for Fixed Income Investing		274	(8)
REITs, Your Home, and the Asset Allocation Decision		282	(3)
A Problem with S&P 500 Index and Total Market Funds		285	(4)
The Investment Policy Statement		289	(7)
The Retirement Calculator		296	(4)
Constructing the Portfolio		300	(3)
Rebalancing and Style Drift		303	(2)
Rebalancing: The 5&percent;÷25&percent; Rule		305	(3)
To Hedge or Not to Hedge, That Is the Question		308	(1)
Too Many Eggs in One Basket		309	(5)
Take the Plunge, or Drip by Drip		314	(2)
Choosing an Investment Advisory Firm		316	(7)
Investment Insights		321	(2)
Summary		323	(36)
Seven Easy Steps to Playing the Winner's Game		326	(5)
Appendices
Appendix A: Efficient Frontier Models		331	(5)
Appendix B: Enhanced Indexing, Fixed Income Strategies, and the Futures Market		336	(7)
Appendix C: The IPO Myth		343	(2)
Appendix D: Shifting from Funds to Stocks		345	(7)
Appendix E: How to Analyze the Hold or Sell Decision: Trapped by a Low Tax Basis?		352	(1)
Appendix F: Variable Annuities: A Product Meant to Be Sold, Not Bought		353	(6)
Library		359	(2)
Glossary		361	(8)
Acknowledgments		369	(2)
Notes		371

Editorial Reviews

Investment adviser Larry E. Swedroe (The Only Guide to a Winning Investment Strategy You'll Ever Need) wants individual investors to understand What Wall Street Doesn't Want You to Know: How You Can Build Real Wealth Investing in Index Funds. With clarity and conviction, he cuts through market mythology (principally that actively managed funds--even those managed by professionals--tend to beat market returns), and explains how to apply his fundamental Modern Portfolio Theory to "passively" manage investments and "deliver the greatest expected return for any given level of expected risk." Copyright 2000 Cahners Business Information.

Publishers Weekly - Publisher's Weekly

This wonderfully iconoclastic book drums home the message that beating the stock market is a loser's game. Larry Swedroe's new book tilts-successfully-at the windmills of professional managers, Wall Street analysts, owing 'the best 100 companies' (or the best ten funds), hedge funds market timers, investment newsletters, and short-term strategies. Once you're convinced by the powerful case the author has made, he then offers seven steps to playing a winner's game. The diagnosis is right on the mark, and his essential prescription-rely on portfolio construction, index funds, broad diversification, minimal costs and taxes, risk control, and time-also comes close to the center of the target: the optimal accumulation of your financial wealth.” —John C. Bogle, founder and former chairman of The Vanguard Group

From the Publisher