Since I am a life-long fanatic reader and a long-time fund investor, over the years I have read scores of books about mutual funds and investing. Three books remain in my active investment information pile: Outperforming the Market by John Merrill, Common Sense on Mutual Funds by John Bogle, and The Intelligent Asset Allocator by William Bernstein. Three other books related to investing remain in my library: The New Money Masters by John Train, The Wall Street Waltz by Kenneth Fisher, and The Visual Display of Quantitative Information by Edward Tufte.
The only review I saw of John Merrill's Outperforming the Market, described the book in terms that made the book seem fairly ordinary. If you peruse the table of contents, you will see a fairly standard list of topics including discussions of risk, asset classes, asset allocation, index and managed funds. So why does this book remain in my pile and why do I refer to this book more than any other? The short answer is the collection of "historical risk/reward" charts. I assume this particular style of chart is available elsewhere, but I have never seen them. The charts clearly show advancing periods and periods of cyclical decline along with the length of period for the market to recover from a decline. These charts generally cover 1960-1997 and there are charts for most asset classes: large cap stocks, mid/small cap stocks, micro cap stocks, government bonds, international stocks, REITs, gold. There are then similar charts for various portfolios based on combinations of these asset classes and pie charts of best performing portfolios. I think these charts represent the best introduction to the various asset classes and how they have performed in contrast to each other. I confess to one irritation that comes to my mind whenever I look at this book. I previously owned John Merrill's Beyond Stocks , which I thought useful. Thus I bought the new book only to find it was essentially the same book with a different title and different publisher; I am enough of a cheap skate to have been irritated.
Over the years I have read most of the books written by John Bogle. I found them all worthwhile (at least for a fanatic reader) but there is obviously a fair amount of overlap. I have kept Common Sense on Mutual Funds because it was one of the most recent and seems to cover Bogle's basic views well. I think every mutual fund investor should read one of Bogle's books and this is the one I would suggest. There is enough good advice in this book to make it worthwhile reviewing every few years.
William Bernstein's The Intelligent Asset Allocator was published in 2001, long after my basic views on investing had been formulated. Thus the book did not have much influence on my thinking. However, I enjoyed reading it and consider it one of the best introductions to asset allocation. This is a book I have loaned to friends with little investing experience and looking for guidance.
John Train's The New Money Masters is one of many books that describe the winning investment strategies of famous investors. I consider it one of the better books of this type and recommend it as a good way to review different investment strategies. Actually, the original book by John Train, The Money Masters, is probably better, but it is not in my library since I read the copy from the local library. If you enjoy this sort of book there are now quite a number of them. Some of the more recent books are composed mostly of interviews of successful investors. I find the interview format gets tiresome rather quickly, but you might find some nuggets of advice.
The Wall Street Walz by Kenneth L. Fisher is a compilation of 90 different charts along with a bit of commentary. There are a variety of lessons to be learned from these charts and they probably serve well to get you thinking in terms of the long historical sweep of the market and international trends.
The Visual Display of Quantitative Information was written by Edward R. Tufte, and you might think it does not belong in this list of books for mutual fund investors. But I believe it is extremely important for investors to understand graphs and charts. Tufte does an outstanding job of explaining and illustrating graphical practice. For those who are interested in graphs and charts, it is a real joy to read.
I suspect that certain lessons must be learned from actual investment experience but much can be learned from books, and these are the ones that I recommend for mutual fund investors.
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