The Best Investment Writing

When I saw a book called The Best Investment Writing, edited by Meb Faber, I couldn’t resist reading it. The book contains about 30 well-written articles, mainly on topics related to active investing. As an index investor who has given up trying to beat the market, this book served as a test of whether I might change my mind. I didn’t.

There are too many articles to comment on all of them, so I’ll just pick out a few parts I find interesting or feel the need to comment on.

Jason Zweig discussed how markets have become more efficient: “If you’re applying the tools that worked so well in the inefficient markets of the past to the efficient markets of today, you are wasting your time and energy.” That’s the conclusion I came to several years ago.

Gary Antonacci gets many people looking to tap into his 40 years of investment experience. I found one typical question and answer both wise and funny:

Question: I just looked at my account, and it is down. What should I do?
Response: Stop looking at your account.

Todd Tresidder says that “if you’re 55 and just starting to build for retirement, then beware of investment advice pushing you toward passive investments like paper assets. Your situation may require the leverage only available in business and real estate to allow you to make up for the late start and still achieve your financial goals.” This sounds like terrible advice to me. It’s better to accept a modest future than to swing for the fences and risk ending up with less than nothing.

Aswath Damodaran says that before answering the question of whether stock markets are too high, “you should consider where you would put your money instead.” Just because the expected return on stocks is low due to high valuations doesn’t mean that bonds or other assets have higher expected returns.

Jason Hsu and John West say that “A preference for complexity is almost hardwired into investors, their agents, and managers because the intuition is that a complicated investment landscape requires a complex solution: a complex strategy also supports a higher fee from both agents and managers.” Simplicity is better.

Charlie Bilello argues that nobody is really a passive investor. For you to be a passive investor “requires a lump sum investment into the market portfolio on the day you are born and only sold on the day you die.” I find this about as useful as saying a person isn’t thin because he or she weighs more than zero pounds. Owning a house, rebalancing your portfolio, and investing new savings do not disqualify you from being a passive investor. I see this reasoning frequently from those who make their livings from active investing. Perhaps this black-and-white reasoning is meant to persuade index investors that since they’re already getting their feet wet with active investing, they might as well dive in.

This book is useful for anyone looking for a diverse set of well-written discussions of investing topics. It didn’t change my mind about sticking to index investing, but it’s a good idea to venture outside your circle of like-minded friends.