Apologies for going off topic again, but the Goldman bonus discussion seemed to strike a chord, so perhaps this one will, too. Also, many of you have asked about the book I was writing last summer, and there's finally news on that front.
The book is called The Wall Street Self-Defense Manual, and I believe it is finally available on Amazon and elsewhere. I've published some excerpts on the book's web site, and Slate ran a couple of additional excerpts last week (here and here). My publisher has also kindly allowed me to provide a downloadable PDF preview of the Table of Contents, Introduction, and Chapters 1 through 3. To download this Preview, please click the link at the bottom of this post.
The first Slate excerpt shows why the average mutual fund will cost you approximately half of your potential retirement nest egg over 50 years. The second excerpt argues that most ordinary investors should not buy hedge funds, a position that earned a predictable blast from some hedge-fund industry boosters. As a result, I am now engaged in an online debate with fund-of-funds manager Ed Easterling on www.HedgeWorld.com .
The premise of the book is that the biggest risk to most investors' returns is not market crashes but the lack of a big-picture framework with which to make intelligent investment decisions. Put differently, most investors know a lot more about how to intelligently buy a car than they do about how to intelligently select a mutual fund or construct a portfolio. Because investors don't know these things, they are likely to follow bad. inappropriate, or irrelevant advice, buy inferior investment products, and/or fall prey to the biggest investment risk of all--their own emotions. The goal of the book is to dispel some of the myths that permeate 90% of what one hears about investing, arm one with the knowledge necessary to avoid expensive mistakes (some of which are so common and accepted that they aren't recognized as mistakes), and, thus, help one invest more intelligently.
One warning: The book doesn't offer any secret tips on how to pick stocks. Rather, it argues that most small investors should never pick stocks (or, for that matter, actively managed funds), and explains why not. The mere suggestion of this often sends some people into apoplexy, so perhaps we will get some good counterarguments here. In any case, if you have the time and inclination to read the book, I thank you in advance, and I hope you enjoy it.
Thanks again for the patience w/r/t the slow posting over the last few weeks. I'll now try to get cracking again.