Okay, I had to shorten the title due to space limitations. I am referring to Larry Swedroe’s book “The Only Guide To A Winning Investment strategy You’ll Ever Need.”
It contains some interesting (but rehashed) information I have written about before. Larry is a proponent of index investing and seems to think that buying and holding indexes is far superior to active investing.
I have to be honest with you; there is not much in this book I can agree with. Actually, it makes my hair stand up and I could write endless posts on my disagreements. However, I will only focus on a couple of items, which I found worthwhile sharing with you.
Page 34 features a table showing the devastating effects of the last bear market and Larry’s point is that even royalty funds like Janus suffered severely.
On page 44 he goes on to state that “in the bear market of July 16 — August 31, 1998, the average equity fund lost 22.2 percent. This compares to losses of just 20.7 percent and 19.0 percent for a Wilshire 5000 Index Fund and an S&P; 500 Index Fund respectively.”
Huh?
Losses of just 20.7% and 19.0% vs. 22.2%? If you had invested in the indexes and lost only some 20%, would you then be pleased that indexing is the answer to conquering bear markets or even worthy of being a long-term investment strategy?
Come on; that’s ridiculous. This is like saying that big losses are better than huge losses. It’s a book that follows the same theme of putting a different lip stick on that same old pig.
To his credit, Larry addresses some of the issues which I have touched on many times and that is the useless reporting by the media designed to attract readers. However, as a bunch the media fails miserably when it comes to investment recommendations. He cites Business Week’s flop with its “Hot Growth” list of 100 great companies titled “For the Class of ’01, a Run in with Reality.” Those recommendations subsequently lost 22.4% over the following 2-year period.
While I don’t agree with Larry’s philosophy, he has some valid points as to how self serving Wall Street operates. It makes for interesting reading as long as you keep in mind that indexing as a buy-and-hold approach will not protect your portfolio during a bear market.