The Four Pillars of Investing : Lessons for Building a Winning Portfolio by William Bernstein

The Four Pillars of Investing : Lessons for Building a Winning Portfolio by William Bernstein is on just about all of the must-read lists I have seen. Dr. Bernstein provides investors the tools they need to successfully build their own portfolios by focusing on the essentials of investment theory, market history, market psychology, and the investment industry.

There is nothing ‘new’ in the book, it preaches the wisdom of using market indexing and asset allocation rather than investing in individual stocks or managed mutual funds that is common to many investment gurus. Novelty, though, has never been a hallmark of successful long term investing. Investing should be boring…if it gets too exciting, you are doing something wrong.

Here is the summary from the back of the book:

… Dr. Bernstein explains how any independent investor can construct a superior investment portfolio by learning these four essentials:

• The Theory of Investing -­ “Do not expect high returns without risks.”
• The History of Investing -­ “About once every generation, the markets go barking mad. If you are unprepared, you are sure to fail.”
• The Psychology of Investing -­ “Identify the era’s conventional wisdom and assume that it is wrong. More often than not, it is.”
• The Business of Investing -­ “The stockbroker services his clients in the same way that Bonnie and Clyde serviced banks.”

And the inside jacket blurb has this great statement:

Investing is not a destination. It is a journey, lined with stockbrokers, journalists, and mutual fund companies whose interests are diametrically opposed to yours. The Four Pillars of Investing shows you how, with relatively little effort, you can determine your own financial direction and assemble an investment program with the sole goal of building long-term wealth for yourself and your family.