In this very short book (< 100 pages) the authors provide their answers to the following five investing decisions:
- The Do-It-Yourself Decision: They argue that the stock market is too complex for the average investor, so they recommend having an independent, fee-only advisor. Not only does this insult the intelligence of many individual investors, but it is inconsistent with their later criticisms about professional money managers (e.g., high fees and sub-par performance).
- The Asset Allocation Decision: They give the standard spiel about investing in several different asset classes in a way that purportedly minimizes risk (volatility) while maximizing return. In this chapter they refer to value stocks as "distressed companies" that may have "bleak prospects for the future," yet they present data showing that value stocks tend to outperform growth stocks.
- The Diversification Decision: Similar to the previous decision, they advocate investing in a mix of domestic and foreign equities and bonds to balance risk and return. They firmly believe in Modern Portfolio Theory.
- The Active Versus Passive Decision: Being strong adherents to the Efficient Market Hypothesis, they argue that it is impossible to beat the market, so they recommend passive investing in various index funds.
- The Rebalancing Decision: They suggest rebalancing your portfolio to maintain the desired levels of asset allocation and diversification.
Note: I read this book in March 2012.