investing · The book · Uncategorized

Zen and the Art of 401(k) Maintenance

books

My book was featured in a nice article by Ron Lieber in The New York Times. It starts out mentioning an alleged Fidelity Investments study that showed a surprising finding about investor success. Here’s a transcript from Business Insider of Jim O’Shaughnessy discussing it with Barry Ritholtz:

O’Shaughnessy: “Fidelity had done a study as to which accounts had done the best at Fidelity. And what they found was…”

Ritholtz: “They were dead.”

O’Shaughnessy: “…No, that’s close though! They were the accounts of people who forgot they had an account at Fidelity.”

Except, as Lieber found, the study had never been conducted. For what it’s worth, I bet that’s what they would have found since, as I note from two actual studies in the book, frequency of trading or even checking your brokerage account correlates negatively with returns. Rip Van Winkle would’ve been an awesome investor.

In addition to being a nice piece on investing, the article has a photo credit (the pic above) by none other than little old me – surely a first for a Wall Street Journal reporter in our rival paper! It’s a snapshot of my collection (well, part of it) of bad investment books that I mention in Chapter One.

investing · The book · Uncategorized

WSJ Excerpt: Why You’re a Lousy Investor

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An excerpt of my book appears in today’s Wall Street Journal (front page of the Money & Investing section).  It explains, using “Back to the Future Part II,” why market timing is so futile.

What follows is an excerpt of the excerpt (is there a word for that … excerptlet maybe?).

Investors are way off in their estimate of how their portfolio has done, routinely guessing several percentage points a year too high. While that comes as a shock, they are even more surprised to be told that it is missing good times rather than suffering through selloffs that hurt them the most.

Like Biff, investors sit out on some really good days by trying to avoid bad ones. Nearly all of those happen around scary episodes such as October 1929, October 1987 and in 2008 following the collapse of Lehman Brothers. Pretend, for example, that you took your money out of the market following the choppiest episodes over the last 20 years and wound up missing the epic rebounds that made up the 40 best days. You actually would lose money. A couple of days a year on average produce all of the market’s return.

Read the whole thing or, even better, buy the book. It just went on sale.

 

 

 

The book · Uncategorized

Forbes Review

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A very nice review of my book appeared in Forbes. By “nice” I mean three things. First, it was quite flattering, which of  course is always welcome for an author. Second, it was written by a very nice guy, Simon Constable, with whom I  overlapped for three years when both of us were at The Wall Street Journal . Third, the book’s message and unique perspective  clearly came through.

Let me explain. Simon is, like me, a rare bird in financial journalism, having come from the finance industry. It’s a heck of a pay cut but also a heck of an advantage for the perspective it gives you. Like me, Simon knows that the emperor has no clothes when it comes to high-priced investing advice. Not only did he understand the book but he understood why I wrote it which is, well, nice.

A quote from the review:

The book gives a deep and realistic insight into how investing really works. I too worked in research on Wall Street, and what he says reflects how things actually work, or don’t work.

Jakab points out that there was more of a reason for him to write the book rather than fulfilling a demand for idle curiosity about the inner workings of one of the most misunderstood sectors of the economy. It’s that while most people can’t fix the appliances in their home, they are now required to be part time money managers of their retirement investments through their 401k or IRA plans.

Unfortunately, most people woefully lack the financial education to do so. His book makes a dent in that knowledge deficit, at least for those who read it.

Heads I Win, Tails I Win will be available everywhere fine books are sold on July 12th.

investing · The book · Uncategorized

Roger & Me

Fortune

I was thrilled to see that my upcoming book was reviewed this weekend in Fortune Magazine and even more so when I saw that the reviewer was none other than Roger Lowenstein. He’s one of the most accomplished financial journalists around, the author of several books I’ve enjoyed, and also a former Heard on the Street columnist like me.

I was perplexed when I started to read the review, though. The first 264 words – as long as some entire book reviews – were about Benjamin Graham, the father of value investing, mentor to Warren Buffett, and a man I mention several times in Heads I Win, Tails I Win. After that he finally got to my book and said a couple of nice things.

He wrote that “Jakab has plenty of sensible advice” and that my writing is “anecdotal and witty.” But that’s where the praise ends. Lowenstein laments that the author, “a former security (sic) analyst … spends many pages debunking the idea that investors should try to time market breaks (he aptly likens this to astrology). He devotes not a paragraph to how one might estimate the future profitability of a business…One does not learn how to evaluate stocks. One learns that value investing has worked, but not why.”

While a more positive review would have made me happier, the weird thing was that Lowenstein really seemed to want to have read an entirely different book – one that taught my mostly mom and pop audience how to value stocks and beat the market. The premise of my book, though, is that this is mostly a wasted exercise, whether you try to do that yourself or pay some clever broker or stock picker to do it. My own work as a securities analyst and overwhelming academic evidence support this.

But the weird thing is that he invokes Graham. I guess Lowenstein isn’t familiar with the great man’s final interview in 1976 in the Financial Analyst’s Journal, the year he died. Here’s the money quote:

I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook “Graham and Dodd” was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost. To that very limited extent I’m on the side of the “efficient market” school of thought now generally accepted by the professors.

Amen.

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First book review!

I received my first book review earlier this month from Publisher’s Weekly. It’s very nice. Below is the closing paragraph:

Jakab’s efforts to acquaint readers with the basic realities of the market and to provide an insider’s view of how to approach money management will be comprehensible to even the most intimidated reader. Energetic and engaging, this is required reading for anyone who’d like to retire ahead of the game.

I also set up an Amazon author page.

The book comes out on July 12th so watch this space.

 

 

investing · The book · Uncategorized

Smart beta…and cheese

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I went on the WSJ Moneybeat podcast today for the first time and it was, um, interesting. For the first segment, Chris Dieterich of Barron’s, Stephen Grocer and Paul Vigna of Moneybeat, and Chuck Jaffe of Marketwatch and I discussed “smart beta,” the hottest trend in investment products. I talk about smart beta in my upcoming book.

In a nutshell, “beta” means stock market return whereas “alpha” is the extra gain that clever fund managers try and usually fail to generate. That’s why passive index funds are the best bet for most investors. But smart beta tweaks that by attaching allegedly smart criteria to a passive fund. These are getting more and more exotic, though they can be something as basic as equally-weighting stocks rather than using market value or favoring stocks with lower P/E ratios.

Some smart beta is a costly gimmick and other products are pretty sound, but beta can be as smart as a whip and not help investors who do dumb things. That tendency to buy high and sell low is hardwired into most of us.

It was a lively, respectful discussion. Then the gloves came off and we discussed the relative merits of Alexa, the Amazon.com talking speaker, and cheese. You see this week’s WSJ Heard on the Street podcast featured David Reilly’s  very own Alexa. Stephen and Paul thought it was a cheap stunt to overshadow their podcast earlier in the week when they attempted to eat three pounds of cheese. You see there’s a big cheese surplus in the U.S. and every man, woman, and child in the country would have to consume that much of the stuff to deplete the excess.

Unfortunately, the lightweights on WSJ Moneybeat couldn’t eat all the cheese between them and had to leave plates of it in the newsroom for the rest of us to help polish off. Despite mild lactose intolerance, I bravely chipped in to whittle away at the surplus.