The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk

by William J. Bernstein and William Berstein

Book Overview

Profit through good times and bad with a resilient, diversified portfolio The Intelligent Asset Allocator has helped thousands of people like you build wealth through carefully diversified portfolios. Now, with global markets in constant flux, balancing risk and reward is more critical than ever. Self-taught investor William Bernstein offers no gimmicks, inside secrets, or magic solutions--just the facts about investing and calm, smart advice on how...

• Format: Hardcover
• Language: English
• ISBN: 0071362363
• ISBN13: 9780071362368
• Release Date: October 2000
• Publisher: McGraw-Hill Education
• Length: 224 Pages
• Weight: 1.16 lbs.
• Dimensions: 0.9" x 6.2" x 9.4"

Customer Reviews

A must read for every investor

This book is a thorough, yet easy-to-read, book full of timeless truths surrounding asset allocation, value vs. growth investing, asset classes, and so much more!

The Intelligent asset allocator

This is a superb investment book. Bernstein first covers basic statistical topics and historical risk and return data for stocks, bonds and bills. He then presents a lucid discussion of portfolio theory and its applications for the small investor. The most important result of this theory is that the risk and return of a portfolio are very different from the risk and return of its constituent parts, so that adding a 'risky' asset to a portfolio can actually decrease the portfolio's overall volatility. This discussion requires only minimal mathematical background. Bernstein then takes on the controversial topic of market efficiency. He also describes stock valuation models, current valuation levels, growth and value investing, Fama and French's three factor model, the concept of the efficient frontier and numerous other important topics in finance. But the discussion throughout is very clear and understandable as well as practical. After making a compelling case for index investing with periodic rebalancing, Bernstein presents helpful Vanguard and DFA model portfolios. What the author has done is to take the most significant results from academic finance and translated them into English for the individual investor. He has done investors a great service.

How's Your 401(k)? Do It a Favor -- Read This Book

I would have to agree with John Bogle's endorsement: "This is a great book!"While Malkiel's Random Walk covers Modern Portfolio Theory, Bogle covers the virtues of index investing, and Graham, Lynch and Fisher cover individual stock selection, studies show that asset allocation alone is responsible for over 90% of a portfolio's performance in the long run. Yet asset allocation theory seems to me to be under-represented in the investment literature for non-professionals.Bernstein's book goes a long way to correct this gap. He starts out almost too simply. Bernstein takes the reader step-by-step through a discussion of basic financial math and statistics (hitting variance and correlation coefficients in particular) as he builds the case and explanation behind asset diversification. He writes to an intelligent audience but does not assume a mathematical or financial background. I like that he encourages the reader to take a chapter at a time. He instructs the reader to finish the chapter, and then put the book down and get back to life. This adds to the methodical tone of the book: a step at a time.In the final chapter "Odds and Ends" the author changes gears. Suddenly we are in the world of - well - odds and ends, the finer points of portfolio management. This was the most interesting part of the book for me. Here Bernstein reviews the case for index investing and - of special interest to me - value investing. What is the premium in returns for small vs. large caps, value vs. growth? Which MPT stat, P/E or P/B is the better predictor of future performance? Why is value averaging so important and yet so counter intuitive? This chapter alone was worth the price of the book.Finally, Bernstein shares the wealth. The bibliography and recommending reading sections are terrific. This alone might be worth twice the price of the book.In a time when we are all more intimately involved with the management of our retirement accounts, I cannot recommend this book highly enough to anyone and everyone. You cannot afford not to be familiar with the contents of this book. Highly recommended.

A Word From Somebody in the Know

I'm quoted on the back cover of Bill's book.In my quote, I admit that Bill's smarter than me. True enough--but that doesn't really indicate that the book is any good. After all, a whole lot of bright people in financial services have written books, most of which are hazardous to your wealth.Bill's book is different because Bill's personality is different. First, he's honest. He wants to be correct, not to get his hands on your money. Second, he has no apparent ego. If he believes something and you convince him otherwise, then he will happily change his belief. The first trait is uncommon among smart people who work in financial services. The second is rarer still.This book isn't especially difficult to read but its concepts are profound. If you understand it, you will know more about the fundamental principles of investing than 99.9% of all MBAs and Chartered Financial Analysts. Eventually, I suspect, you'll end up richer for your troubles, as well. Caveats. This book isn't for stock traders or anyone else who believes that they can get rich quickly. In addition, it's not beach reading. Although Bill writes very clearly and well, the book does take on serious material, so it demands serious attention. If you don't like to think, you won't enjoy the book.If you're still with me, buy the darn thing!

A classic investment book in the making

ONE CLICK THIS BOOK NOW Few investment books rarely deserve our time and attention but this is a "must read" for novice and experienced investors alike.If you've read anything by Bogle, Malkiel, Swedroe or Graham, then you'll appreciate Berstein's book. And given the current market situation and volatility, your nerves will be calmed by what Berstein has to offer. The arguments are cogent and the text is well-written which makes this book easy to read again and again. And best of all, you can act on his recommendations for how to get started on constructing and re-balancing a diversified portfolio. What's the big message to grok then from reading this book? (Let me whisper this to you very quietly so as not to disturb the brokerage and fund managers). Stock picking and active fund management are not as effective (consistently) as simply buying and holding a diverse set of asset classes. Most of which can be assembled and maintained using low-cost index funds. (Bernstein also points out the importance of low transaction costs and fees on performance/returns). You may have heard this before but Berstein has done the hard part and now explains in detail why this is the case if not the law of intelligent investing. Is this case, what you don't know about investment risk will hurt you. But the bigger message is that market risk is real. Asset values go up and down. However, by applying intelligent asset allocation, your individual portfolio risk can be managed (even minimized) while at the same time achieving reasonable rates of investment return. In other words, owning and investing in a diversified set of assets is the single most important investment policy decision you will make. Period. Imagine that. Stock picking and hot hand mutual funds don't work as effectively as a diversified portfolio of index funds in the long run. And this is key because intelligent investing is all about time. Buying and holding a diversified portfolio for long periods of time. And most importantly, maintaining a disciplined approach to asset allocation and re-balancing on an annual basis. Who should read this book? For starters, anyone who has won the big prize on Who Wants To Be A Millionaire? Read this book before you call a broker. Secondly, any individual managing their own investments and/or 401K investments. Finally, to all reformed stock pickers and chartists: do you want to sleep better at night? Read this book as well as Swedroe's book. As much as we would like to have our own black box trading systems to out perform/hedge the market, it probably isn't going to happen on this planet. Just ask the folks at Long Term Capital Management or George Soros or Julian Robertson. If you're still not convinced of Bill Bernstein's wisdom, then go to his [site] and read his quarterly journals. His understanding and grasp of the subject are inspiring even to first time investors like myself. And he's a good writer too!

Let the good doctor stimulate your thinking

My copy of William Bernstein's new book, " The Intelligent Asset Allocator," has arrived, and I give the book a very high recommendation for anyone interested in this vital subject. Fundamental mathematical concepts of geometric return, standard deviation, and correlation are given clear and understandable definition. The real-world behavior of investment portfolios is dissected with intelligence and insight. Portfolio optimization (its limitations as well as its legitimate uses), portfolio rebalancing, indexing (Mr. Bernstein's arguments against active management might even surpass Mr. Bogle's), Dunn's Law, efficient markets, random walks, momentum factors, the three-factor model, behavioral finance, and numerous other topics are given full and rewarding discussion.I especially found Mr. Bernstein's treatment of investor utility functions to be especially insightful. In addition to the usual concern with risk tolerance, he suggests an investor must decide on how simple or complicated one`s investment plan must be, and also how tolerant or intolerant one will be concerning tracking error to the market index as fundamental to implementing one's asset allocation plan.In implementing asset allocations Mr. Bernstein considers the two indexing giants: Vanguard and DFA. Readers will find this section especially valuable.This just scratches the surface; thought-provoking insights are available on just about every page of this absorbing book.My recommendation may carry very little weight in your estimations, so I would add that the front jacket to the text contains a small, sunny emblem with the following inscription:"This is a GREAT book!" John C. BogleAmen to that, blb