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Posted November 10, 2011
Welcomed¿ evidence based financial decision making
I have just finished reading Paul Merriman new book, Financial Fitness Forever and very impressed. His evidenced based approach to investing is a welcome departure from usual fuzzy opinion. His recommendations are based on a long personal experience, ongoing research (while preparing for his workshops), and a careful review of academic research. Another feature I appreciated was the insight he provides on why we make decisions the way we do. Knowing our psychological vulnerabilities helps us avoid errors. His evidence based recommendations substantiated by abundant data provides confidence in decision making. I think this is a wonderful guide. I found it personally an outstanding work. The book includes a goldmine of information. Reading it made be look forward to his upcoming Public Television programs. Lynn Staheli, MD.
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Posted December 17, 2011
A Must Read Even If You Are Happy with Your Investment Plan and Returns
Merriman removes much of the mystery from the investment process and helps make you a much more ¿informed investor¿ about the choices you have already made and will make in the future. As you read, you may find out that your current plan is right on--and why. Or you may learn that, while your returns are OK at the moment, you are at greater risk than you had appreciated. Or you may even learn that you are already on the way to major financial disappointment down the road unless you make some changes now.
As an evidence-based medical researcher who does systematic reviews of the actual outcomes of medical interventions, the most compelling thing about Merriman¿s approach is that it is ¿evidence-based¿ investing. However, it is not the biased and unsubstantiated ¿evidence¿ we are accustomed to from Wall Street firms. Whether you like your Wall Street broker or not, he or she is under constant pressure to sell the financial products that will bring the highest profits to them and their firms. In recent years, we have learned of the even more egregious behavior from Wall Street in which investors have been repeatedly and fraudently duped into buying worthless financial products. Merriman, once a Wall Street broker himself, throws a bright light on these practices and offers an alternative.
Merriman introduces us to ¿University Street¿ (i.e., the departments of economics at universities) which, in recent years, has produced highly creditable research quantifying the sources of finanical return and risk. He explains the three measureable factors that have been found to explain more than 90% of the difference between the return of any equity portfolio and the overall market. He also introduces us to key findings from the new science of behavioral economics and finance. Despite earlier assumptions that our economic behavior is totally rational, this research shows that ¿When it comes to investment decisions, your emotions always trump your intellect.¿
Merriman then maps out an investment strategy that takes into account what has been learned from this creditable evidence. It is a remarkably simple strategy that you can even pursue on your own. The goal is to provide for your financial security alone.
Merriman is an outstanding teacher of investing and his purpose is to give people the inside scoop about what you can and should do to improve your financial future. He writes in a way that anyone can understand and he provides the details in a separate section for those of us who want the hard data behind everything he says.
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