The Quest for Alpha: The Holy Grail of Investing

Overview

"In a world where many investment books promise sure-fire techniques to earn extraordinary returns, it is refreshing to have Larry Swedroe remind us that there are no such techniques—in short, there is no holy grail. This delightful book will help investors win by teaching them how to avoid losing."— Burton G. Malkiel, author of A Random Walk Down Wall Street

"Larry has written an extremely readable book that you will find hard to put down. I find this to be the best book Larry Swedroe has written, both due to its general readability and its

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The Quest for Alpha: The Holy Grail of Investing

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Overview

"In a world where many investment books promise sure-fire techniques to earn extraordinary returns, it is refreshing to have Larry Swedroe remind us that there are no such techniques—in short, there is no holy grail. This delightful book will help investors win by teaching them how to avoid losing."— Burton G. Malkiel, author of A Random Walk Down Wall Street

"Larry has written an extremely readable book that you will find hard to put down. I find this to be the best book Larry Swedroe has written, both due to its general readability and its content. One thing is certain: this book will not be found on the bookshelves of brokerage houses—it puts the lie to just about everything they claim they can do."—Edward R. Wolfe, PhD, Professor of Finance, Western Kentucky University

"If your crystal ball is working, don't read this book. But if it's cloudy and you care about your or your clients' investments, you must read The Quest for Alpha. You may not discover the holy grail, but you will be a far better investor."—Harold Evensky, President, Evensky & Katz Wealth Management

"Over the last forty years, researchers have produced a mountain of evidence documenting the advantages of a simple, low-cost, diversified approach to investing. Larry Swedroe has climbed this mountain and condensed their wisdom into a manageable volume that offers one-stop shopping. Anyone setting off on the path of managing their own money would do well to consult this comprehensive guidebook."—Weston Wellington, Vice President, Dimensional Fund Advisors

"With his entertaining and easy-to-read writing style, Larry presents a clear and concise message that is supported by decades of research: hold a globally diversified portfolio of low-cost index funds and ETFs; harvest tax losses; and periodically rebalance. This winning strategy is how I manage my money, and it can help you prudently manage your portfolio, too."—Dr. William Reichenstein, CFA, Professor of Finance, Baylor University

"Larry Swedroe uses his inimitable style with research findings to convey the message most investors do not want to hear and certainly do not want to believe—the search for alpha is dominated by the 'wizards of advertising'—and, for relatively sophisticated investors, by the 'wizards of overconfidence.'"— John A. Haslem, Professor Emeritus of Finance, University of Maryland; Editor of Mutual Funds: Portfolio Structures, Analysis, Management, and Stewardship

"Caution active investors: after reading this book, you'll probably never be able to buy another active fund. In The Quest for Alpha, Larry Swedroe provides the most thorough and compelling evidence-based case for passive investing I've ever read."—Mel Lindauer, Forbes.com columnist and coauthor of The Bogleheads' Guide to Investing and The Bogleheads' Guide to Retirement Planning

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What People Are Saying

Nathan Hale
“As I noted recently, success in investing is somewhat counterintuitive, and requires most investors to set aside their pre-conceived notions of how to build a portfolio that will allow them to reach their goals. The task is made all the harder because the vast majority of the participants in the financial services industry spend hundreds of millions of dollars annually reinforcing the myth of active management. Fortunately for investors, experts like Larry Swedroe are hard at work pointing out the fallacies of those myths, while also detailing the undeniable logic and mathematics that underpin a passive approach. The Quest for Alpha is a wonderful addition to that effort, and investors will be well-rewarded by reading it and acting upon its wisdom.”
— Nathan Hale, moneywatch.com, March 2011
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Product Details

  • ISBN-13: 9780470926543
  • Publisher: Wiley
  • Publication date: 2/8/2011
  • Series: Bloomberg Series , #130
  • Edition number: 1
  • Pages: 208
  • Product dimensions: 5.60 (w) x 8.60 (h) x 1.00 (d)

Meet the Author

LARRY E. SWEDROE is a principal and the Director of Research for the Buckingham Family of Financial Services, which includes Buckingham Asset Management and BAM Advisor Services. He has also held executive-level positions at Prudential Home Mortgage, Citicorp, and CBS. Swedroe frequently speaks at financial conferences throughout the year and writes the blog "Wise Investing" at CBS MoneyWatch.com.

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Table of Contents

Acknowledgments.

Introduction.

The Holy Grail.

The Quest Begins.

Chapter 1 Mutual Funds: The Evidence.

When You Wish Upon a Morningstar.

Focus Funds.

Active Management of Bond Funds.

Skill Versus Luck.

Who Carea about the Average Fund?

With Active Managers, How Long Is Long Enough? 

Advice from Professional Investors and Academics.

Admissions from Industry Practitioners and the Financial Media.

Chapter 2 Pension Plans: The Evidence.

Counterproductive Activity.

The Value of Consultants.

The Performance of Funds Offered by 401(k) Plans.

Fund Selection Skills.

Please Don't Do Something, Stand Still.

Advice from Professional Investors.

Admissions from an Industry Practitioner.

Chapter 3 Hedge Funds: The Evidence.

The Problems With Hedge Funds.

Advice From Professional Investors and Academics.

Chapter 4 Private Equity/Venture Capital: The Evidence.

Characteristics of Private Equity Returns.

Bias in the Data.

Advice from a Professional Investor.

Chapter 5 Individual Investors: The Evidence.

Investment Returns Versus Investor Returns.

Advice from Professional Investors and Academics.

Admissions from Industry Practitioners and the Financial Media.

Chapter 6 Behavioral Finance: The Evidence.

There Is Smoke, But No Fire.

The Tyranny of the Efficient Markets.

Further Evidence.

The Failed Quest.

The Value of Behavioral Finance.

Even Smart People Make Mistakes.

Admissions from Industry Practitioners.

Summary.

Chapter 7 Why Persistent Outperformance is Hard to Find.

The Quest for Alpha Is a Game Played on a Different Field.

Successful Active Management Sows the Seeds of Its Own Destruction.

Closet Indexing.

Concentration and the Role of Trading Costs.

The Role of Trading Costs.

Drifting Out of Small Caps.

Encore Performances.

Who Gets the Money to Manage?

The Value of Economic and Market Forecasts.

The Value of “Expert” Judgment.

We All Want to Believe.

The Value of Security Analysis.

Buy, Sell or Hold.

The Hurdles Are Getting Higher.

Advice from Professional Investors and Academics.

Admissions From Industry Practitioners and Academics.

Chapter 8 The Prudent Investor Rule.

The Prudent Investor Rule.

The American Law Institute.

The Uniform Prudent Investor Act.

Chapter 9 Whose Interests Do They Have at Heart?

Advice From Professional Investors.

Admissions From Industry Practitioners and Academics.

A Triumph of Hope Over Experience.

The Arithmetic of Active Management.

The Math Is Always the Same.

The Costs of Active Investing.

The Cost of Cash.

An Expensive Quest.

Summary.

Chapter 10 How to Play the Winner's Game.

Indexing Is More Than the S&P 500 Index.

Does Passive Investing Produce Average Returns?

Enough.

Needs Versus Desires.

Pascal's Wager.

Conclusion.

The Yale Endowment Fund.

The Way to Win Is Not to Play.

The Quest for the Holy Grail.

The Winner's Game.

Appendix A Rules of Prudent Investing.

Appendix B Doing It Yourself.

Notes.

Sources of Data.

About the Author.

Index.

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Sort by: Showing 1 Customer Reviews
  • Posted March 12, 2011

    Highly Recommended

    It may seem from the book's title that believing the investment markets are inefficient is an exploitable concept that will reward the smartest stock pickers and their clients with above market returns (alpha). Mr. Swedroe presents convincing evidence that this belief is wrong and does not represent "The Holy Grail of Investing".
    Imagine having many of the most respected and award winning academic financial experts together in a room to offer the average person prudent investing advice. Mr. Swedroe has done this for us presenting their wisdom as well as his in this fine book. His writing is easy to understand and often entertaining. He presents information in a way that we can understand and make use of. Understanding and implementing the principles he explains will improve the average investors odds of achieving their investment goals without undo risk.

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