[Front Cover of The Smartest Investment Book]

The publicist for author Daniel Solin sent a copy of the Canadian edition of his book (listed at $26 and available from Amazon.ca), which is subtitled The Simple, Stress-Free Way to Reach Your Investment Goals, for review. The author defines “smart investing” as constructing a passive portfolio of index funds and rebalancing it periodically. The bulk of the book deals with why passive investing is actually smart, easy and stress-free and why active investing is injurious to your financial health. Mr. Solin devotes the last few chapters to show how to implement a smart portfolio.

I was a little bit surprised at the lower than usual allocation to Canadian equities in the model portfolios. For example, the high-risk portfolio (80% stocks, 20% bonds), which is comparable to the Sleepy Portfolio, has an 8% allocation to Canadian stocks. The author explains that the 10% of equities allocated to Canadian stocks is appropriate because foreign stocks have historically provided a higher return at lower risk.

I do have a few quibbles with the book. While the sample portfolios composed of XBB, XIC, XSP and XIN (or their equivalent index mutual funds) are fine for small portfolios, bigger ones should have exposure to asset classes such as real-return bonds, small-cap equities, emerging markets and real estate. Also, while the author mentions cash as an asset class, there is no allocation to cash in the model portfolios.

Despite the quibbles, I found the book’s central thesis compelling and the arguments against active investing sound. As an investor who is already convinced of the merits of indexing, I found myself agreeing whole-heartedly with the book’s main message. Newbie investors and active investors should check out the book and better yet consider following the author’s advice.

This article has 9 comments

  1. CC – you do realize that the more PF books you review, the more books will be sent to you?

    You might become the “Google” of Canadian PF book reviews.

  2. Canadian Capitalist

    You’re right Mike. So far it is manageable, so let’s see how it goes. I hope not too many books are being written :)

  3. I’ve recently started reading this book and am amazed at the case he presents against actively managed funds. He makes many references to academic studies proving this.

  4. Newbie: I haven’t read the book, although I probably will eventually, but a really good classic book which cuts down active management is “A Random Walk Down Wall Street” – Malkiel.
    He uses a lot of academic studies as well but it’s still a fun read (at least I thought it was).

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  8. I just simulated a one time $50,000 purchase using the ETFs in the 60/40 portfolio and a start date of Dec 3, 2001. As of Today (dec 4, 2010), the portfolio is worth…. 49700.37. In other words a TOTAL return of -0.6% over a 10 year period. How on earth do authors get away with publishing books on indexing????

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