Daniel R. Solin - The Smartest Portfolio You’ll Ever Own: A Do-It-Yourself Breakthrough Strategy

Everything should be made as simple as possible, but not simpler.

Albert Einstein

We can learn a lot about investing from Albert Einstein. As legend has it, when he died, he met two men and a woman outside the pearly gates. Always one to strike up a conversation, he asked them about their IQs.

The woman said her IQ was 190. Einstein was excited. He said, We can discuss my theory of relativity.

The first man said his IQ was 150. Good, said Einstein. We can discuss global warming and arms reduction.

The second man sheepishly said, Im sorry, but my IQ is only 100. Im afraid I wont have anything to discuss with you.

Unfazed, Einstein looked at him intently and said, Thats not a problem at all. Where do you think the market is headed?

Heres the real skinny on investing:

• Its not complicated.
• No one has a clue where the markets are headednot even Albert Einstein!
• Holding individual stocks or bonds exposes you to higher risk without higher expected return.
• Holding any actively managed mutual fund increases your costs and reduces your expected return.
• Using the services of brokers or advisers who claim to be able to beat the markets significantly reduces your chances of capturing market returns.
• The free market system works. Stock prices are random and efficient. There is no mispricing.
• Theres a wealth of irrefutable data supporting these views.

The idea that index based investing is simple and vastly superior to and market timing recommendations?

The value of do-it-yourself investing in index funds was the basic message of my previous book, The Smartest Investment Book Youll Ever Read. If you followed the recommendations in that book, you emerged from the market crash of 2008 largely unscathed because you were in a portfolio appropriate for your risk tolerance. When the markets tanked, your paper losses were tolerable. You did not panic. You held on, and benefited from the rapid recovery in 20092011.

The success of The Smartest Investment Book spawned tens of thousands of savvy investors. They wanted to know if there was any way to improve the returns of the index fund portfolios I recommended.

The answer is yes. These portfolios are well known to a small group of advisers who understand the data and have access to the funds (available only through them) necessary to construct a portfolio that could achieve this goal. Until now, if you were an investor who wanted to go it alone, you did not have access to the funds, or the knowledge, to truly maximize your returns. Now you will.

A note of caution and full disclosure: I am an adviser. I recommend passively managed, risk-adjusted portfolios to my clients, following the principles used to construct the SuperSmart Portfolio set forth in this book. I believe most investors are well served by retaining an adviser who understands and implements the sound, academic underpinnings of these portfolios.

But I have to be realistic. I know many of you will continue to use brokers or advisers who claim to be able to beat the markets by picking stocks or recommending hot mutual fund managers. What you will learn in this book will give you the ammunition you need to protect yourself from these investment professionals.

I also know many of you may not have a portfolio large enough to interest advisers who follow the sound investing principles I describe in this book. Or you may simply want to do it yourself and save the advisory fees, even when confronted with facts showing that paying the fee is in your best interest, when you consider total returns.

For whatever reason, I believe you should be empowered to have the most optimal portfolio available. I wrote this book so you can do just that. The rest is up to you.

If you come across a word or phrase you dont understand, please refer to the Glossary. You will most likely find it there.

Finally, most investors will benefit from a discussion of what they are currently doing wrong and a review of the academic underpinnings for the Smartest Portfolios. For those who just cant wait to see the allocations and funds in the SuperSmart Portfolio, you will find this information in through 25.