Recommended Reading

The first Saturday of March is a special day for me, as that is traditionally the morning when Warren Buffett’s annual report and shareholder’s letter is released (though last year he surprised me by releasing it late Friday afternoon). Reading his letters are invaluable. I will share some highlights of this year’s letter when it is released.

As Buffett made a huge gift to the Bill and Melinda Gates Foundation, Buffet encouraged Bill Gates to write an annual letter, which was released earlier this week. It is fascinating reading and incredible, both in the poverty and medical problems in other parts of the world and the significant efforts that Gates and his wife Melinda are making, both financially and with their time, in an attempt to address and cure some of these problems.

For example, in 1960, almost 20 million children died under the age of 5, of the 110 million children born. In 2005, when more than 135 million children were born, fewer than 10 million children under the age of 5 died. Gates called this “one of the most amazing statistics ever.” His Foundation is focusing on vaccines to cut the 10 million figure in half again within the next 20 years.

I highly recommend reading this report. It will give you an appreciation of how well off so many of us are, and the steps that Gates is taking to address many of the world’s problems. For more information and the full annual letter, see

In commenting on the world’s economic issues, Gates wrote: “If you take a longer timeframe, such as five to ten years, I am very optimistic that these problems will be behind us. A key reason for this is that innovation in every field-from software and materials science to genetics and energy generation-is moving forward at a pace that can bring real progress in solving big problems. These innovations will help improve the world and reinvigorate the world economy.”

If the Best Can’t Pick ‘Em, How Can You?

Each week, publishes an article entitled “Fund Times,” which writes about fund managers that have been fired, quit, changed jobs, etc., among other things.

On January 22, 2009, the lead article was that Vanguard was replacing a subadvisor (manager) for 50% of one of their actively managed funds, Vanguard Growth Equity. In early 2008, they replaced the other subadvisor, who managed the other 50%.

With all the resources that Vanguard has, why would they be frequently changing the managers of this mutual fund? This once again shows how difficult it is to predict the future success of active fund/money managers. Even Vanguard could not do it. Vanguard selected a certain manager a few years ago (presumably after lots of research by many professionals), based on their past performance, then the performance fell below their respective benchmark for a period of time and Vanguard decided to make a change.

Our philosophy is rather than trying to pick and chase a fund manager that will consistently beat a respective benchmark (which is extremely hard to do), we build a portfolio to match the benchmark for each asset class. In the long run, academic data shows that this will be the winning strategy.

Can You Judge a Book By It’s Cover?

I’m not sure we have the answer to that, but we do know that you can judge or evaluate a financial advisory firm by the information and books that they read, or do not read. We value the importance of continually learning from prior financial history and the lessons that can be learned from reading other experts and certain journalists.

Books that we’ve read (and recommend):

  • Snowball, Warren Buffet’s biography, by Alice Schroeder (Excellent background on his life)
  • Panic, by Michael Lewis, a collection of essays on financial crisis from the 1980s to now
  • A Demon of Our Own Design, by Richard Bookstaber
  • Investment Policy, Charles Ellis
  • Buffet: The Making of an American Capitalist, written in 1990s, Roger Lowenstein
  • When Genius Failed: The Rise and Fall of Long Term Capital Management, Roger Lowenstein
  • A Random Walk Down Wall Street, Burton Malkiel
  • Four Pillars of Investing and other books by William J. Bernstein
  • Books by Larry Swedroe, Director of Research, BAM Advisor Services

I will post more to this list in the future. Many of the books that I read before we formed this firm were instrumental in developing our investment philosophy.

Daily or Periodic Reading

  • The Wall Street Journal (in print and electronically), daily, since high school
  • The New York Times, electronically
  • Nick Murray Interactive (online advisor’s newsletter)
  • Information and commentary provided by BAM Advisor Services and Dimensional Fund
  • Advisors
  • Financial Journals: Investment News, Financial Advisor, Investment Advisor
  • Leimberg Services, an online subscription service which provides tax and estate planning updates
  • Some of our favorite journalists: Jason Zweig (WSJ), Roger Lowenstein (NY Times and others), Floyd Norris and Joe Nocera (NY Times)
  • Atlantic Monthly (now emailed monthly to my Kindle)


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