Blogs & Comment

Book review: The Empowered Investor

Over the Christmas holidays, I read The Empowered Investor: A Guide to Building Better Portfolios, authored by Montreal-based investment advisor Keith Matthews. It was the second, new and expanded edition published in 2008.
The first edition, published in 2005, was brevity personified, at about a hundred pages. It attracted several reviews including one from the Financial Posts Jonathan Chevreau. He gave it a thumbs up for its asset-based, passive, low-cost, low-turnover, time-in-the-market, diversified, indexing approach — in the mold of John Bogle, Larry Swedroe, and William Bernstein.
Chevreau also hailed it for being the first book to introduce Canadians to the three-factor French/Fama approach whereby portfolios are tilted toward small caps and value stocks. As the book notes, research carried out by Professors French and Fama show that these asset classes have historically outperformed the market over the long run.
A reviewer on thought the 2005 edition was too short. I finished it thinking is that all there is? he wrote. I think he was also making the point that much of the writing was at a general level and a rehash of what Bogle, Swedroe, and Bernstein have already covered.
The new material in the 2008 version, which extends the books length by over 50%, is more interesting. The two chapters on international investing, especially, were an interesting, fact-filled defense of the merits of diversifying into foreign assets and currencies.
The other chapters in the new section advised avoiding: i) boilerplate asset allocations, ii) alternative assets such as hedge funds, iii) the slippery-slope explore part of core-and-explore portfolios, iv) sector ETFs, v) excessive pessimism or optimism regarding future returns on stocks, and vi) excessive optimism on real long-term returns from real estate.