The 3 Simple Rules of Investing

Why Everything You've Heard about Investing Is Wrong- and What to Do Instead

Michael Edesess (Author) | Kwok Tsui (Author) | Carol Fabbri (Author) | George Peacock (Author)

Publication date: 05/16/2014

The 3 Simple Rules of Investing

Explains why the most common investment advice is misleading, useless, or just plain wrong

* Proves that investing is easy if you follow three simple rules and use a few basic investments

* Explains why the most common investment advice is misleading, useless, or just plain wrong

* Written by a team of veteran financial industry insiders

Personal finances can be a huge source of stress. And confusing and complicated advice from the financial industry, which is supposed to be helping, just makes it worse-and is a reason why many investors are falling further and further behind.

But investing is actually simple, maybe more simple than ever before. As the authors of this clear, practical, and enlightening book-part financial guide, part exposé-prove, there are just three simple rules you need to follow and just a few investment products that are necessary for an ideal portfolio-with perhaps a few optional ones that might help and won't hurt. That's it.

But what about the advice of investment gurus, financial industry pundits, advisors, journalists, and academics? The authors debunk the financial industry's Seven Deadly Temptations-including trying to beat the market, investing via the latest "scientific" financial theories, and succumbing to the lure of expensive and complex-sounding investments.

Whether you are a hesitant first-timer, an experienced veteran, or even a professional institutional investor, this book will help you make wise selections in your 401(k)s and create portfolios for all seasons. And as an added benefit, the authors explain how turning your back on convoluted investment products reduces systemic risk to the overall financial system and deprives Wall Street of some of its undeserved profits, thereby curbing its unhealthy political influence.

Read more and meet author below



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Overview

Explains why the most common investment advice is misleading, useless, or just plain wrong

* Proves that investing is easy if you follow three simple rules and use a few basic investments

* Explains why the most common investment advice is misleading, useless, or just plain wrong

* Written by a team of veteran financial industry insiders

Personal finances can be a huge source of stress. And confusing and complicated advice from the financial industry, which is supposed to be helping, just makes it worse-and is a reason why many investors are falling further and further behind.

But investing is actually simple, maybe more simple than ever before. As the authors of this clear, practical, and enlightening book-part financial guide, part exposé-prove, there are just three simple rules you need to follow and just a few investment products that are necessary for an ideal portfolio-with perhaps a few optional ones that might help and won't hurt. That's it.

But what about the advice of investment gurus, financial industry pundits, advisors, journalists, and academics? The authors debunk the financial industry's Seven Deadly Temptations-including trying to beat the market, investing via the latest "scientific" financial theories, and succumbing to the lure of expensive and complex-sounding investments.

Whether you are a hesitant first-timer, an experienced veteran, or even a professional institutional investor, this book will help you make wise selections in your 401(k)s and create portfolios for all seasons. And as an added benefit, the authors explain how turning your back on convoluted investment products reduces systemic risk to the overall financial system and deprives Wall Street of some of its undeserved profits, thereby curbing its unhealthy political influence.

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Meet the Authors


Visit Author Page - Michael Edesess

Michael Edesess is an accomplished mathematician and economist with experience in the investment, energy, and sustainable development fields. He is a senior research fellow in the Centre for Systems Informatics Engineering at City University of Hong Kong, principal and chief strategist of DC-based Compendium Finance, research associate of the EDHEC–Risk Institute, and senior fellow and project consultant at two Hong Kong–based think tanks.

He writes regularly for the online journal Advisor Perspectives, coauthored "The 3 Simple Rules of Investing" (Berrett-Koehler 2014) and authored The Big Investment Lie (Berrett-Koehler, 2007). He was a founding partner and chief economist of the Lockwood Financial Group until its 2002 sale to The Bank of New York. Previously a consultant and provider of mathematical computer systems to institutional investors, Dr. Edesess worked with several of the largest banking and consulting firms. He has taught courses in finance, energy and environmental economics, mathematics, and statistics at six universities. He has been interviewed on radio and TV and published in the Wall Street Journal, the Journal of Portfolio Management, and Technology Review, among other publications.

In addition to his work in investments, Dr. Edesess has been active in nonprofit organizations. He chaired the board of International Development Enterprises USA, which focuses on rural smallholders in developing countries, and also chaired the board of Rocky Mountain Institute, a prominent energy efficiency think tank, and the Rocky Mountain Advisory Board of the Environmental Defense Fund. Dr. Edesess holds a bachelor’s degree from MIT and a Ph.D. in pure mathematics from Northwestern University.



Visit Author Page - Kwok Tsui


Kwok L. Tsui is a distinguished statistician whose work focuses on the statistics of quality, informatics, and data mining, and he is an expert on the problem of spurious patterns in big data. He has spent 24 years as a professor and department head at several major universities as well as a practical applied researcher. Prior to his university positions, he was for 4 years a member of Technical Staff at AT&T Bell Laboratories’ Quality Assurance Center. Dr. Tsui is currently head and chair professor in the Department of Systems Engineering and Engineering Management at City University of Hong Kong, before which he was a professor in the School of Industrial and Systems Engineering at the Georgia Institute of Technology.

A recipient of the National Science Foundation Young Investigator Award, he has served in numerous positions in professional statistical societies, including fellow of the American Statistical Association and the American Society for Quality; elected member of the International Statistical Institute; U.S. representative in the ISO Technical Committee on Statistical Methods; department editor of IIE Transactions; chair of the INFORMS Section in Quality, Statistics, and Reliability; and founding chair of the INFORMS Section in Data Mining. In addition to his work on statistical quality and reliability, Dr. Tsui’s current research includes health informatics, data mining, and surveillance in health care and public health, prognostics and health management, calibration and validation of computer models, bioinformatics, process control and monitoring, and robust design and Taguchi methods in industrial engineering. Dr. Tsui holds a Ph.D. from the University of Wisconsin.


Visit Author Page - Carol Fabbri

Carol Fabbri, an experienced financial advisor, certified financial planner, and certified advisor in philanthropy, cofounded Fair Advisors in 2008. As the managing partner of Fair Advisors LLC, an independent financial advisory firm, she works with individuals and nonprofit organizations. Prior to that role, she worked as an advisor at Merrill Lynch and formerly spent a decade as an international business consultant after receiving an MBA at MIT’s Sloan School of Management. She leverages her consulting experience to educate her audiences and simplify the seemingly complex financial environment. She also works with individuals to achieve their goals using financial, estate planning, and philanthropic tools.

Ms. Fabbri’s unique and clear perspective on personal finance issues is often quoted in the national press, including Forbes, Smart Money, and the Wall Street Journal. She is the coauthor of Personal Investing: The Missing Manual (O’Reilly, 2010). To address the broad need for financial literacy courses, she founded Fair Advisors Institute (FAI), a nonprofit dedicated to improving financial literacy through education and research. In 2012, FAI received the “Right on the Money” award for its work providing financial education to foster youth. Her efforts toward educating individuals about personal finance have been recognized locally and nationally. Ms. Fabbri received the TIAW World of Difference Award for her work economically empowering women and has been recognized as a Colorado Top Wealth Advisor. She recently received her black belt in taekwondo and lives in the mountains of Colorado with her husband and son.



Visit Author Page - George Peacock


A 27-year investment industry veteran, GEORGE PEACOCK is a principal at Compendium Financial Investment Advisory, the founder and manager of the Purchasing Power Portfolio, the author of the Yoga of Investing blog, and the managing editor, investments for the online financial site FrankInsight.com. He entered the financial advisory business as an associate at American Express Financial Services (now Ameriprise). He also worked at the Wallace Financial Group, a regional insurance, investment, retirement, and financial planning firm, and Mullin Consulting, advising Fortune 1000 companies on niche compensation benefits for their senior executives. He returned to advising high-net-worth individuals and families when he joined the D.C. office of US Trust, which was later purchased by Bank of America. Mr. Peacock left Bank of America when the firm, like the rest of the investment industry, began relying increasingly on mathematical models whose output depended on a myriad of unknowable assumptions.

At Euclid, he immediately established the Purchasing Power Portfolio, a precursor to the Simplify Wall Street approach described in this book. Mr. Peacock is the president of the Georgetown University Alumni Association and is an ex-officio member of the University’s board of directors. He is also a member of the External Advisory Board of the Georgetown University Alumni and Student Federal Credit Union, the largest student-run credit union in the country, and The Georgetown Chimes, an all-male a capella singing group. A part-time stand-up comic, he lives in Bethesda, Maryland, with his four children, Duncan, June, Hayley, and Mackenzie.

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Table of Contents

PREFACE

INTRODUCTION

The Simplify Wall Street Portfolio

PART I The 3 Simple Rules of Investing

RULE #1

Simplify Your Options

RULE #2

Look Only Forward

RULE #3

Tune Out Noise

PART I I Investing's 7 Deadly Temptations

DEADLY TEMPTATION #1

Beat the Market

DEADLY TEMPTATION #2

Trust It All to Our Expertise

DEADLY TEMPTATION #3

Precisely Calibrate Your Portfolio

DEADLY TEMPTATION #4

Sleep Well at Night with Your Risk Under Control

DEADLY TEMPTATION #5

Use the Strategies That Always Work

DEADLY TEMPTATION #6

Do What Wealthy and Sophisticated Investors Do

DEADLY TEMPTATION #7

Use Modern Scientific Financial Theory

EPILOGUE

The Invisible Squeeze

Notes

Glossary

Acknowledgments

Index

About the Authors

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Endorsements

“This may be the clearest and most valuable guide yet written to successful investment. It immunizes you to the parasitic financial services industry's offers that you can't understand and it can't fulfill. If you read only one investment guide in your life, make it this one—elegantly boiled down to the essence of what makes sense and makes money.”
—Amory B. Lovins, cofounder and Chief Scientist, Rocky Mountain Institute

“Edesess has done it again. As the individual investor's best friend, he takes the whole financial advice industry to task. What's the secret sauce? Keep your strategies simple.”
—Vanessa Drucker, financial journalist, former Wall Street attorney, and writer of popular business fiction

“Put your skepticism aside. Investing properly to achieve your financial goals can be accomplished by following the three simple rules contained in this book.”
—Bob Huebscher, CEO, Advisor Perspectives

“This is the book that investors have needed for a long time. It empowers readers to take control of their financial lives and to tune out the propaganda from the investment industry. It becomes easy for investors to do the right things for themselves once they get rid of all the noise, and follow the "Simple" approach that the book recommends.” 
--Joseph Tomlinson, actuary and financial planner

"In the world of high finance and investment, in which the top .01% and the wannabes who work for them are out to make lots more money with your money, without giving a hoot about your interests, this is one of the few books that we non-experts on such matters can trust to get us started."
--Bill Domhoff, a professor emeritus of sociology at the University of California at Santa Cruz.

“This very practical book by four expert insiders cuts through all the nonsense and reduces successful investing to a few common-sense principles. It can help you and everybody else, except perhaps, the huge financial industry that generates lavish profits by misleading millions of investors.”
--Richard C. J. Somerville, Ph. D. Professor Emeritus and Research Professor at Scripps Institution of Oceanography at the University of California, San Diego

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