5 ms·

A Dying Banker’s Last Instructions

58 points by dgudkov 16y ago

light3 16y ago
That's an awfully long article to say his dying and written a book on his 'new found' way of investing.
- hugh3 16y ago
  And to save everyone the trouble, his "new found" way of investing is: The book asks readers to make just five decisions. First, will you go it alone? The two authors suggest hiring an adviser who earns fees only from you and not from mutual funds or insurance companies, which is how Mr. Goldie now runs his business. Second, divide your money among stocks and bonds, big and small, and value and growth. The pair notes that a less volatile portfolio may earn more over time than one with higher volatility and identical average returns. “If you don’t have big drops, the portfolio can compound at a greater rate,” Mr. Goldie said. Then, further subdivide between foreign and domestic. Keep in mind that putting anything less than about half of your stock money in foreign securities is a bet in and of itself, given that American stocks’ share of the overall global equities market keeps falling. Fourth, decide whether you will be investing in active or passively managed mutual funds. No one can predict the future with any regularity, the pair note, so why would you think that active managers can beat their respective indexes over time? Finally, rebalance, by selling your winners and buying more of the losers. Most people can’t bring themselves to do this, even though it improves returns over the long run. If you think the article is full of filler, wait 'til you see how filler-chocked the book is!
  - pavel_lishin 16y ago
    Aren't 2 and 3 fairly basic and obvious?
    - electromagnetic 16y ago
      Perhaps yes, but the old ideas were that diversification was for the incompetent. Literally the more competent you were, the less diverse your portfolio would be. If you keep only a handful of high-strong earners, you're golden. Consider that if you invested $5,000 in Apple in early 2003 you'd have around $212,000. If you sold a 1/4 million dollar home and invested it all, you'd have 10 million dollars. If you're Prometheus, you might have enough foresight and intelligence to play the market amazingly. If you kept money in stocks like Apple that are making like 60% growth annually, you'd be able to invest $1 at 18 and retire with 15 billion dollars at 68. However, given that homeless people don't suddenly move into mansions by playing the stock market is a clear illustration that this doesn't work in the real world.
  - minsight 16y ago
    If I had brain cancer and had a book to write, I would almost certainly err on the side of brevity.
- sudont 16y ago
  He even said “Everyone wants to hear what you have to say…” when you have a brain tumor. Apparently NYTimes still has the romantic notion of banker noblesse oblige.
- nerfhammer 16y ago
  It actually appears to be a PR piece for Dimensional Fund Advisors. See also http://www.portfolio.com/executives/features/2007/11/19/Blaine-Lourd-Profile/ http://www.portfolio.com/executives/features/2007/11/19/Blai...
RiderOfGiraffes 16y ago
Single page: http://www.nytimes.com/2010/11/27/your-money/27money.html?pagewanted=all http://www.nytimes.com/2010/11/27/your-money/27money.html?pa...
ljordan 16y ago
Why yes, I work on Wall Street and the man's got a point. In fact, the situation he describes is part of what inspired me to change careers.
mbesto 16y ago
While it is disheartening to hear about someone battling cancer, why is this on the front page of HN?
- brown9-2 16y ago
  Because its about the futility of conventional investment wisdom.
mbyrne 16y ago
This guy was a bond salesman, not an investor, it is no wonder why he didn't even understand the basics. It didn't matter. His job was to convince people to buy what his company was selling and to generate commissions.
- deleted 16y ago
  [deleted]
a5seo 16y ago
There's an interesting story about how Google invited a bunch of brokers and wealth managers to present to their employees, along WITH Nobel laureate Bill Sharpe (and others) who basically torpedoed the active wealth manangers' hopes of scoring clients. Posted here: http://news.ycombinator.com/item?id=1949158 http://news.ycombinator.com/item?id=1949158 I like the idea of having evidence that i couldn't be doing better by trying harder. I prefer to focus my energy on building value thanks very much.
jaysonelliot 16y ago
I started that article feeling very cynical. "He's dying of cancer, and his last work is to write an investment book?" Then I read the whole story. He's trying to leave something behind that will improve people's lives by giving them more control over one of the most important things in their lives - their finances. I was genuinely moved.
Jabbles 16y ago
Keep in mind that putting anything less than about half of your stock money in foreign securities is a bet in and of itself, given that American stocks’ share of the overall global equities market keeps falling. Could someone explain this sentence please? What does he mean by "a bet", and why is the fraction of global shares that are American important?

58 points by dgudkov 16y ago

light3 16y ago

That's an awfully long article to say his dying and written a book on his 'new found' way of investing.

hugh3 16y ago
And to save everyone the trouble, his "new found" way of investing is: The book asks readers to make just five decisions. First, will you go it alone? The two authors suggest hiring an adviser who earns fees only from you and not from mutual funds or insurance companies, which is how Mr. Goldie now runs his business. Second, divide your money among stocks and bonds, big and small, and value and growth. The pair notes that a less volatile portfolio may earn more over time than one with higher volatility and identical average returns. “If you don’t have big drops, the portfolio can compound at a greater rate,” Mr. Goldie said. Then, further subdivide between foreign and domestic. Keep in mind that putting anything less than about half of your stock money in foreign securities is a bet in and of itself, given that American stocks’ share of the overall global equities market keeps falling. Fourth, decide whether you will be investing in active or passively managed mutual funds. No one can predict the future with any regularity, the pair note, so why would you think that active managers can beat their respective indexes over time? Finally, rebalance, by selling your winners and buying more of the losers. Most people can’t bring themselves to do this, even though it improves returns over the long run. If you think the article is full of filler, wait 'til you see how filler-chocked the book is!
- pavel_lishin 16y ago
  Aren't 2 and 3 fairly basic and obvious?
  - electromagnetic 16y ago
    Perhaps yes, but the old ideas were that diversification was for the incompetent. Literally the more competent you were, the less diverse your portfolio would be. If you keep only a handful of high-strong earners, you're golden. Consider that if you invested $5,000 in Apple in early 2003 you'd have around $212,000. If you sold a 1/4 million dollar home and invested it all, you'd have 10 million dollars. If you're Prometheus, you might have enough foresight and intelligence to play the market amazingly. If you kept money in stocks like Apple that are making like 60% growth annually, you'd be able to invest $1 at 18 and retire with 15 billion dollars at 68. However, given that homeless people don't suddenly move into mansions by playing the stock market is a clear illustration that this doesn't work in the real world.
- minsight 16y ago
  If I had brain cancer and had a book to write, I would almost certainly err on the side of brevity.
sudont 16y ago
He even said “Everyone wants to hear what you have to say…” when you have a brain tumor. Apparently NYTimes still has the romantic notion of banker noblesse oblige.
nerfhammer 16y ago
It actually appears to be a PR piece for Dimensional Fund Advisors. See also http://www.portfolio.com/executives/features/2007/11/19/Blaine-Lourd-Profile/ http://www.portfolio.com/executives/features/2007/11/19/Blai...

RiderOfGiraffes 16y ago

Single page: http://www.nytimes.com/2010/11/27/your-money/27money.html?pagewanted=all http://www.nytimes.com/2010/11/27/your-money/27money.html?pa...

ljordan 16y ago

Why yes, I work on Wall Street and the man's got a point. In fact, the situation he describes is part of what inspired me to change careers.

mbesto 16y ago

While it is disheartening to hear about someone battling cancer, why is this on the front page of HN?

brown9-2 16y ago
Because its about the futility of conventional investment wisdom.

mbyrne 16y ago

This guy was a bond salesman, not an investor, it is no wonder why he didn't even understand the basics. It didn't matter. His job was to convince people to buy what his company was selling and to generate commissions.

deleted 16y ago
[deleted]

a5seo 16y ago

There's an interesting story about how Google invited a bunch of brokers and wealth managers to present to their employees, along WITH Nobel laureate Bill Sharpe (and others) who basically torpedoed the active wealth manangers' hopes of scoring clients. Posted here: http://news.ycombinator.com/item?id=1949158 http://news.ycombinator.com/item?id=1949158 I like the idea of having evidence that i couldn't be doing better by trying harder. I prefer to focus my energy on building value thanks very much.

jaysonelliot 16y ago

I started that article feeling very cynical. "He's dying of cancer, and his last work is to write an investment book?" Then I read the whole story. He's trying to leave something behind that will improve people's lives by giving them more control over one of the most important things in their lives - their finances. I was genuinely moved.

Jabbles 16y ago

Keep in mind that putting anything less than about half of your stock money in foreign securities is a bet in and of itself, given that American stocks’ share of the overall global equities market keeps falling. Could someone explain this sentence please? What does he mean by "a bet", and why is the fraction of global shares that are American important?