The Power of Passive Investing by Richard Ferri

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The Power of Passive Investing by Richard FerriThe Power of Passive Investing by Richard Ferri explains why investing is so much easier when you do it passively through index investing. If this sounds like John C. Bogle, founder of Vanguard, then you won’t be surprised to learn that he wrote the foreword to this book! (or that Ferri was a co-author of The Bogleheads’ Guide to Retirement Planning)

There’s one quote in the book that I think sums up why passive investing is a good idea: “Investment greats such as Warren Buffett, Peter Lynch, and David Swensen are all outspoken advocates for passive investing. In addition, the U.S. government’s Thrift Savings Plan (TSP) for federal employees has only passive investment options available for participants.” When you couple that with the statistics and research that Ferri has put into the book, it’s a combination of facts that become very difficult to refute if you want to advocate active investing.

It’s hard for me to have an opinion on the book because I’m already a big proponent of index investing. I’m a customer of Vanguard, I’m bought into the system of low cost index funds, and so this book isn’t designed for me. It’s preaching to the choir.

This book is for the scores of Americans who invest by way of active mutual funds with 1%+ expense ratios, sales loads, and scores of other fees that I never see. The books charts and technical analysis, while impressive, only cement the idea I already have in my mind.

So my charge to you is that if you don’t believe in passive investing, give this book a look. If you believe market experts can beat the market because of skill and not luck, despite the overwhelming evidence that they don’t; read this book and tell me if you still believe the same. If you do, I’d love to discuss it!

If you were interested in learning more about Rick Ferri, you can check out his website.

{ 11 comments, please add your thoughts now! }

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11 Responses to “The Power of Passive Investing by Richard Ferri”

  1. As my wife and I are getting close to a debt-free life, I am thinking more and more about passive income. I want to work now and get paid later over and over and over again! I am certainly interested in reading this book!

  2. DIY Investor says:

    There are a number of books in this genre and one of their themes is that it is not difficult to invest. Many people hear “investing” and they immediately think they have to pick stocks etc. These types of books show that is not necessary and in fact isn’t the best way to go.
    By the way “passive investing” has a negative connotation. I prefer “evidence based investing” for the simple reason that the evidence is overwhelming that over the long term low cost,low turnover, index fund investing beats most professional active managers.

  3. There is no doubt that passive investing is right path for the majority of investors.

    In my opinion, the mutual fund industry should not even exist because it under-delivers and over-charges for its services. However, it has a gigantic sales force that is effective in convincing the masses to buy the product.

    Yet there people who can do better. They have the time and skills required. And the tools.

    As you know, I’m a big proponent of using options to increase the chances of success. But it takes time and effort to learn. And when I tell you that options are not for everyone, I mean it.

    Passive investing is better than paying for management services. Passive investing is best for the majority. However, it is not best for everyone.


  4. tom says:

    As a side not, unrelated to the content, all of the royalties from this book are being donated to charitable organizations that help injured armed service members.

    (See the Acknowledgments section on Amazon “Look Inside”)

  5. I skimmed through this book a while ago, and it looked quite interesting. Just havent found the time to read it yet! D’oh

  6. Bogey says:

    It seems like just over the past 6 months everyone is jumping on the passive index investing bandwagon. Shocking.

    Even read a story about a Wall Street fella that is dying from cancer, and he basically said the whole investing industry (active mgmt) is BS.

  7. After reading this book I took a close look at my Fidelity statements for the year. I found that I had made a lot of trades, but not a lot of money. I have now dedicated a portion of my portfolio to this “passive” approach and it seems to be working better. The tough part is pulling myself away from CNBC every day!

  8. cubiclegeoff says:

    Does this book have anything about diversification with passive investments? That would be more interesting to me than another person saying that index funds are the way to go.

    • Gary says:

      Also get a copy of The Investment Answer by Dan Goldie and Gordon Murray. Murray was referenced above as the former Goldman Sachs guy who left the “dark side” for the passive (hate that term, structured) approach to investing. It doesn’t just preach. It teaches.

  9. if it’s good enough for buffett, it’s good enough for me. love the book’s cover, btw.

  10. elloo says:

    Sorry, guy. I have to disagree. I did the passive thing in funds for many many years. Made money to be sure. But nowhere the amount over the past year that I have in active stock trading. I mean active–buy stocks with good dividends and hold for 3 or 4 weeks and sell. I may go back to the passive fund style, but not now.

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