Please post your comments, reviews and suggested amends to the book here. The plan is to publish a revised edition of the book later in 2012.

96 thoughts on “Comments/Reviews

  1. Excellent book. Mirrors my (and my wife’s) experience with investing in a stocks and shares ISA – heavy losses! No longer investing in them – sticking to building societies and cash ISAs – and living with the ravages of inflation. Have now to persuade my daughter to stop investing in a stocks and shares ISA to supplement her pension through her ‘financial adviser’ (fees? trust?) and take control herself, preferably investing in a cash ISA!

    • Thanks Grant. I hope your wife and you did not lose too much in your share ISA. The average person probably has over the last decade I’m afraid.
      Good luck in persuading your daughter. Give her the link to the book to read!

      • Thank you Pete for a really excellent book – I only wish I had read it 20 years ago when I started investing. After making many of the mistakes you describe (eg always investing in the top performing fund only to see it mean- revert the next year) I came across index investing around 8 years ago In a few hours reading your book today I learnt more than I have in the last 10 years of self-education.

        Monkey with a Pin is in the top few investment books i have read – the losers game- index investing for dummies and smarter investing being the others.

        Thanks again and I hope you get the wide readership you deserve.


        • Adrian – I am truly humbled to read your comments. It makes the man months of effort to research, write, create and then market it, worth it.

        • With market capitalisation index-investing, one is buying more of companies that are valued highly by the market and less of those that are cheap – when the companies’ performances mean-revert, how is market cap index-investing the panacea?


          • Snaj,

            A good point. Personally I’m going to be buying my portfolio by throwing darts into the newspaper thereby getting a random selection of the index – some of which are under valued and some over valued, but I’m pretty sure it will beat an index tracker for the reasons you say (amongst others).

  2. Hi Pete, I really enjoyed the book and I enjoyed listening to you on Moneybox yesterday. I hope it starts a discussion which should have happened 30 years ago. However, I’m sorry to say that the effect it’s had on me is to produce a feeling of despair and a sense that I might as well p*** it up the wall now…well not really, but perhaps you can see my point, Speaking as someone with limited funds, I simply don’t have the time (or if I’m honest, the willpower) to manage a portfolio. I just want a decent return on the money I’m paying into my pension fund.

    • Dave – please don’t despair. I’m personally no planning to give up investing. I agree with you though. What we all want is decent return on our money.
      More positively, there is no need to lose 6% a year on your investments. You might be able to get the number down by doing the couple of things I mentioned to Paul Lewis yesterday, ie trade less, use cheap index trackers with low costs and being like a panther and holding any new money as cash until the market dips again.

      PS As ever, I repeat the health warning in the book and in this website’s T&Cs, that I’m not qualified to give professional advice. I’m just a private investor like you. Please do your own research before acting in any way.

      • Looks like I wasn’t the only reader to come away with the step away very carefully message :) Which for most people and possibly me included, could be the right action – First, Do No Harm.

        > use cheap index trackers with low costs and being like a panther and holding any new money as cash until the market dips again

        That’s not quite as easy as it sounds, because cash is also a wasting asset. Particularly if you have to hold it on instant access to be able to deploy, because things that could protect you against inflation like NS&I ILSCs take time to liquidate. Or you have to hold your cash in an ISA and as you said in the book, watch it die because you get no useful interest.

        Inflation is probably a serious hazard in the near future. We have a big national debt to inflate away in the UK ;)

        • I don’t disagree with all the problems over cash, but there are instant access accounts paying 3%.

          Over inflation, I agree. “Financial repression” is ugly. If I ever write another book it will be for the victims of this policy. I really fear what it will do to the savers and particularly the old in this country.

          I also have great sympathy at the other end of the age scale with the debt shackles of student loans that are being created.

  3. Fantastic – you have taken the trouble to write and make available exactly what I have been arguing for years – I wish I had your energy and ability.

    In homage.


  4. The book made two very good points; the first to watch like a hawk the charges and fees and that in many cases are well-hidden, while the second is the generally poor track record of those who work in the investment industry. I am amused you are forced to make a disclaimer about not being qualified to give advice, when the evidence does suggest that those who appear to be authorised to do this (or least meet FSA compliance regs) are clearly notIndeed, I would draw a parallel with the banking crisis in which it was pretty clear that people didn’t know what to do and now we know much of banking is a house of cards. I think the investment advisory industry is similarly strewn with marginally competent people who may have more company knowledge and information, but have no greater idea of market behaviour than the monkey. I recall as markets were tumbling a broker insisting that, based on some charting alchemy, it bottoming out, but it just kept going — so much for

    I would make a stronger point about exchange rate costs and make sure folks understand double taxation treaties.

  5. Your book definitely deserves to be read widely. However I suspect many won’t have the time (or basic financial understanding) to read it, much as most (self included) rarely analyse their pension and other investment reports in detail. Have you considered doing a summary version of a few pages covering the key points with lots of clear graphics? The graphs are good but some of them could possibly be made clearer, e.g. the one showing golden crosses / death crosses is a little complicated and it’s not immediately clear what’s going on. Appreciate this is not easy in a self funded / published project!

    Thanks for your hard work and honest observations, and for making it freely available

      • Hi Pete
        I was thinking of a word / pdf document illustrated with some graphics (about 75% graphics) but I guess the sky’s the limit! Something animated would be more attention grabbing and simpler to digest. Powerpoint can do all that (e.g. graphs / pie charts progressively showing change in net fund returns or charges over time) as I am sure you know, and it has quite a nice feel / look and is easy to do. And most people will have a reader for PPT.
        Assuming PPT apps exist for smartphones (I don’t have one but I am sure they do) a 5 minute PPT with sound would potentially reach a huge audience.
        I could even volunteer some help with this if you like, I’m not a ppt expert but know the basics. I do feel quite strongly about this issue, as a normal person / investor who has been continuously disappointed by poor performance and lack of clarity by the vested interests in the industry!

  6. Hello Pete………..Excellent book, very informative as far as I have read but I have just skimmed the surface. What stands out a mile is the utter uselessness of a bunch of self serving highly paid fund ‘managers’. Their inability to organise a bevvy or two in a brewery springs to mind. I have nevertheless found a company which has looked after my money very well indeed and if any of your investers are interested in the name of the company perhaps you could contact me, I will give you the details and you can pass them on if you think it appropriate…………Regards and thank you…..Carl Haynes

  7. I found the book very interesting, especially as I was considering starting to invest in Britain. I have been investing in Israel for the past two years, almost exclusively with index linked corporate bonds which seem to be one of the best investments available, trading yield (which is not too shabby) for safety. Unfortunately, there don’t seem to be similar investments in Britain!

  8. Excellent book. I’d have been happy to pay for it.

    Having worked in the financial markets for a few years, I have always suspected that what you say in the book is true. Very refreshing to see it so clearly presented. Keep up the good work.

    • Thank you for the kind comments.

      It is free because I want as many people as possible to read it. If I’d read such a book 10 years ago, it would have saved me a lot of money.

  9. Great book, but can I suggest another chapter?
    Inflation- mentioned a lot and assumed to be an annual ‘constant’.
    RPI, CPI whatever- it is a national ‘measure’, but it is not your inflation, nor is it mine. I have tracked my personal inflation for 20 years, and know this for certain ( it is, fortunately, lower than the published measure most years) . Given that a spur to changing investment strategy for many (often to higher risk for greater gain) is the fear of losing capital value, this is an important subject. After all, one’s investments are, eventually, going to be spent on oneself. It is your own personal future needs that determine the real value of your capital. Taking risks to produce returns you will never need is not a good strategy!
    Keep up the good work!

    • Chapter on inflation…
      Interesting that. In my day job as a market researcher, I’ve just written a report all about inflation and the parallels with the 70s particularly.

      To me there is whole bigger issue of “financial repression” which is potentially the cause of this inflation in the first place. The impact on it on savers over the coming years will be great, especially for the old. That indeed may be the subject of the next book.

      • It is certainly a big enough subject for a book…
        One issue is that inflation calculations are based on ‘objects’ not functionality ( e.g. ‘a phone’ not ‘voice communication ability’) which does not match the choices a consumer has. It is also re-based at the same level when objects change, missing reductions due to technology change.
        For those who think such issues are not of consequence, I would compare a brand new top-of-line BMW and a 10year old Toyota. Is the difference in price fully reflected in functional difference? (clue- both keep the rain off and can travel at the legal limit…) Another item- there is no inflation on a one-off purchase. If you want to visit the great wall of China, you do not compare the price with previous years- it is either an acceptable price or not.

  10. Honestly Mr Comley your book is simply BRILLIANT!

    About 6 years ago I remember reading a book by Peter Lynch ‘Learn to Earn’, who sang the praises of index trackers. However when it came to starting a pension a few years ago, I decided to go for actively managed funds through Hargreaves Lansdown. All the marketing for active funds did the trick. It pushed what I had read about index funds out of my mind.

    Hargreaves Lansdown gets a huge amount of PR in the U.K. media. Normally I think the person usually comes across very well. However when listening to you and Mr Dampier on Radio 4, I got the feeling you had really got his goat, and he wasnt feeling too comfortable with the discussion! I was waiting for Mr Dampier to make some strong counter points – but they never came. I sat there thinking: who is this Comley chap, and why has he got the normally smooth Mr Dampiers knickers in such a twist?

    Excitedly I fired up the old Kindle and read your book. I’m SO grateful you’ve written it.

    Portfolio turnover rate? I had never heard of it before, nor did I have any idea it impacted the cost of funds. Total expense ratio doesnt include all the total expenses…huh?? Unbelievable.

    I’m not sure what I’m going to do next re saving/investing, but I feel I’m now far but prepared.

    I doth my cap to you sir

    • Thank you for the kind words. Good luck with your investing. At least you know some of their tricks now, so hopefully you can invest more profitably.


  11. Thank you Pete for taking the time and trouble to put monkey with a pin together.
    Apart from small gamble with spread betting i have considering investing in the market for some time without actually taking the plunge. Your book has brought me up to speed. Invaluable!
    I would point readers in the direction of money saving expert .com for details of saving in cash ISA’s, saving and regular saving accounts.
    I that respect Monkey With A Pin fillls a gap in the market as Martin Lewis’s site does not touch on stocks and shares investments.
    Once again a big thank you.

    • Agree is a great site for all things investing too. They are going to promote Monkey with a Pin to their members in a forthcoming newsletter.


  12. Good book.
    1. Secular means long-time. It is in contrast to the church which was supposedly eternal.
    2. I agree investors ought to aim for lower costs and cash is not a bad asset. In my opinion pensions are the most in need of reform as it seems that tax benefits of pensions are merely swallowed up in higher fees that appear small but are paid year after year after year. There is also a lot of political risk as governments cannot bind future governments.
    3. I feel you assume that savers get the highest rates(ie behave rationally), but fund holders incur a 2.2% penalty by not investing at the right times. I do get that it is less hassle to switch building society account – but if everyone did it rates might fall.
    4. It would be interesting see an estimate of the “equity penalty” for low cost trackers via an online discount broker over regular payments into the fund. Presumably it would be around 1%.
    5. I guess many studies use short-term gilts as building society accounts are only really useful for private individuals. Most larger companies dump their money in the money market overnight and get pathetic returns.

    Good book as I said.

    • Thanks for help understanding “secular”. I think I get it now.

      You could be right over the effects of everyone being rational over switching their building society accounts. However it won’t happen due to inertia and the fact that you don’t remember to check what rate you are being paid. What i do hope is that readers of Monkey with a Pin will be smarter in this respect with their Cash ISAs in the future. A simple way to keep remember is put your money in 1 year fixed interest accounts and then you get a free reminder annually to switch.

      You are about right about the costs of owning a tracker in low cost platform, though it depends a bit on what the platform fee is if you use a ISA/SIPP. This usually add 0.5% pa on its own.



      • You can get platform fees of zero though if you shop around. Who knows what will happen after that to be honest.

        I personally feel there is still an equity premium out there which means shares ought to outperform over the long term. The problem is that it is easy to incur costs that exceed this equity premium. I guess there are two sources of these costs – the institutional structure of the industry which means it is almost impossible to know how much you are actually paying and a “psychological” cost in which people invest at the wrong time.

        I think you highlight well that cash is not so bad a choice if you are able to bear the psychological cost of losing money. Hopefully the institutional costs will improve and the market will tilt towards lower cost tracker funds.

  13. thank you VERY much for writing the book. It addresses so many issues that I wondered about but haven’t seen so thoroughly and transparently addressed. And I really enjoyed the various research-based anecdotes that you used to support/explain your arguments. The results have direct implications for my investment strategy, and so I really appreciate your hard work.

    Before I started reading, I got your email asking for feedback. So, since I knew you were thinking of writing an updated version, and since you’ve been generous enough to give the book away for free, I jotted a few comments down as I went through. I read the whole thing fairly quickly, start to finish (skimmed some of chapters 16-18 though). Due to the brisk pace I was reading, there were things that would have been clearer, had I read more slowly. But, I’ve included these issues in the comments below as I figure many other readers will take the same approach as me. Also, focused my comments on ideas for improvement rather than the many many things I learnt and enjoyed reading. I hope the comments are useful, and your thoughts on the question at the bottom woud be much appreciated.

    p10. “that most investment companies quote” – I’d have appreciated more support for this statement. As you mention, fund projections allude to much higher returns than actually occur (I’ve be sucked in by that approach myself), but I’d be interested in even more explicit examples of expectations building.

    The “key learning points” part to each chapter works very well.

    p 29. “My best estimate of the actual values lost per year is around –2.2% for fund investors and –1.3% for share investors”. (before or after management charges?) (a reminder would be useful though am sure it’s clearly stated above)

    p38. “This is beginning to have an impact on their sales”. I’m not sure the potential investor’s quote supports the statement above. Some people may always have held such a view, so I’d like more evidence that this is the beginning of a trend.

    p55 “That is lot” typo

    p66. “Tim Bennett” – I can infer who he is, but would like to know exactly who he is. spread bet company owner?

    p89. I found the gilts v bonds chart slightly confusing at first. The most recent data is to the left and the earlier to the right. This is the opposite of the earlier line graphs. perhaps the data should be swapped around. And does the equity data include dividends? (A reminder would be handy, am surprised gilts did so well)
    p.89. I was also surprised that corporate bonds performed worse than gilts and by such a margin. A brief explanation of the reasons would be appreciated.

    About the bonds section, I’m interested to know what you think of:
    iShares Markit iBoxx £ Corporate Bond 1-5 (IS15)
    As they buy bonds close to when they pay out, the ETF promises less volatility in its price. Do you think this will be the case? (I really hope so, I have some money in this ETF)

    • Thanks for all those. They will make their way into the next version!


      UPDATE 14/5/2012: I think they are all fixed in v1.1. Thanks again.

  14. A friend recommended your book which I’ve read once and enjoyed, and will now read again. The discovery in its pages that there are more ways of levying charges than I had detected has deepened my contempt for the financial sector that claims to serve us. I just wish that I was more surprised.

    I read with interest your discussion with MikeM above on inflation where he says,”After all, one’s investments are, eventually, going to be spent on oneself. It is your own personal future needs that determine the real value of your capital”. Perhaps, with your market researchers background, you could describe how wisely (or not!) we buy the non-financial stuff in out lives. After all, if you can cut your outgoings without lowering your required standard of living, you don’t have to run so fast to stand still with your investments.


    • Chris,

      I’m not sure I’m qualified on that one. Have you used moneysaving They have loads of tips.


    • chrisb,
      I am currently writing a book on this subject, encouraged by Pete C. I do not expect it to be at the high level he achieves, but it will contain views on personal inflation, spending for value, and tailoring income to match spending needs- in order to maximise personal time.
      I intend to publish in a similar manner…


  15. Excellent book, Pete. I love to read (and sometimes write) books that tell it like it really is. Since you mention spread betting as a possible viable approach — though not a panacea — I wonder if you might find the time to offer some constructive criticism on the “Better Spread Betting” book that I am authoring ‘live’ on-line at It’s free for anyone to read, comment on, and link to while it is evolving.

    Well done, again, and thanks for your very worthy contribution to financial literature.

    • Tony – what an interesting idea making it a collaborative writing exercise. I’d be interested to know how much involvement you get from people.

  16. Great book! I thought I knew quite a bit about the subject but have learnt quite a bit. You’re clearly an excellent researcher and your numbers are very instructive. The big challenge now seems to be how to manage “wealth” (savings, SIPP…) in, what might well be 10 years of stagnation or even stagflation. I have always shied away from gold but perhaps…???
    This is unfortunately a never-ending journey of vigilance and earnings.
    N.B. With the new FSA regulations coming in on commission, my next big job will be to work out where to keep my money in future. Hargreaves has worked well for us so far but now I need reconvincing…

    • @ceebee. Good luck. You definitely have to remain vigilent.

      Over Gold, I personally like it and bought again on Tuesday at $1530 hoping we might have seen a bottom. I have been panther like awaiting a dip to that level over the last few months, My logic was looking at the parallels with the 2008 correction which showed three retracements over a similar 8-9 month period.
      However with my monkey hat on, I am well aware there could be yet a further correction to $1400/$1250 (or even the end of the bull run). Investing is very much luck some of the time. Good luck with yours.

  17. Reference to indexes such as the FTSE 100 are common. What is not widely understood is that there are TWO FTSE 100 indexes- the Share and the TRI (total return index). The latter has the dividends ‘folded back’ into the index. Most references to the index do not tell you which one they are using. Finding out the rules of the TRI index is also difficult. Any explanation of who uses which and why would be very valuable.

    • Good point. I think every time I refer to the FTSE 100 in the book, I mean the the one you see quoted in newspapers that excludes dividends. I think I hope I was pretty clear when I was referring to an index including dividends ie in the Barclays data.
      The fund industry are also the other main users of the TR index, but agree maybe that needs to be made clearer in the book and that people understand about the two. I’ll add to the v2 list.
      Thanks mhmagnay.

  18. Excellent book, I was familiar with a fair bit of the content, but the presentation of the facts is very clear and invaluable. Before reading this book I was in the process of devising a new trading system, the facts presented within this book is likely to help shape my future strategy. Thanks again.

  19. Probably the best book on investing I have ever read. Pete has not only done a fine job of demolishing many of the myths promoted by the financial industry, but also raising the veil a bit on the obfuscation churned out by them in order to confuse the ordinary investor. Like another reader, I wish I’d seen something like it 20 years ago as well.
    Regarding spread betting: I used to do it more than I do now. It does get around some of the issues mentioned, but there are frequent changes to e.g. the way your bets are rolled over which raise others. Also, I have been a victim of the 15 sec. (downward) spike which stopped me out on many otherwise upwards trending shares.
    I am frankly surprised there aren’t more comments on here. Does anyone know of a debate going on somewhere else? I would assume that having digested this people would want to discuss alternative investing scenarios somewhere.
    Anyway, a job well done Pete. Thanks for your efforts.

    • Mick,
      Good point about the spikes and spread betting. I should have put that bit in too as I agree it strikes me a bit fortuitous for the spread betting industry that they keep happening.
      Over the lack of discussion, I have had a lot of people just write to me directly and they are not reflected here.
      Over a debate, I am half chewing over organising some form of free (virtual) conference for investors to discuss the issues. May not be until later in the year. Might you be interested?

      • I wasn’t really thinking of a debate, more a bulletin board discussion. Maybe on TMF, for example (which would also save you the hassle of setting it up). This would be easier for me to participate in and catch up with for the frequent occasions I’m traveling and don’t have Internet access.

  20. There is a common thread in the peoples replies. Lack of education.

    Get educated people.

    We are in the information age. You can google anything. Information is freely abundant.

    The biggest miss selling scandals have been perpetrated by some the biggest financial institutions.
    They take advantage of peoples apathy and ignorance.

    Nothing Pete is saying is hidden. FSA regulation requires all costs and charges to be disclosed.

    You think financial products are expensive:
    How about bottled water?
    What about petrol/diesel where the government charges 86% !!!
    What about charities where 40-60% goes in charges.
    Football shirts..made for £1 in China sold in UK for over £50.

    Pete here is an idea for another book:
    Hargreaves Landsdown has one of the biggest marketing budgets.
    How many of the people they have suckered in with their marketing make any money EVEN with all the commission rebates and low charges on their products.

    Here is another idea:
    How many people that trade shares or run investment clubs a). make money b0. beat the markets?

    Here is another idea:
    How do Motley Fool make money?

  21. Mick of 25 May;

    Here are some of the best books on money:

    The Richest Man Babylon – George S Classon
    The Rich Dad Poor Dad I & II ( I recommend the entire series) – by Robert Kiyosaki
    The Road to Wealth – by Robert Allen
    The Science of Getting Rich – Wallace Wattles

    • Mikee,

      I can’t argue that I’m not particularly well read on some of these things so thanks for the list and I’ll check some of them out.


  22. “If it is interesting, it’s wrong.”
    What a pity you didn’t write a boring book, because it is all so true.
    I’ve been investing in shares for about 50 years and have made too many mistakes to remember.
    As a retired scientist, I like real data and references, and I love a book that makes me think and change my mind.
    Thank you so much

  23. I enjoyed your interview on Money Talk with David Kuo very much and have downloaded your book through iTunes. I am looking forward to listening to it on my ipod while working in my “community garden” (what an allotment is called here in Canada). Your comments on the UK investing scene seem to translate quite well into our situation here — including the misrepresentation of bank account interest rates.

  24. I listened to your podcasts over the weekend having heard the Motley Fool interview and just wanted to congratuklate you on an excellent book Peter and one who’s time has definetely come. Kudos to you also for not charging, though I would have happily paid for it. I can’t imagine you have more free time to devote to this topic but if you do, I would be fascinated to read your analysis of research regarding the common investor errors that contribute to the poor return of an average investor. The message regarding the avoidance of costs is clear in your book as is the conclusion that equity returns may not offer an easy growth path over the next decade and so (presumably) diversification across asset classes is more important than ever before. The question then is, how do I outperform the average investor and what cognitive traits contribute to their poor returns.

    • Pablo

      Many thanks for your comment. If you want to know more about the cognitive biases of traders, try reading the “The Little Book of Behavioral Investing” by James Montier. It’s a good read and has lots of interesting examples.

      Kind regards


  25. Pete, really enjoyed the book, listened to the ipad version. Heard you last week on the Motley Fool and immediately took to what you were saying and advocating.
    As I listened to the book and took note of what was being said it was often not that I was hearing new facts and data it was more a case that, like you and share trading costs and spreads, the relevance of the information had not really or totally sunk in before, and suddenly the costs of trading, the value of cash investments, not necessarily buying to hold, the changing form and make-up of the FTSE100 etc suddenly made more sense and had more relevance.
    It was very refreshing, in the turbulent times that we currently trade in, to not be continually told to ‘Invest now, shares are cheap, when you invest for the long term the buying price is not important’, because I certainly do not feel comfortable with that message, yet.
    As time goes by I’ve reduced the data sources I read regularly. The Motley Fool is still one for example that I still fairly regularly read however I think that I will have slightly different coloured glasses on for all reading thanks to you and The Monkey With a Pin.
    Good luck, you get my vote for the Private Trader’s Ambassador. Hope you keep up the good work.


  26. An excellent book but one of two halves.

    The first takes us on a journey that illustrates how investor behaviour and costs massively reduce returns. It shows also how there is a failure of most active managers to achieve anywhere near the “alpha” to justify the overall costs that are higher than most people appreciate. This is all good and investors should be educated by it. I also agree broadly with the addtional estimated values.

    Where the whole book needs developing is in its exploration of alternative ways of planning portfolios.

    Pete himself refers to the random walk of prices in the early chapters but then advises people to aim at buying cheap. The largest changes occur on only a few days. Being out of the market too early and in too early only adds an extra dimension of risk on which most investors will lose. This is an important point of debate, but my main issue is in the lack of exploration of alternative passive (low cost) investment methods, especially getting an overall advantage in terms of value that does not mean frequent trading.

    It also first appear that the author equates passive funds with tracker funds and could do some more research in this area. Many passive funds and portfolios do not follow any index but focus on selecting assets classes in a very different way where there is evidence of a longer term advantage to the “whole market” and there is little need of the trading that drives up costs. There also needs to be an understanding of the correlation between asset classes and how risk can be managed better. Petes dismissal of gilts/bonds misses a few tricks here There is no silver bullet, but there are finer methods of driving down costs and getting more favourable odds without resorting to cash for the main means of protection – other than the easy to get at short term needs.

    There are definitely ways in which the book could be enhanced.

    • Foxy – thanks for the comments. I’d be interested in knowing more about the alternative passive funds.

      Over timing the market, I’ve been having a debate about that on Monevator following an article I wrote over there ( – see extract of my comments below. A key thing to note is that most of the claims people make that it does not work are based on:

      “This is based on a press release issued in 2002 by a junior analyst working at SEI Investments. The original press release does not exist anymore and all we have a report based on it in Marketwatch which has been quoted hundreds of times by people since to back up market timing being futile.
      Unless someone can provide me the full original survey results so I can verify what they did, I’m going to give you may take of how they probably got to those figures which so say justify their conclusion.
      They state that if you’d held on to your stocks you’d have gained 32.5% in the first year of the recovery in the 12 bear markets from 1945 and 2002. Instead if you’d bought three months after the market turned you’d have made just 14.8%.
      What this logic fails to present though is that, to have made the 32.5% you’d have needed to held your stocks during the preceding market decline of potentially 50% or more.
      Therefore the true comparison is probably more like buy and holders still be doing down 10-30% after the first year of the recovery whilst those buying three months in being 14.8% up. This does not look like evidence against trying to time the market to me.”

      • It doesn’t look like evidence FOR timing the market either. It shows how, with the benefit of hindsight, buying or selling at cetain times will have provided better results than buying and holding. There is no argumwent against this. The point is that those that try to predict when the random walk of the stock market frequently sell before meeting their predicted peaks or buy two late into a recovery. In the event of this being a nil-sum gain over time (which it is) they are at a loss due to the addtional costs of the trading; in a not disimilar way to active stock pickers. The way to manage risk is through a long view asset allocation. Gaining addtiional returns might be best explained by including passive approaches that aslo focus on value stocks or away from large cap companies that make up most of the conventional tracker indices. A good basis of understanding this came from Fama and French. The expalnation of returns is largely down to three things: Market, Size and Value.

  27. Thanks Pete for putting all this information together – I feel I’ve learnt a great deal, especially around the hidden costs of investing and survivorship bias. The inaccurate reporting on the returns from cash was a real eye-opener too.
    However whilst I now understand survivorship bias, I don’t understand why you’re factoring in 1% for it. As I understand it an index is misleading because it automatically dumps some shares whilst picking up others, without reflecting the cost of doing that in real life. But you’ve already included costs associated with portfolio turnover elsewhere – so aren’t you double counting?

    • Roger,

      An interesting point but the two are different. Portfolio Turnover Rate is all about the costs associated with buying and selling your shares. Survivorship bias is to do with the fact that if you buy and hold a lot of shares you never quite get the return you expect from looking at the index alone, because the index is slightly misleading by removing the weak shares. It does not matter what the costs are to the index of dumping those shares. I hope that makes sense.

  28. Pete – many thanks. Downloaded and listened as I went about my daily chores; your insights and anecdotes have broadened my knowledge and sharpened my cynicism…I will be more wary and more likely to challenge next time I invest…good job.

  29. Hi Peter
    In the book you talk about the cost of bid/ask spreads
    If the cost of the bid ask spread is significant, why not just do ‘at limit’ orders?

    • You can of course do a limit order (and we probably all should). But it does not get around the fundamental issue that an intermediary is making a bid/offer spread commission from you. Clearly using limits, helps your market timing to get a better price but it does not remove this factor. I hope that makes sense.

      • Many thanks for the reply, Peter.
        I didn’t know that when I put in a limit order that somebody is getting a bid/offer spread commission from me. How do I find out more about this?
        Cheers, Glenn

        • Glenn

          To some extent, think of buying shares as you would changing money when you go on holiday. The middle man has to make money somehow and so charges slightly more to the buyer and gives slightly less to the seller (always). You may try and be clever and sit outside the bureau de change for a few days watching his rates gyrate and only change your money when you get the rate you want, but at that point, he is still making his spread still. (It’s just that the price has gone up at that point.)

          The bid/offer spreads depends on the risk the intermediary is taking by buying the shares (or currency) off you. If they know they can sell them very quickly and the share is unlikely to changed much in price, the spread will be small. However for smaller companies and especially very news sensitive ones, like exploration companies, the spread can be very large as the intermediary is taking a greater risk he may be out of pocket when he trades the shares on.

          There are quite a few articles you can find online about it. Monevator did one (in relation to ETFs) not long ago – see


  30. Thanks for making this thought provoking book free. Like you, I have spent considerable time finding out how difficult it is to make genuine returns out of shares and funds, indeed I was employed by a stockbroker writing an investment writer evaluating biotechnology company shares for a few years. I share your conclusion that selecting individual shares or equity funds is generally not a winning strategy for private investors and agree that a major problem is the understandable tendency to sell when all is collapsing in the financial world and prices are low, such as in 2008. However, my conclusion about the way forward is different to yours. My approach is too leave my money until I actually need it in managed funds which show less volatility than the stock market and have the stated aim of preserving capital. There are hardly any such funds around and the key point is that the managers of these funds can and do invest in virtually anything (i.e. they are multi-asset funds) including, most importantly, cash. The funds I have selected showed reasonable capital preservation during the turmoil of 2008 (believe me there are very few that achieved this). I believe that Investing in different assets, including cash, is a game changer as your returns are no longer affected by many of the stock market linked problems mentioned in your book, though of course these funds can invest in the shares if the manager wishes. Most of these funds have had relatively low exposure to shares for some time. It is particularly comforting that relatively few private investors use this strategy and it also fits in quite well with my character as I generally dislike losing money more than I like making money. I also think this strategy is particularly appropriate to the current financial turmoil. I invite you to check out the views of the managers of these funds, notably Sebastian Lyons of Troy Asset Management and Personal Assets Investment Trust, Peter Spiller of Capital Gearing Investment Trust, Martin White of Midas Asset Management and the managers of Ruffer’s Total Return Fund and European Fund. It would be worth comparing their returns to your monkey approach, particularly noting that their returns will have lower volatility and be subject to lower risk than those achieved by your monkey.

    • Thanks for the feedback.

      I have had a look at those funds. All I can say is that they may do better currently than the average at preserving capital but who can say what might happen to them in the future? Take the Capital Gearing one. It appears to be almost complete invested in bonds. Should the bond market go pop, (which is highly likely in the next few years in my opinion), what might you capital be worth? In a short period in the 1970s, bonds dropped 80% of their value!

      The issue here is that if you entrust your money to someone else to invest (eg in a fund) you have lost control of what happens to it. You’d like to think they will sell out to cash before disaster strikes, but history unfortunately shows they rarely do.


  31. Hi again Pete,

    I thought about you when I wrote my latest blog article “Spread bettor makes almost £40,000 per year, tax free! (or does he?)” at

    I make the point, which I think you’ll agree with, that it is all too easy for investment fund managers and even trading authors like me to misrepresent the figures (even to ourselves) in order to flatter our historic or potential returns.

  32. Hi Pete, Good book if a little depressing. I decided a few years ago that IFA’s and fund managers were a waste of my money. I have moved back into renting out property which I left 20 years ago due to tenant hassle. With a new approach to management this is showing me a return of 9% to 14.5% pa over the past 3 years. I am also involved in shares again after having set up an ISA for my wife using her allowance plus transferring in her cash ISA money as the returns are so poor. I am using a trading system which I will not advertise here as my post in not about that. I find that with including costs on the 10 shares that I have bought for her using the system she has made a return of 2.62% in 5 weeks as of Friday 27/7/12. 6 winners and 4 losers so far. I hope this will continue and we can buck the system. Thanks for all the useful information in the book. I will be factoring all this in during my future machinations. 3 pieces of advice to all your readers: 1. Get a trading plan. 2. Stick to the plan. 3 STICK TO THE PLAN!

  33. Hello Pete – A great book which correctly focuses on profits after all expenses and inflation. About Investment Trusts, you mention that because of their borrowings and the discount/premium effects, the capital performance is more volatile than equivalent OEICs. However their dividend yield tends to be more stable than OEICs because many ITs use their reserves to smooth out fluctuations in their own income. This feature of ITs can be very useful for retired investors who are more interested in a growing income stream than short-term capital stability.

    • Many thanks for the feedback you posted on the book.

      That is an interesting feature of Investment Trusts and possibly one I should have mentioned. Like all investments, you have to really understand them and decide what is most appropriate for your particular circumstances.


  34. Excellent piece of research Pete, thanks for your efforts. I transferred 5 old (small) pensions into a SIPP just over a year ago to try to take control of their abysmal performances. My main concern and effort for the past 12 months has been capital preservation while taking slow and steady steps through educating myself in the world of investing. Your ‘revelations’ have been both enlightening and depressing in equal measure. However, having read your book I now feel at least able to dodge some of the underhand blows the financial establishment are trying to lay on all of us.

    • I’m glad it was of use. I agree the main aim at the moment for all of us is capital preservation during this period of financial repression.

      Good luck with your SIPP.



  35. A very interesting and informative read. I have to say it has left me quite depressed!

    I have been investing in Unit Trusts for over 20 years now and always thought that they were a better bet (pun intended) than a building society account. I’ve just assessed that had I switched my £50k worth of units to a competitive easy access savings account 2 years ago, I would now be almost £4k better off. Had I not done some switches between fund providers it would be over £6k. Had I followed the recommendations of my IFA it would have been worse!

    I really haven’t the heart to cash them all in and give it to Nationwide/ING/etc, but maybe that is the best thing to do until the next bull cycle comes along. Clearly the stats show that you are spot on here regarding the cycles. Thinking back, I got into UT’s because my father turned a small amount into a relatively large amount in the late70’s/80’s. I did well initially but the last 10 years have been flat to say the least.

    Being a fund manager seems to be like being a weatherman – we expect them to get it right given the amount of data, resources and technology at their disposal, but we just shrug our shoulders when inevitably it rains on our parade. So much for saving for a rainy day!

    • Sorry the book left you depressed. Unfortunately it is telling things largely as they are, which is not good at the moment. However a new bull cycle will emerge at some point. Personally I’m holding out for the FTSE to dip down to sub 4000 at some point in the next few years, then I’ll get back in and see where it goes.

      Thanks again for posting some feedback.

  36. Thanks for the free audio version of the book, I have been listening to it in the back ground, at work. And hence had to re-listen to several chapters. It is interesting the examples of cash v’s equity. And I assume you point is that over a given time span and depending on the market you may be better off in cash or may equity. But I must admit I have never heard a money man dare to say cash might be the way to go.

    On the Audio version – the file seems to drop the very first and last sounds in the word, so may need to allow a second of silence.

    Many thanks

    • Thanks Giles. I’ll look into that issue with the files. I guess they may need a bit more padding put at the end of each chapter to allow for fading on certain players.

    • The Surprising “Alpha” from Malkiel’s Monkey and Upside-down Strategies1 Rob Arnott2
      Research Affiliates, LLC
      Jason Hsu3
      Research Affiliates, LLC UCLA Anderson Business School
      Vitali Kalesnik4 Research Affiliates, LLC SDSU
      Phil Tindall5 Towers Watson Limited
      First Draft: October 31, 2011 Current Draft October 10, 2012
      The latest index literature is bursting with new innovations based on quantitative strategies that are predicated on sensible investment beliefs. Empirical studies confirm that these strategies do indeed deliver economically large and statistically significant excess returns over the cap- weighted market benchmarks in nearly all geographical and country studies. To the casual observer, it will be shocking to learn that inverting the portfolio construction algorithms does not reverse the alphas. Embarrassingly, the inverted strategies often outperform the originals.
      This paradoxical result is driven by the phenomenon that seemingly unrelated and non-value- based strategies and their inverse strategies often have unintended and almost unavoidable value and small-cap tilts. Even Burt Malkiel’s blind-folded monkey, throwing darts at the Wall Street Journal, would produce a portfolio strategy with a significant value and small-cap bias that would have outperformed historically. The value and small tilts stem from the fact that these new weighting schemes sever the link between a company’s share price/capitalization and its weight in the portfolio. Generally, an investment thesis where price does not drive the weight in the portfolio will have a value tilt and an investment thesis where company size/capitalization does not drive portfolio weights will have a small-cap tilt. As a result, these strategies produce outperformance against the cap-weighted benchmark due to the often unintended value and small cap tilts and independent of the investment philosophies that drive the product design.

  37. I first realised there was a problem when, six or seven years into the lifetime of various “products” that I’d bought in the 80s, I noticed that none of them were making any actual money for me. So, one rainy Sunday I ploughed through all the paperwork to work out exactly what I was being charged. I was so amazed at the answer that I wrote to the companies concerned to ask if I’d made some sort of mistake (I hadn’t).

    I suspect my stock picking skills since then owe a lot to your eponymous monkey, no matter how much I kid myself that I’m being scientific, methodical etc.

    Looking forward to your next book, loaded up as I am at present with index-linked bonds in £ & $!

  38. The reason I got into investing was because of the INSANE price of UK property which I still feel to be unsustainable. I’m an electronics engineer by profession so not a dimwit – however my actions proved otherwise. I read at least 10 investment books (Motley Fool, Smarter Investing etc) but I thought I’d take a gamble while I’m young. I saw gold rising and started pouring money into an AIM gold miner. I poured more and more in hoping for it to pay off until I’d put in £20k – about 3 years’ worth of savings. Basically, it went down the toilet along with just about every other penny share in the last 4 years. Pretty dismayed about it…. I also put money into big FTSE100 stocks but rather than going with the madness of crowds to make money, I tended to go with my own view (surely property companies can’t rise in value, or the FTSE, given not much has changed since 2007 – it’s really madness that they have risen!).

    Rates are SO low now. I recently purchased under £1k’s worth of gold through bullionvault as I’m seriously worried about £GBP devaluation (only to see gold fall near 2% within days – I have NO luck whatsoever).

    Pension – no idea what to do. Advisor recommends Aberdeen Emerging markets and the like but I’m thinking…. core part of portfolio should be trackers & some bonds, with maybe 30% being managed funds. Unsure.

    I had the intention to write more but I’ve got to run for now…

  39. An extremely interesting read – thankyou! The fact that 85% of fund managers underperform the market is amazing. However, would it not be more informative to weight this calculation by the total value of funds managed by each? Could it be that 90% of the money is in fact invested with the top 15% of managers?

    • Daniel,

      A good question. I’ve not seen the stats, but I very much doubt it. Undoubtedly when managers have a successful year or two they attract more cash. They similarly bleed it when they don’t do so well in the following years.


  40. Thank you for your very insightful ebook. I read it originally last year and in the last few days I’ve read it again for the second time. A great reminder of the pitfalls and what to bear in mind when considering investing in the stock market. A question that came to mind and I would love to know your thoughts. You state that 85% of the professional fund managers do not beat the market so by implication investing in the top performing fund of the moment is a limited strategy for success. What are your thoughts on the remaining15% of fund managers? do they generally consistently beat the market? Is a better strategy to consider those funds run by those alpha’s?

    • Paulette,

      Thanks for the comment.
      Even the 15% don’t seem always consistent these days. Take Antony Bolton. For years, people said he could do no wrong. However his China fund has languished.
      Having said that, I think if you have a consistent (and good) system with proper risk controls and stick with it, you may beat the market. Remember those Turtle Traders I mentioned in the book.

  41. Peter, excellent book – real eye opener and so easy to read.
    Interesting that cash may be just as good as equities, and a lot safer. Would you have any views on then using cash to make early repayments on mortgage debt (assuming the rates are much higher than deposit interest rates) Or is inflation your friend in terms of mortgages eg 1000 today and 1000 in 10 years, then paying the 1000 in 10 yrs might not be as painfully due to inflation. Just wondering if you have a view on that as you mention you may bring out a book on inflation.
    Again, congrats and many thanks on wonderfull and honest book.

    • Many thanks for your comments. I suppose my views on cash have moved on a little bit since last year as two things have happened. Firstly, interest rates have declined still further due to government manipulation/desire to stimulate housing market. Secondly, the period under which interest rates will remain below the inflation rate looks like it will be longer. Therefore in the UK anyway, you’ll probably going to lose 10% of your purchasing power within 3 years alone. However as to alternative investments, I’m not sure there are any guaranteed ones anymore. See:

      Over using spare cash to pay down your mortgage, you’d need to get professional advice for that as it depends on your circumstances.

  42. After Reading Monkey with a Pin, out of interest I set up a virtual portfolio in Google Finance on Jun 1, 2012.

    I downloaded a “List of all companies.xls” from the London Stock Exchange website and then randomly selected 10 companies from it, I then purchased (virtually) £1000 of stock for each company.

    Out of the 10 randomly selected companies I had only heard of one and that was a FTSE AIM company.

    Over a year later, if I had actually owned the portfolio, it would have been the best performing portfolio I own:-

    Cost basis Mkt value Gain Gain % Overall return
    £10,000.00 £13,014.81 +£2,850.85 +28.51% 28.51%

    Some companies are down up to -80%, while others up +144%.

    Obviously, in real life it would have been a massive gamble to administer this kind of portfolio, and the success could have gone two ways, but I think the results are none the less interesting and supportive of the book.

  43. Hi Pete,

    I got you book from Amazon, great work, if not thoroughly depressing. I dabbled in shares for many years before giving it up for a scam of epic proportions and you book just confirmed why. The stock market is really no different to putting money on the horses.

    Even today, they’re is a “calling” in my head to “invest” now, even though we are at a15 year nominal high. Common sense says run for the hills but the constant marketing, often disguising itself as the daily TV news keeps telling us shares and pensions are the way forward.

    I’m surprised you still invest, you clearly understand that the game is like 3 cups and a ball at a country fair where you know you will never guess the right cup, but we convince ourselves we are lucky and can beat the system.

    Anyway, well done. I’ll wait for the next big correction then maybe get the lowest cost trackers!



    • Stefan

      Thanks for your comments. I think deciding to invest now is arguably more difficult that it has ever been. The prices of shares are no longer influenced in any meaningful way by fundamentals. It is under the control of central bankers and the large speculators and their whims. Predicting their game is neigh on impossible.
      You may be lucky to join along with their revelry occasionally and be lucky enough to get a free glass of champagne or two thrown in. However most of the time, you paying a high price to attend their party and will probably get your pockets picked whilst you are there.
      By the way, I hope to do a rewrite of the book at some point. So much has moved on. The world we live in now does not obey all of the old rules of the game.

      • HI Pete,

        haha, very funny.

        Yes, in the years since you wrote it, the market goes higher and higher with endless QE pumping valuations higher.

        I remember one of my first forays into the stockmarket. Before the Mirror and certain well known editor got in trouble for pump and dumping….
        Many years ago, the news was full of amazing stories about Cable and Wireless. “…Amazing company…” “….excellent Balance sheet….” etc etc. One morning I bought some shares, By the end of that day they dropped 50%.

        That was my Eureka moment, the game is rigged…..

        Anyway, I look forward to your Inflation book next.



  44. Hi Pete, just finished reading your book. I’ve been looking for something on the experiences of a ‘real, ordinary’ investor for some time. I intend to read it again, but at the moment I’m feeling a bit put off. I’ve been investing lump sums gradually in ISAs since mid 20014. Split between managed funds and trackers, and split geographically. About 16 funds in all. They’ve done rather well. Some better than others obviously. About 7pc per annum overall. Have I just been lucky? Great book btw. Many Thanks.

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