Uninvested: How Wall Street Hijacks Your Money and How to Fight Back by Bobby Monks (PDF)

Description

Bobby Monks is blowing the whistle on Wall Street, giving middle class Americans the low down on how they’re being fleeced of their retirement money—and what they can do about itEvery month our financial statements arrive, and every month we glance at them, trying to understand, hoping that we’ll come out ahead. But most of us have no idea what’s really going on or the costs involved. According to Bobby Monks—who has been a banker and borrower, investor and entrepreneur—financial firms and money managers have complicated the investing process to keep us in the dark, profiting from our ignorance.Having dealt with the financial sector throughout his career, Monks has seen it all. In Uninvested, he reveals how, when, and why the relationship between us and our money managers became corrupted—and what we can do to fix it. Monks shows how the system works not only against us as individuals but also against society at large. Without our knowledge or approval, our money is diverted into the pockets of CEOs and misappropriated, promoting business practices that contribute to economic inequality, political dysfunction, and environmental woe.Monks’ experiences give him a unique perspective on how we got to this point. Drawing on original research and interviews with key figures such as Vanguard founder Jack Bogle, legendary investor Carl Icahn, and former congressman Barney Frank of the Dodd-Frank Act, Monks teaches us how to take back ownership and control of our money. As he writes: Even in the decades preceding the most recent downturn, very few investors enjoyed financial success equal to that of their money managers. Given this, I have long wondered why investors don’t pull their money out of the system en masse.I suspect that it is because most feel powerless. Unaware of the implications of their investments and unable to penetrate the excruciating complexity of the system that facilitates them, many seem to seek refuge in their money managers’ aura of sophistication, pretense of competence, and projection of certainty. It seems to me that most investors are simply sleepwalking through the investing process. They have become uninvested.When we outsource our investing, we sacrifice control—but not responsibility. My goal in writing this book is to convince you that the best (and only) way to fix this broken system is to awaken a critical mass of engaged investors and recruit them to participate more fully in the investing process.

User’s Reviews

Reviews from Amazon users which were colected at the time this book was published on the website:

⭐Like the other recent reviewer, I feel cheated of my money. Monks got himself some good press as an insider who was going to talk about the behind the scenes hazards, and offer useful advice for the small investor. Neither was accomplished. The less you know about investment options, the more useful this book will seem to you. Unfortunately, you’re in the worst position to understand his rather blatant biases and borderline lies as he castigates the mutual fund business in particular. And there is no special information that you couldn’t get from hundreds of other sources. A key premise of his is that it’s easier for money managers to charge fees on your money than to invest their own money. But I’ll say the second easy way to make money is to sell books about investing.To be clear – I’m not a fund manager and my prior involvement in the industry’s largest asset manager was in technology. I put the bulk of my money in index funds across multiple sectors with a slight over emphasis on internationals, both equities and bonds.Monks points out a vital truth – that most in the finance sector are not responsible for giving you the best advice. They are selling. But he goes on to paint everyone universally with this brush. There is a difference between Vanguard and T Rowe Price, versus middle position Blackrock and Fidelity, and then the ripoff products from JPM and even more unsavory characters. And the real dangers lie outside the highly regulated mutual fund market. The worst fraud is in those who peddle ‘zero risk, guaranteed double digit returns’ to people who are looking to roll their 401k into an IRA. They get sold illiquid investments that lose a substantial amount of principle. Most mediocre mutual funds just trail the market by a couple percentage points.Monk doesn’t cover the primary flaws in mutual funds, that which contributes most to their tendency to trail the indexes. Mutuals are ranked by their prior return, and so those who have a hot year (by luck or by actual insight) see a flood of money come in. Once a fund gets sufficiently large – more than a few billion dollars, they are less nimble and their returns quickly regress. No where else do we see a clearer example of buy high, sell low. Worse, the tax rules on mutuals can result in your investment losing money, but you having to pay taxes on the capital gains the fund realized when it had to sell assets to pay departing investors. (ETFs are better structured here and avoid this).Speaking of indexes – Monk disdains them because no one can track more than 10 companies effectively. Which misses the point. The reason one chooses to invest in the indexes is an acknowledgement that it’s virtually impossible to beat the market for a sustained period of time. You don’t need to track all 500 members of the S&P500, or the thousands in the total market. This is the primary advice John Bogle, founder of Vanguard, espouses, along with countless others. Monk was happy to quote Bogle’s remarks about the overcharging by the industry, but did not include that philosophy.Monk encourages direct stock ownership so that you may vote as a shareholder. He believes that mutual fund owners do not act in the general interest, but just approve whatever the board wants. However, activist billionaires like Carl Icahn and Private Equity firms that invest their own money – their judgement is trusted. He concedes as an afterthought that these folks often act in a short term perspective. I’m not convinced that individual investors will vote more intelligently, but it’s a moot point unless there is a massive shift from mutual funds to individual stocks. Otherwise, the large financial firms will continue to control the majority of voting shares.Monk also encourages social investing, very clearly espousing a belief that investing in companies (be it direct, or via mutual/etf) is endorsing all actions they take. He’s not alone in this, but odds are you will pay a price in lower returns for doing this. There are few choices out there, esp in your 401k. (The only data I’ve seen trying to prove socially aware funds do well come from partisan sources. It’s much easier to see that sin investment returns well). If your 401k offers a brokerage option, then you can choose individual stocks, but if you exclude all energy companies as an example, you’re concentrating into fewer arenas.In my kindle copy, Chapter 6 “Awakened: A Better Way to Invest” came at 65% through the book. Great – there’s finally going to be some meat in this book! Sadly, I found, the footnotes begin at 75%, and the advice chapters 6 and 7 only represent 7% of the pages (65-72%). So he spends nearly 10x as much time complaining about problems as he does about solutions. What advice does he give? Invest in a CIP concept (shared investment, shared returns) he likes but that doesn’t actually exist, or ask your money manager (the one he spent the first 2/3rds of the book castigating) a lot of questions. Then what? Or only invest in up to 10 stocks. Forget about meaningful diversification. The funny thing is that Vanguard comes pretty close to the shared, low cost vehicle he espouses. The investors are the owners of the funds and the fees are the cost of running it.If you feel over your head and want general good advice, look for Bogle’s books. If you want to invest in stocks (exclusively or in part), the classics by Peter Lynch remain. And some of Jim Cramer’s books have merit – just don’t watch his show; it’s purely entertainment. His biography where he describes the rather grey areas cheats he did to prevent his find from going under are especially interesting if you want to read about the underbelly of the finance world. The key is to read multiple viewpoints so you don’t fall prey to the biases of a single decent writer. And even the best (like Bogle) can be wrong about some topics (ex: his hatred for ETFs, and that Vanguard sells them).

⭐You don’t have to look hard to notice that there are huge problems with the U.S. financial sector in 2015. Monks has written what is to me the definite book that explains in clear, layman terms not only why this came about, but what should be done about it.First, Monks walks us through the relevant parts history of the financial sector — and in my experience, it is always a good sign when a book starts by building upon historical trends. He tells us about the rapid rise in mutual fund ownership (in percentage of U.S. households) from 1980 to 2010. He tells us about the massive distribution shift of U.S. stock ownership by individual investors, which was > 90% in 1950 and had shifted to < 30% in 2010. He also points out the sadly increasing discrepancy between the salaries of financial industry professionals and the median household income in the U.S.All the while, he notes the important and troubling intersection between politics and the financial sector. As he explains, one key example of how this manifests is via the passage of the Pension Protection Act. The PPA allowed the 401(k) to become the dominant financial instrument and further incentivized the finance industry to sell complicated products -- such as the vast majority of mutual funds -- to a population of financially illiterate investors. The nuggets from interviews with Vanguard founder Jack Bogle (among others) add useful exposition to these ideas.Next, Monks describes what you can do to navigate the system as it currently exists. He explains the operating principles of the type of companies and mutual funds you should be looking to invest in. These tenets include a requirement for "skin in the game" by investors and encouraging insourcing of financial advice rather than outsourcing and thus increasing fees. He analogizes their ideals method to open-source software, in which the code underlying the process can be examined freely by anyone. He then describes the practical tips you should follow in order to reinvest your money, ranging from advice on how you can vet your money manager to how you can vote your proxy online to encourage good corporate governance.I expect that the active investment strategy that this book espouses will not only help assuage the woes of the financial sector writ large, but will also help you grow your own portfolio as well. I know I'm going to try to follow the advice myself. All in all, *Uninvested* comes highly recommended. ⭐As the title suggests, Bobby Monks' book does an excellent job of explaining how Wall Street uses your money, via mutual funds and 401k retirement plans, to make themselves extremely wealthy. The book mentions how much profit various companies made while at the same time receiving a government bailout. And the book will make you absolutely livid as to how much corporate CEOs are making (particularly in comparison to what CEOs were making 20 and 30 years ago). But what really disappointed me about the book was that, unlike the title suggests, there are no viable answers on how to "fight back." Monks suggests the creation of a Cooperative Investment Partnership, an alternative style of investing account that does not yet exist (big help that is!). He also talks about investing in companies that reflect your personal values (e.g. eco-friendly, family-friendly, non-militaristic, etc.). But for the most part, the book leaves you feeling hopeless to change the system.Bottom Line: great for gaining information on how Wall Street screws the common man out of his hard-earned money; not so great at offering solutions on how to solve the problem ⭐Not found. ⭐Not found. ⭐Not found.

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