Predicting the Markets of Tomorrow

January 30, 2006
A Bear Stearns executive and bestselling financial adviser, O'Shaughnessy (How to Retire Rich
) is a self-described "passionate advocate" of paying attention to the stock market's historical trends rather than impulsively reacting to short-term fluctuations. Though the technology bubble of the '90s led many to believe the financial rules had changed, O'Shaughnessy still believes that the soundest investment lies not in chasing the fastest-growing big stocks, but in careful management of holdings in small and midsize companies, with large companies selected for value rather than expansion. Buttressed by an array of financial charts, he discusses how to create a set of investment portfolios—some with as many as 25 separate stocks—that with annual tinkering will yield effective results over a two-decade period. His advice tends toward technical precision; when discussing intermediate bonds, for example, he recommends a laddered portfolio that continually frees up assets for potential reinvestment in the event of changing interest rates. Although he speaks briefly to the emotional reasons why most investors are unable to resist the allure of short-term gains, O'Shaughnessy is primarily concerned with the cold, hard facts that will trump sentiment, and he lays out his positions in a straightforward and effective manner.