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Selecting an Investment Advisor

Selecting an investment advisor can be a difficult challenge. There are many firms across the country and around the world offering these services. Each firm has its own unique philosophy and style. It can be hard for an individual to make distinctions among firms and to decide which one is best suited to his or her needs and circumstances. This difficulty was highlighted by Claude Rosenberg, the founder of Rosenberg Capital Management and a highly-regarded "elder statesman" of the investment counseling industry; in his book Investing with the Best:

"Finding the best person or the best organization to invest your money is one of the most important financial decisions you'll ever make. It's also one of the toughest. The right manager for someone else may not be the right manager for you, nor can you reasonably expect to find many objective, or even reliable, sources to help you narrow your choices. You will be bombarded with figures, charts, and statistics that seek to sell you on each adviser's services… The sad fact is that too often you cannot even believe what has been presented to you."
-Claude N. Rosenberg, Jr.
(Investing with the Best, John Wiley & Sons, Inc., 1986)

Fortunately, one of the best resources available to prospective clients of an investment adviser is Mr. Rosenberg's book. In addition to discussing the selection process, it includes important information on how to have a successful relationship with your investment manager by becoming a good client. It includes a number of guides, questionnaires and templates to assist you in the evaluation, selection and monitoring process.

An article in The Journal of Investing (Vol. 8, No. 1, Spring 1999, pp. 65-74) by Andrew Weiss entitled "Why Institutions Systematically Under perform Broadly Based Marked Indexes" contained a questionnaire that can be used to assist prospective clients in choosing an investment manager.

Perhaps the most critical element in a successful advisor/client relationship, though, is the client him/herself. A book that we urge each of our clients to read is "Winning the Loser’s Game, Fifth Edition: Timeless Strategies for Successful Investing" by Charles Ellis (McGraw Hill, 2009). This short, highly readable volume provides very important information on the importance of defining an investment policy and then implementing it consistently. As Mr. Ellis states:

"To fulfill their responsibilities to themselves, clients need three characteristics: (1) a genuine interest in developing an understanding of their own true interests and objectives, (2) an appreciation of the fundamental nature of capital markets and investments, and (3) the discipline to work out the basic policies that will, over time, succeed in achieving their realistic investment objectives."

Another book that we highly recommend to our clients is "Extraordinary Popular Delusions and the Madness of Crowds" by Charles MacKay, LL.D. (First published in 1841). This informative, funny collection of popular delusions, from Alchemy to Tulipomania, has become a classic – a study of mass manias, crowd behavior and human folly. As its author says:

"Every age has its peculiar folly; some scheme, project, or fantasy into which it plunges, spurred by the love of gain, the necessity of excitement, or the mere force of imitation."

Our approach at Cypress Asset Management is to work with prospective clients by taking as much time as is necessary for the client to understand our philosophy and approach and for us to understand our client and his/her style, needs and goals. Often this process can take weeks or months. Our objective is to build long, lasting relationships. We are willing to invest as much time and energy and to provide as much information as necessary in order to establish a solid basis for such a long term relationship.

Books or Articles

Recent Additions:
"The Social Life of Money" by Nigel Dodd (Princeton University Press, 2014)

"Debt: The First 5000 Years by David Graeber (Melville House Publishing, 2014)

"The Investment Answer" by Daniel C. Goldie and Gordon S. Murray (Business Plus, 2011)

"The Elements of Investing" by Burton G. Malkiel and Charles D. Ellis (Wiley & Sons, Inc. 2010)

"Fault Lines" by Raghuram G. Rajan (Princeton University Press, 2010)

"This Time is Different: Eight Centuries of Financial Folly" by Carmen M. Reinhart and Kenneth S. Rogoff (Princeton Univeristy Press, 2009)

"The Sages: Warren Buffett, George Soros, Paul Volker, and the Maelstrom of Markets" by Charles R. Morris (Public Affairs, 2009)

"The Myth of Rational Market: A History of Risk, Reward and Delusion on Wall Street" by Justin Fox (Harper Collins Publishers, 2009)

"The Wealth in Families" by Charles W. Collier (Harvard University, 2008)

"Predictably Irrational: The Hidden Forces that Shape Our Decisions" by Dan Ariely (Harper, 2008)

"The Black Swan: The Impact of the Highly Improbable" by Nassim Nicholas Taleb (Random House, 2007)

"Unconventional Success: A Fundamental Approach to Personal Investment" by David F. Swensen (Free Press, 2005)

"Freakonomics" by Steven D. Levitt and Stephen J. Dubner (William Morrow, 2005)

"Fooled by Randomness" b Nassim Nicholas Taleb (Random House, 2004)

"Asset Prices and Portfolio Choice," William F. Sharpe; Princeton Lectures in Finance, May 2004 (

"The New Financial Order" by Robert J. Shiller (Princeton University Press, 2003)

"Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay (Harmony Books, 1980)

Tax-Efficient Investing:

"The Advantages of Tax-Managed Investing," Ludwig Chincarini and Daechwan; The Journal of Portfolio Management; Fall 2001.

"Equity Portfolio Structure and Design in the Presence of Taxes," David M. Stein; Journal of Wealth Management; Fall 2001.

"Loss Harvesting: What’s It Worth to the Taxable Investor?" Robert D. Arnott, Andrew L. Berkin, and Jia Ye; The Journal of Portfolio Management; Spring 2001.


"Mutual Fund Investment Performance," William G. Droms and David A. Walker, The Quarterly Review of Economics and Finance, Vol. 36 No. 3, Fall 1996.

"Determinants of Persistence in Relative Performance of Mutual Funds," David A. Volkman and Mark E. Wohar, The Journal of Financial Research, Vol. XVIII, No. 4, Winter 1995.

"Does Historical Performance Predict Future Performance," Ronald N. Kahn and Andrew Rudd, BARRA Newsletter, Spring 1995.

"Do Winners Repeat?," William N. Goetzmann and Roger G. Ibbotson, The Journal of Portfolio Management, Winter 1994.

"The Judgment of Economic Science On Rational Portfolio Management: Indexing, Timing, and Long-Horizon Effects," Paul A. Samuelson, The Journal of Portfolio Management, Fall 1989.

"Challange to Judgment," Paul A. Samuelson, The Journal of Portfolio Management, Fall 1974.

"Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, May 1970.

"Capital Asset Prices: a Theory of Market Equilibrium Under Conditions of Risk," William F. Sharpe, Journal of Finance, September 1964.

"Portfolio Selection," Harry M. Markowitz, Journal of Finance, March 1952.

Survivorship Bias:

"Survivorship Bias and Mutual Fund Performance," Edwin J. Elton, Martin J. Gruber and Christopher R. Blake, The Review of Financial Studies, Vol. 9, No. 4, 1996, pp. 1097-1120.

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