An investment banker's deathbed confession

Deathbed confessions are usually reserved for our most personal thoughts and feelings.  That's why Gordon Murray's investing advice is so intriguing - and valuable.  What makes it even more interesting is that he now completely rejects the thinking he honed and promoted while working on Wall Street.

As chronicled in a New York Times article last month, Mr. Murray has been battling cancer since 2008 and recently stopped treatments, but not before he was able to finish writing a book on his new-found investment strategy - The Investment Answer.  In his book Mr. Murray teaches the fallacy of trying to "beat the markets" by trying to pick the best companies to invest in.

He threw out everything he was taught on Wall Street by studying the research from Dimensional Fund Advisors, a mutual fund company that has been teaching the dangers of active management for several decades.  Dimensional teaches the exact opposite of what Mr. Murray promoted during his entire career at Goldman Sachs, Lehman Brothers and Credit Suisse First Boston.   In fact, Mr. Murray eventually became a consultant to Dimensional to help them teach their philosophy to other investment professionals still stuck in the old-school Wall Street mentality.

Here are a few of the ideas he teaches in his book:

  • When using an investment professional, use an independent, fee-only advisor.

  • Your asset allocation will determine your portfolio performance.

  • Use proper diversification.

  • Don't try to beat the markets with actively-managed mutual funds, or by trying to pick stocks.

  • Rebalance your portfolio regularly.

Admittedly, these ideas aren't new to our clients because this is who we are - independently-owned to remain free from conflicts of interest, and using Dimensional's research and mutual funds.  But coming from someone so deeply entrenched in Wall Street tradition it's refreshing to see him make the switch. 

If you'd like to understand these principles more, please contact us, or read our article The Inconvenient Truth About Active Investing.