William Bernstein, Ph.D, M.D., is a retired neurologist and co-principal at the money management firm Efficient Frontier Advisors. He has written for The Wall Street Journal and Money, and was the 2017 recipient of the CFA Institute’s James R. Vertin Award for his body of financial publications.

What do you do? Do you stride to the car without further ado, drive away, and hope that by luck you can pick your way to your intended destination? You hesitate. It does not go unnoticed by the locals that you are a rube, and further the proud driver of an expensive automobile. Several sleazy characters crowd around you to offer their expert assistance. Do you trust yourself to one of them?

Hopefully you do neither and instead find the nearest book shop, purchase a detailed road map, and plot the most efficient route to the airport. Only then do you start on your way.

Most investors find themselves in a very similar situation. Many choose the first course and begin their investing careers with bold action (usually committing a large amount of their capital to a very risky market sector at or near its top). They rarely have a clear idea of exactly where they are headed, or how to get there. Many more know that they are lost and depend on the kindness and expertise of strangers (otherwise known as "account executives" or "financial planners") to find their way. All too often, the interests of these "experts" are very different from their own.

Learning how to invest successfully on your own is much like getting from one city to another in the manner of our fictional traveler. The road map is a simple one and will be briefly described below. The journey will pass particular landmarks in a precise order; each one will be described in its own chapter. The journey will be slow and painstaking at times, and there will be no shortcuts. This book cannot be read quickly; it must be methodically consumed, one page and chapter at a time.

THE ROAD MAP

1. Take a deep breath, and do nothing for several weeks or months, or as long as it takes to complete the below steps. You are in no rush to immediately and radically alter your finances. You have the rest of your life to get your affairs in order; the time you take learning and planning will be time well spent.

2. Acquire an appreciation of the nature of and fundamental relationship between risk and reward in the financial markets.

3. Learn about the risk/reward characteristics of various specific investment types.

4. Appreciate that diversified portfolios behave very differently than the individual assets in them, in much the same way that a cake tastes different from shortening, flour, butter, and sugar. This is called portfolio theory and is critical to your future success.

5. Estimate how much risk you can tolerate; then learn how to use portfolio theory to construct a portfolio tailored to produce the most return for that amount of risk.

6. At this point you are finally ready to purchase individual stocks, bonds, and mutual funds. If you have succeeded in the above tasks, this is by far the easiest step.

The Intelligent Asset Allocator will take you through the above steps chapter by chapter on your journey to a coherent and effective lifetime investment strategy.

Can you invest successfully without acquiring a solid understanding of risk and reward in the capital markets, and of portfolio theory? Sure-many people have done so. It is also possible to learn to swim or to fly an airplane without lessons. I don't recommend it.

HOW TO READ THIS BOOK

This is not a Grisham novel. The material to be mastered requires some effort. Each chapter forms the foundation for the next, so the book must be read page by page, chapter by chapter; no skipping around allowed. Ideally, the book should be taken with you on vacation and tackled first thing in the morning, while you are still fresh. Put it down after an hour or so, and do not pick it up again until the next day.

A faculty with numbers will help but is not essential. For those who are interested, some of the key mathematical concepts and techniques will be described in greater detail in a few small print sections. These can be skipped by those with limited time or mathematical interest.

The most important part of this book is Chapter 9, "Further Reading and Resources." Investing is a journey of lifelong learning, and my fondest hope is that this book will instill in the reader a thirst for further exploration of the subject.