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Capital
Book

Capital

The Story of Long-Term Investment Excellence

Charles D. Ellis
Wiley, 2004

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Editorial Rating

7

Qualities

  • Innovative

Recommendation

This is an excellent book about an extraordinary organization. Founded by a brilliant but self-effacing contrarian from Alabama, The Capital Group has prospered by doing things differently. Most investment firms are ego-driven and focus on the short term. The Capital Group discourages egotism and looks to the long term. Its "multiple counselor" system assigns each of several investment managers a component part of a big fund, but in such a way that while performance can be measured, no one manager can take full credit for the fund’s successes or blame for its failures. At times, the narrative loses itself in a thicket of anecdotal detail, but that is a small flaw in a generally well-written book. Capital is an anomaly in its business, and getAbstract.com finds that author Charles Ellis does an admirable job of sketching its chronology and important developments in its evolution.

Take-Aways

  • Structure determines strategy in the long term, as shown by The Capital Group Companies, one of the biggest investment management firms in the U.S.
  • The Capital Group is a very rare investment organization in that it has beaten market indices consistently with its mutual funds.
  • Active management is usually less economical than an indexed investment strategy, because it is more expensive and provides, on average, lower returns.

About the Author

Charles D. Ellis is the author of ten books including Winning the Loser’s Game. For 30 years, he was the managing director of Greenwich Associates, a strategy-consulting firm. He has taught at Yale and Harvard, and is a Director of Vanguard.

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