Most investors, and even quite a few advisors, do not understand the detailed workings, costs, and incentives across the mutual fund industry. This book sets out with a goal of making mutual fund investing more transparent. The list of contributing authors is impressive, including chapters by William Bernstein, John Bogle, and Burton Malkiel. John Haslem is less well known to the investing public, but is a long-time crusader for better discloures and regulation of the mutual fund industry. There are also chapters by noted author/advisor Larry Swedroe, Don Philips (the president of fund research at Morningstar) and Paul Kaplan (VP of Research at Morningstar).

Chapter 3 (The Economics of Mutual Funds) and Chapter 4 (Mutual Fund Fees and Expenses) are worth the price of this book. Far too few investors understand the basic economics of the mutual fund industry and how that drives the behavior of fund managers.

There is a chapter that compares and contrasts mutual funds with ETF's which is very useful for investors who are just becoming aware of ETF's.

There is also a nice chapter on standard index funds vs. so-called 'enhanced index funds' such as those that follow fundamentally-based weighting strategies. This chapter also includes specific discussion of DFA's fund offerings. Given the large presence of DFA funds in the market, it is nice to see some objective discussions of their performance.

There is also an interesting chapter that compares the performance of active vs. passive funds from the Vanguard family over an extended period of time. The chapter fails to make a conclusive case for the superiority of one over the other, but it does a nice job of motivating how one goes about doing a good job of trying to judge active performance.

There is considerable discussion by both Haslem and Bogle on the need for better disclosure and more alignment of incentives between fund managers and their clients. If you have not encountered some of the discussions about how funds are run, the take-aways from these chapters will be quite eye opening.

The three chapters written by Morningstar's Philips and Kaplan provide a tour through the range of Morningstar's fund analysis tools and statistics. For fans of Morningstar, this will prove useful. The reader should, of course, be aware that Morningstar tends to promote actively managed funds over index funds and to take that into account when reading these chapters. In the Chapter titled Building a Portfolio of Mutual Funds, there is only one paragraph on expenses. Morningstar provides many useful tools--even at no cost--and I use these regularly. These three chapters seem perhaps more appropriate to a users manual for Morningstar than to a text that is designed to explain the ins and outs of mutual funds, however.

Given that most American's are relying on mutual funds to provide the basis for their retirement savings, it is very important for individuals and advisors to have a deeper understanding of these financial products. Mutual funds have greatly democratized the investing industry, giving even small investors access to diversified portfolios. This book explains a great deal about the industry from the persepctives of some of the most respected insiders and critics in the field. As such, I highly endorse this book.

As a final note, I must say that this book is not aimed at individual investors in the way that much of William Bernstein's writing is. There is no question that the intended auidence is more practitioner and academically oriented. As such, the reader should be prepared for the fact that the writing may come across as somewhat dry in some sections. This does not detract from the books value, however. I would suggest that the educated mutual fund investor seriously consider having this book as a reference volume.

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