INSEAD Library

Includes bibliographical references and index

Digitized

Smarter investing Preface / xii Publisher's acknowledgements / xiv Author's acknowledgements / xv Foreword / xvii Introduction / i I. I What should I do with my money? / 1 1.2 Ten eye-openers to get you thinkirtg / 1 1.3 How this book will help you / 5 1.4 How this book works / 8 1.5 A few points to note / 9 m 1 Smarter investing basics Simplifying the confusion / 15 1.1 Choices, choices, choices. / 15 1.2 How did we get here? / 16 1.3 Battling for investors' money / 18 1.4 Reducing confusion and complexity / 20 2 Covering the basics / 23 2.1 What is smarter investing? / 23 2.2 Ten points of focus for smarter investors / 26 2.3 The two distinct phases of investing / 35 2.4 There are no perfect answers / 38 2.5 Summary: smarter investing basics / 39 3 It only takes a minute / 40 3.1 Twenty tips for smarter investing / 40 Smarter thinking 4 Get smart - find your philosophy / 49 4.1 Without a smart investment philosophy you are lost / 49 4.2 The foundations of your philosophy / 52 4.3 The path to establishing your philosophy / 58 4.4 Can uctive managers beat the markets after costs? / 59 4.5 Do a few managers outperform consistently? / 69 4.6 Can you identifi them in advance? / 72 4.7 Leading active managers endorse index investing / 73 4.8 Summarising what you now know / 74 4.9 In conclusion / 75 4.10 A personal philosophy / 76 4.1 1 Your investment philosophy rules / 79 Anthony Bolton - The exception that proves the rule / 80 5 Get smart - have a word with yourself / 85 5.1 You are your own worst enemy / 85 5.2 Challenges to decision-making / 90 5.3 Thirteen questions for you to answer - unlucky for sorne? / 91 5.4 Ms Rational versus Mr Irrational / 100 5.5 Wise words to leave you with / 104 5.6 Behavioural rules and tips / 104 Building smarter portfolios 6 Sorting out your goals / 109 6.1 Well thought-out goals underpin success 1 109 6.2 Five steps in defining your goals / 112 6.3 The nitty-gritty of basic financial survival goals / 119 6.4 A working exarriple / 129 6.5 Usefid calculations / 132 6.6 Summary: investment goals / 133 7 Building a smart but simple portfolio / 7.1 Choices, choices 1 134 7.2 The two steps to building a portfolio / 135 134 Contents ix 7.3 Understanding retum and risk / 136 7.4 Step I: Picking a spot on the risldretum spectrum / 137 8 Equity and bond building blocks in brief / 142 8.1 Equities in brief 1 142 8.2 Bonds in brief / 151 8.3 W h y use high-quality domestic bonds as market trauma protection? / 157 8.4 By and large bonds help dampen market trauma / 160 8.5 Summary: rationale for owning some bonds / 161 9 Getting your equitylbond mix right / 162 9.1 Focus on your end goal, not bumps in the road / 162 9.2 Rules of thumb to decide your mix / 164 9.3 Making an informed choice / 166 9.4 A thirty-year investment horizon / 170 9.5 A twenty-year horizon / 173 9.6 A ten-year horizon / 175 9.7 A five-year horizon / 178 9.8 A 'lifecycle' approach to investing / 179 9.9 Drawing an income from your portfolio / 180 9.10 Finally, wise words from a respected investor / 182 9.11 Summary: getting the mix right / 183 10 A portfolio for all seasons / 185 10.1 Creating a diverse portfolio / 186 10.2 A free lunch from Harty Markovitz / 189 10.3A practical framework for adding building blocks / 193 10.4 A paragraph on each / 196 10.5 Simple rules for constructing a portfolio / 200 10.6 Possible portfolios / 203 10.7 Summary of the portfolio construction process / 205 11 Fancy tools - getting technical / 209 11.I Using optimisation to define 'efficient'portfolios / 209 11.2 Usingprobability-based models / 214 11.3 Summary: getting technical / 21 7 Smarter implementation 12 Six steps to a smarter portfolio / 221 12.1 Step 1: Choosing your market benchmarks / 221 12.2 Step 2: Decide whether to go index or active / 225 12.3 Step 3: Funds, separately managed accounts or brokers? / 227 12.4 Step 4: Selecting the best index funds / 231 12.5 Step 5: Administering your investments / 236 12.6 Step 6: Portfolio maintenance / 240 12.7 Market valuation levels and lump sum investing / 245 12.8 Tip 1: Selecting the best active managers / 247 12.9 Tip 2: Where to find information on indices / 250 12.10 Tip 3: Where to find useful information on funds / 250 12.11 Tip 4: Don't forget about tax / 253 12.12 Ten tips for smarter practical investing / 255 13 Costs - what a drag / 257 13.1 W h y do we throw our money away? / 257 13.2 More than just management fees / 258 13.3 Summary: costs - what a drag 1265 14 Standing firm on index funds / 267 14.1 Common arguments used to put down index funds / 267 14.2 Bond investing: active or index? / 273 14.3 Summary: the active versus index debate / 273 Smarter building block insights 15 The thrills and spills of equities / 279 15.1 W h y the thrills and spills? / 280 15.2 The thrills of equity investing / 284 15.3 The spills of equity investing I 2 9 0 15.4 What about future equity returns? / 293 15.5 Summary: the thrills and spills of equities / 295 16 The ins and outs of bonds / 297 16.1 The ins and outs of bonds / 297 16.2 Taking a closer look at bond returns / 305 16.3 Bond markets crash too! / 307 16.4 The outlook for bond returns / 309 16.5 Summary: bonds / 311 17 Spotlight on return smoothers / 3 13 17.1 Index-linked gilts - 'linkers' / 313 17.2 Property - the misunderstood asset class / 318 17.3 Hedge funds - are they all they are cracked up to be? / 323 17.4 Commodities / 333 17.5 International equities I 3 3 6 18 Spotlight on return enhancers / 341 18.1 Smaller companies - higher returns? / 341 18.2 Value and growth: what's that all about? / 345 18.3 Emerging market equities make sense in theory / 349 Conclusion / 354 Bibliography / 356 Websites / 356 356 356 357 Insightful books / Data-orientated books / Additional sources / Asset allocation software / 358 Index / 359