Normal view MARC view

The informed investor: a hype-free guide to constructing a sound financial portfolio

Author: Armstrong, Frank III Publisher: AMACOM, 2004.Language: EnglishDescription: 298 p. : Graphs ; 23 cm.ISBN: 0814472508Type of document: BookBibliography/Index: Includes bibliographical references and index
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Item type Current location Collection Call number Status Date due Barcode Item holds
Book Europe Campus
Main Collection
Print HG4529.5 .A76 2004
(Browse shelf)
001301717
Available 001301717
Total holds: 0

Includes bibliographical references and index

Digitized

The Informed Investor
A Hype-Free Guide to Constructing
a Sound Financial Portfolio
Contents
PREFACExix
ACKNOWLEDGMENTSxxi
1. INTRODUCTION1
Dumping the Performance Fairy2
Drowning in Data4
2. GATHERING INTELLIGENCE7
Rates of Return8
Definitions9
A Look at the Long-Term Data11
The Range of Reasonableness11
Savings vs. Investment15
3. ASSESSING THE RISK17
A World Without Risk18
Risk Offers the Chance for Higher Returns19
The Investor's Dilemma19
Reexamining Risk20
Investing Is Not Gambling21
Decision Making in an Atmosphere of Uncertainty24
The Professional's View24
Sources of Risk27
Risk Is Part of the Investment Process29
Factors That Multiply Risk29
An Investor's View of Risk30
Visualizing Risk30
Market Risk Is Short-Term Risk33
Risk Falls Over Time33
How Often Can You Expect Losses?35
How Bad/Good Can It Get?36
How Often Will You Beat Inflation?37
The Risk-Reward Line37
Risky Business39
4. TAMING THE BEAST41
Business Risk42
Market Risk44
Interest Rate Risk45
Currency Risk48
Political Risk50
A Bite out of the Old Free Lunch51
5. A NIBBLE FROM THE FREE LUNCH53
The Beginning of Modern Portfolio Theory54
What Is Modern Portfolio Theory?54
The Efficient Frontier58
6. TRAVELS ON THE EFFICIENT FRONTIER61
Improving an All-Bond Portfolio62
International Investing and Modern Portfolio Theory64
Modern Portfolio Theory as a Risk Management Tool65
7. THE ASSET ALLOCATION DECISION69
A Groundbreaking Study71
Wall Street Calls Foul73
Asset Allocation: The Lessons for Investors74
8. THE EFFICIENT MARKET DEBATE75
The Information Age76
Market Fundamentals76
In a Perfect World77
Prices in an Efficient Market77
Pricing Models77
Degrees of Efficiency78
Types of Research80
Conflicts of Interest81
An Alternative Point of View82
9. CAN MANAGERS ADD VALUE?85
A Quick Test86
What About the Winners?87
If It Was Good Yesterday, Will It Be Great Tomorrow?88
Where Are They Now?89
Bigger Was Better90
Some Recent Dissenting Voices95
Toward Better Benchmarks96
Taking Big Bets Against the Benchmark97
Can Managers Add Value? Don't Bet on It!98
More on Style Investing98
10. DOING IT WITH STYLE99
A Modest Proposal100
Dividing the Market by Size and BTM Ratio101
Each New Study Creates New Problems102
Economic Justification for the Three-Factor Model103
A Bag Full of Sick Puppies104
Fun With Numbers105
11. MORE FUN WITH NUMBERS107
First Things First108
Put Time on Your Side108
Lesson One: Start Early110
Lesson Two: Plan for a Reasonable Rate of Return110
Lesson Three: Control Costs111
Lesson Four: Control Taxes111
Building a Tax Model113
Beating the Tax Man115
Dollar Cost Averaging116
Forcing Yourself to Save117
12. MAY DAY AND BETTER MOUSETRAPS119
How Deregulation Opened Up Wall Street119
Viva La Revolution!120
The Dutch Make a Purchase120
Enter the Pigs121
May Day121
The Price of Change124
Monopoly and Regulated Industries124
13. IT'S A JUNGLE OUT THERE!127
Horror Stories128
The Role of Commissions130
The Flawed System of Large Brokerages134
Alternatives136
14. SETTING YOUR GOALS137
Setting Monetary Goals138
How Software Can Aid the Planning Process138
Time Horizon141
Dealing With Risk, the Four-Letter Word142
15. BUILDING YOUR PORTFOLIO145
In the Real World145
A Quick Review of Some Basic Principles146
Methodology147
Conclusions154
16. PORTFOLIO TACTICS157
Old-School Investing157
Turning Your Goals Into a Strategy158
Let's Get Risky159
Balancing Risk With Return160
Expecting Periodic Declines162
No More Second-Guessing162
Adjusting the Portfolio for Individual Preferences163
The Proof Is in the Performance164
Happiness Through Asset Allocation165
Reality Rears Its Nasty Head165
A Strategy for Everyone166
17. EDUCATION167
Education in the Good Old Days167
Annuities for College Funding? Not!169
Help From the Government?169
Other Options for Education171
18. A COMPREHENSIVE APPROACH TO INVESTING
DURING RETIREMENT175
A Different Game Plan176
Sustainable Withdrawal Rates177
Constructing the Investment Policy181
Transition Planning184
Midcourse Corrections and Inflation Adjustments185
Alternative Withdrawal Plans185
Additional Considerations186
Note187
19. THE JOYS OF FUND SELECTION189
The Mutual Fund Industry190
Fund Basics190
Cost: The Natural Enemy of the Investor190
Targeting Your Market Segment194
Style Drift: The Natural Enemy of Asset Allocation195
Traditional Labels and Fund Objectives That Obscure
Rather Than Enlighten196
Active vs. Passive198
An Action Checklist198
Limited Budget199
Just Do It!199
20. THE GOOD, THE BAD, AND THE UGLY201
Advice From Mom202
A Short History Lesson202
NASD: The Name Says It All203
Cost Creep203
The Mutual Funds Marketplaces204
A Strategy to Have Your Cake and Eat It Too206
The Role of Independent Directors206
Deals Cut in the Dark207
Soft Dollars208
Paying for Order Flow209
Directed Trades and Fee Sharing210
Preference Bidding211
Economic and Moral Implications211
Regulatory Reform212
Vote With Your Feet212
Sunlight: The Best Disinfectant213
Playing the Hand We Are Dealt213
21. FUND ALTERNATIVES215
Closed-End Funds215
Unit Investment Trusts217
Real Estate Investment Trusts218
Wrap Fee Accounts219
Variable Annuities221
Exchange Traded Funds221
Index Fund Features222
ETF Features222
The Bottom Line222
Conclusion223
22. TENDING YOUR GARDEN225
Finding the Right Home for Your Assets225
Keeping It Simple226
Get a Grip227
Take a Break227
Build Your Own Benchmark229
Avoid Endless Tinkering229
The Big Picture230
Less Is More231
23. INVESTOR, HEAL THYSELF!233
What's Going On Here?234
Investors Do the Strangest Things235
What Have Investors Learned?237
Know Thyself237
Know Thy Market238
The Tuna Fish Factor238
Zen and the Market Experience239
Relative Pain240
The Cocktail Party Factor240
The Analytic Investor240
More Advice From Mom241
Your Investments Are Your Future242
Run a Fire Drill242
24. THE CULTIVATION, CARE, AND FEEDING OF INVESTMENT
ADVISORS 245
Investors as Frogs246
A Riddle Wrapped Up in an Enigma247
The Fee-Only Alternative to Business as Usual on Wall Street247
Recent Industry Trends248
The Revolution Bears Fruit250
Finding an Advisor250
A Commonsense Checklist251
The Bottom Line259
25. PULLING IT ALL TOGETHER: A SUMMARY261
Good News, Bad News262
There Is Good News262
Action on Several Fronts263
Return on Investment263
Risk264
Correlation264
Time Horizon265
Efficient Markets265
Harness the Power of Asset Class Investing267
Deregulation: The Beginning of Revolution267
Wall Street's Rear-Guard Action268
A New Breed of Financial Advisor269
Just Do It!270
Marx Had It Wrong270
APPENDIX 1: The Joneses' Retirement Income Portfolio:
Year-by-Year Results Compared to the Large Company
Index and One-Months CDs271
APPENDIX 2: The Joneses' Income and Portfolio Values:
Income From CDs: 1975-2002273
APPENDIX 3: Adjusting the Portfolio for Individual Preferences:
Annual Returns and Summary Data: 1975-2002277
APPENDIX 4: Sample Investment Policy Statement279
RECOMMENDED BOOK LIST291
INDEX293

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