cover
ISBN: 0136130895

2008 edition.
US focused (in terms of the recommended financial pdts) but covers more than US market; basic principles are also non-geographic specific.

Writing is direct; explanations are easy to understand. Gives simple explanations for mutual funds, bonds, ETFs. On the whole, the book is suitable for those with a basic understanding of financial and investment approaches. I would say it’s above basic level and not quite intermediate level. Very accessible for the masses.

Basically advocates a regular 3-month review and “balancing” approach, based on a diversified portfolio. Provides suggested strategies on how to review, tweak, and achieve that desired portfolio.

Chpt 1, P2. key elements of a winning investment portfolio:
1. Balance
2. Diversification
3. Ability to outperform component benchmarks

There’s a tables to compare and contrast results of different mixes.

Makes the case that diversification (e.g. Different country markets) may not have the highest yield but tends to also not have the lowest yield. Recommends a 60/40 allocation in equities and bonds respectively.

P7. on how to decide on your blend: “your first step is to appraise your own financial and temperamental abilities to accept loss”.

P8. In caps “THE GREATEST MISTAKE YOU CAN MAKE IN THE STOCK MARKET IS TO TAKE A LARGER LOSS THAN YOU CAN AFFORD.”

P8. “every 50% loss means you need to make 100% just to breakeven… Every 25% loss means 33% just to make even.”

P9. Stresses diversification.

Chpt2, on advanced diversification. Example of a well-balanced diversification:
– based on industry sector (type of business) and geography (country)
– using mutual funds/ ETFs

P18. Advocates “active diversification”, i.e. “Rebalancing”. Makes the case that there are drawbacks to letting leading sectors become disproportionately large relative to whole of investment portfolio.

P20. Chart showing how Rebalancing strategy results in better returns in long run (30 years). But also points out some drawbacks to Rebalancing strategy (greater transactional costs).

P21. based on 8 segment multi-sector portfolio, each sector starting with 12.5% of initial assets. If one sector rises to 22.5% of the whole. If one allows for 10% deviation from avg, then one would sell off (10%, I think) and place the proceeds into a sector whose value has fallen far below original 12.5% allocation (seems to me like locking in profits and buying up lower cost units). I.e. “sell into strength” (sell higher relative to your own avg cost) and “buy into weakness” (buy lower prices) rather than “buy into strength” (i.e. Higher prices).

196. advocates starting early in savings and accumulation process.

P70. Overview of international equity landscape. Japan, emerging markets (i.e. Economies and capital markets still developing, like south korea, china, taiwan, south africa, brazil, india, russia, india, mexico).

Advertisements