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ACKNOWLEDGMENTS
INTRODUCTION
Making Investment Mistakes Is Normal
You Are a Portfolio Manager
A Different Kind of Investing Book
What You Will Learn
1 WHAT IS IT?
If We Can’t Explain an Investment, Then We Shouldn’t Invest
The Primary Reason to Buy an Individual Stock
If You Can’t Explain It, Don’t Invest
Who Is Selling It?
We May Not Know as Much as We Think
Dealing with Unknowns
Complex Adaptive Systems
Reacting to Available Information
Why Accurately Predicting the Future Is So Difficult
Investing on the Leading Edge of the Present
The Math and Emotion of Investing
An Investing Framework
Chapter Summary
2 IS IT INVESTING, SPECULATING, OR GAMBLING?
A Simple Filter for Segmenting the Investing Universe
What Is Investing?
What Is Speculating?
Attempting to Day-Trade
What Is Gambling?
Chapter Summary
3 WHAT IS THE UPSIDE?
Rules of Thumb for Estimating Investment Returns
A Flawed Financial Plan
Rules of Thumb
Estimating Bond Returns
Estimating Stock Returns
How to Estimate Returns in Your Portfolio
A More Reasonable Financial Plan
Chapter Summary
4 WHAT IS THE DOWNSIDE?
Rules of Thumb for Evaluating Risk
Navigating the Global Financial Crisis
What Is Risk?
Maximum Drawdowns and Recoveries
The Potential Devastating Impact of Large Portfolio Losses
Why Assets Fall in Price
How to Manage Risk in Your Portfolio
Chapter Summary
5 WHO IS ON THE OTHER SIDE OF THE TRADE?
Evaluating What the Seller Knows About an Investment
With Whom Are You Trading?
Financial Markets Are Increasingly More Competitive
Active Manager Underperformance
Are Markets Efficient?
Adaptive Markets
How to Balance Active and Passive Investing in Your Portfolio
Chapter Summary
6 WHAT IS THE INVESTMENT VEHICLE?
Evaluating Exchange-Traded Funds, Mutual Funds,
and Other Investment Securities
Applying the Investment Framework
Evaluating Investment Vehicles
Closed-End Funds
Exchange-Traded Funds
Chapter Summary
7 WHAT DOES IT TAKE TO BE SUCCESSFUL?
Identifying What Drives Investment Outcomes
Wayfinding
Return Drivers
Dividend Investing
Market Conditions
Multiple Return Drivers
Chapter Summary
8 WHO IS GETTING A CUT?
Managing Fees and Taxes
Types of Investment Expenses
Managing Investment Fees
Retaining a Financial Advisor
Taxes
Rebalancing Your Portfolio
Inflation and Asset Allocation
How to Manage Investment Costs in Your Portfolio
Chapter Summary
9 HOW DOES IT IMPACT YOUR PORTFOLIO?
Asset Allocation
Asset Allocation Using Modern Portfolio Theory
The Asset Garden Approach to Asset Allocation
International Stocks and Bonds
Fundamental Indexing
How to Allocate Assets in Your Portfolio
An Alternative Approach
Chapter Summary
10 SHOULD YOU INVEST?
Applying the Investment Framework
Dollar-Cost Averaging
Position Size
Market Timing Versus Risk Management
Economic Trends
Socially Responsible Investing
Piecemeal Portfolio Managers
Chapter Summary
CONCLUSION
GLOSSARY
BIBLIOGRAPHY
NOTES
INDEX
