Tim Hale. Simpler decisions for better results. Second Edition. Financial Times Prentice Hall is an imprint of

Transcription

1 Tim Hale Simpler decisions for better results Second Edition Financial Times Prentice Hall is an imprint of Harlow, England London New York Boston San Francisco Toronto Sydney Singapore Hong Kong Tokyo Seoul Taipei New Delhi Cape Town Madrid Mexico City Amsterdam Munich Paris Milan

2 Preface / x Author's acknowledgements / xii Publisher's acknowledgements / xiv Foreword / xvi Introduction / What should I do with my money? /1 1.2 Some eye-openers to get you thinking /1 1.3 How this book will help you / How this book works / A few points to note / 8 Smarter UnwestSng basics 1 Simplifying the confusion / Choices, choices, choices / How did we get here? / Battling for investors' money / Reducing confusion and complexity /18 2 Covering the basics / What is smarter investing? / Ten points of focus for smarter investors / The two distinct phases of investing / There are no perfect answers / Summary: smarter investing basics / 37 3 It only takes a minute / Twenty tips for smarter investing / 38

3 vii Smarter thinking Get smart - find your philosophy / Don't be a loser / The foundations of your philosophy / The path to establishing your philosophy / Can active managers win? / Do a few managers outperform over time? / Can you identify them in advance? I Don't just take my word for it / Summarising what you now know / A personal philosophy / Your investment philosophy rules / 79 Get smart - manage your emotions / You are your own worst enemy / Challenges to decision-making / Thirteen questions for you to answer / Ms Rational versus Mr Irrational / Wise words to leave you with / Behavioural rules and tips /102 Building smarter portfolios Understanding your emotional risk tolerance / What is your risk profile? / Why is it so important? /Ill 6.3 Exploring your risk profile / The process from here / 116 Sorting out your goals / Well thought-out goals underpin success / Five steps in defining your goals / Basic financial survival goals / A working example / Useful calculations / Summary: investment goals /142

4 viii Smarter Investing 8 Smarter risk taking / a violent introduction to risks / The cost of capital / Focusing on market risk / The risks and rewards of being a lender / The risks and rewards of being an owner / Therefore, risk choices are fortunately limited /153 9 Smarter portfolio construction / The portfolio building process / Construction goals and approach / Deciding on the asset class menu / Ground rules for the growth portfolio / Building your growth-oriented portfolio return engine / Building a robust defensive asset mix / Portfolios along the risk spectrum / Smarter portfolio choice / Understanding and using the matrix / Smarter Portfolio insights / An insight into key asset classes / The thrills and spills of equities / Voting machine v. weighing machine / An insight into equity market returns / Developed equity market returns / Emerging market equities / Value (less financially healthy) companies / Smaller companies / In summary - equity asset classes / Commercial property - a diversifier / Commodity futures - a bit esoteric / Defensive assets / Key asset classes excluded / Summary of asset class assumptions / 223

5 Smarter implementation 12 Hire an adviser or do it yourself? / Hiring an adviser / What attributes will a leading adviser have? / Checklist for finding a leading wealth advisory firm / The do-it-yourself option / Don't forget about tax / Smarter product choices / The serendipity of index-fund investing / Choosing your market index / Product structures / Selecting the best passively managed index funds and ETFs / Passive providers / A possible shortlist- caveat emptor! / Using active funds (if you must) / Costs - what a drag / Why do we throw our money away? / More than just management fees / Summary: costs - what a drag / Standing firm on index funds / Common put-downs / Bond investing: active or index? / Summary: favour index strategies / 282 Conclusion / 284 Bibliography / 286 Websites / 286 Insightful books / 286 Data-orientated books / 287 Asset allocation software / 288 Additional sources / 288 Appendix 1 / 289 Index / 291