Synopses & Reviews
The key to good investment decisions is making informed choices. And while you cannot predict the future, it is possible to create investment strategies that can maximize your chances of success. In The Intelligent Portfolio, author Christopher Jones shows you how this can be accomplished.
Written with the thoughtful investor in mind, The Intelligent Portfolio draws upon the extensive insights of Jones and Financial Enginesa leading provider of investment advisory and management services founded by Nobel Prize-winning economist William F. Sharpeto reveal the time-tested institutional investing techniques that individuals can use to help improve their investment performance. Throughout these pages, Financial Engines' Chief Investment Officer, Christopher Jones, uses state-of-the-art simulation and optimization methods to demonstrate the often-surprising results of applying modern financial economics to personal investment decisions. By illustrating the realistic range of possible investment outcomes, Jones skillfully reveals how the decisions you make today can impact your financial future.
Challenging conventional wisdom that often leads both novice and experienced investors astray, The Intelligent Portfolio builds from basic intuition on how financial markets function to practical tips on evaluating investment trade-offs and real-world advice on selecting investments to better reach your goals.
Along the way, you'll be introduced to the proven principlesa mix of common sense and counterintuitive conceptsthat will put you in a better position to succeed, including:
Recognizing the link between risk and reward
Leveraging the wisdom of the market
Minimizing losses due to investment fees
Avoiding the risks of stock picking
Selecting funds using relevant forward-looking criteria
Understanding how to realistically fund financial goals
Investing tax-efficiently
And much more . . .
In addition to the information outlined throughout this book, you'll also receive a fee waiver for a one-year investment advisory account at FinancialEngines.com, so that you may apply what you've learned here to your own investment endeavors.
Through simple explanations of powerful investment ideas and real-world examples that bring them to life, The Intelligent Portfolio reveals what you need to know when making personal investment decisions. With this book as your guide, you'll quickly discover how you can effectively implement the strategies that institutional investors have known for decadeshelping you achieve a brighter financial future.
Review
"The irreverence [Jones] displays toward history as a predictor for investment is one of dozens of viewpoints that fly in the face of conventional portfolio-building wisdom." --The Star-Telegram
Synopsis
The Intelligent Portfolio draws upon the extensive insights of Financial Engines—a leading provider of investment advisory and management services founded by Nobel Prize-winning economist William F. Sharpe—to reveal the time-tested institutional investing techniques that you can use to help improve your investment performance. Throughout these pages, Financial Engines’ CIO, Christopher Jones, uses state-of-the-art simulation and optimization methods to demonstrate the often-surprising results of applying modern financial economics to personal investment decisions.
Synopsis
A must-read book on making informed and confident decisions with your nest egg
The Intelligent Portfoliois an easy-to-read guide to intelligent personal investing drawing upon the insights of Financial Engines (FE)—a leading independent investment advisor founded by Nobel Prize-winning economist William F. Sharpe that makes advice available to millions of retirement plan investors at America’s largest companies. In this book, FE Chief Investment Officer Christopher Jones uses state-of-the-art simulation and optimization methods to demonstrate the often-surprising results of applying modern financial economics to personal investment decisions. By illustrating the realistic range of possible investment outcomes, Jones reveals how today’s decisions impact future results and helps investors maximize their chances of reaching goals. Challenging conventional wisdom that often leads novice and experienced investors astray, The Intelligent Portfoliodiscloses the most important factors for investment success using insights familiar to large pension funds, foundations, and endowments, but often mysterious to individual investors. Specifically, readers will discover how to: avoid common investing mistakes; prioritize the most important factors to simplify decisions; understand the tradeoffs that underlie investment choices; build high performing portfolios; critically evaluate the investment advice they receive; and much more. In addition to the information outlined throughout these pages, readers may also become a user of the online advisory service at FinancialEngines.com for one year, so that they may apply what they’ve learned to their own personal investment portfolios.
Synopsis
This easy-to-read guide to intelligent investing draws on insights and examples from Financial Engines, a leading investment advisor to millions of retirement plan investors.
Synopsis
Praise for The Intelligent Portfolio"This is one of those rare investment books that actually raises your investment IQ. Christopher Jones's ten basic rules get investors focused on what really matters. You may have heard some of these investment truths before, but probably never in a way that is so powerful and intuitive. Filled with practical and insightful examples, this book is a real eye-opener for anyone serious about planning for a bright financial future."
—Jane Bryant Quinn, columnist for Newsweek and Bloomberg.com and author of Smart and Simple Financial Strategies for Busy People
"Books on personal investing are a dime a dozen. But if we add them up, all those dimes come to plenty of money. This book is worth all that and lots more. With its strong foundation in theory, the depth of its insights, the power of its message, the clarity of its exposition, and the value of its examples, The Intelligent Portfolio is worth many multiples of anything else in this overcrowded field."
—Peter L. Bernstein, author of Capital Ideas Evolving
"Christopher Jones gives investors a guided tour of the inner workings of modern portfolio theory. If you prefer to look under the hood and kick the tires of your retirement plan, this hands-on manual can help you turbocharge your portfolio."
—Mary Beth Franklin, Senior Editor, Kiplinger's Personal Finance
"Jones provides his readers with a refreshing investment guide, chock-full of pithy and pertinent advice. Can you ignore expenses if a manager exhibits excess performance? His no-nonsense advice, 'the view that you can ignore the impact of fees is just a bunch of hooey.' And for those chasing yesterday's hot funds, he reminds us that 'good funds are not defined by how well they have performed in the past, but how well they are likely to perform in the future.' A quarter century of experience tells me readers will be better investors if they heed his easily digestible investment wisdom."
—Harold Evensky, CFP, President, Evensky & Katz
About the Author
Christopher L. Jones is Chief Investment Officer and Executive Vice President of Investment Management for Financial Engines. Working closely with founder William F. Sharpe, Jones built and led the team of experts in finance, economics, and mathematics that developed the financial methodology for Financial Engines' personalized investment advice and management services. Jones has led the investment management function at Financial Engines for more than a decade. He holds an MS in business technology, an MS in engineering-economic systems, and a BA in quantitative economics, all from Stanford University.
Financial Engines, Inc., is a leading provider of personalized investment advisory and management services to investors in workplace retirement plans. The company provides advisory services to more than 6.8 million employees, including workers at 109 Fortune 500 companies. In addition, Financial Engines manages more than $16 billion in defined contribution assets for individual employees as of year-end 2007. All advisory services are provided by Financial Engines Advisors L.L.C., an independent registered investment advisor and subsidiary of Financial Engines, Inc. Financial Engines does not receive compensation based on the investments it recommends.
Table of Contents
Acknowledgments.
Introduction to Financial Engines.
Chapter 1. Making it Personal.
A Changing World.
The Grand Social Experiment: 401(k).
Knowledge Gap.
The Traditional Advice Model.
Institutional Tools of the Trade.
Chapter 2. No Free Lunch.
I'll Take the One With the Highest Return…
A Little Bit of Latin: Ex-Ante and Ex-Post.
How are the Prices of Risky Assets Set?
The Link between Risk and Return.
When High Risk Does Not Mean High Return.
Hidden Risks and the Peso Problem.
How Much Risk am I Taking?
The Risks and Returns of Different Assets.
Does it Pass the Blush Test?
Chapter 3. History is Bunk.
History and Expected Returns.
The Past is Not the Future.
History is Sometimes Not What it Seems.
Investing with Perfect Hindsight.
The Lucky and the Skillful.
Evaluating Fund Performance.
Chapter 4. The Wisdom of the Market.
The Efficient Market?
What is the Market Portfolio?
What Does the Market Portfolio Look Like?
There's No Place Like Home.
History of the Market Portfolio.
Betting Against the Market.
Avoiding Unintentional Bets.
Risk and the Market Portfolio.
The Market's View of Future Returns.
Market Portfolio Simulations.
Final Thoughts
Chapter 5. Getting the Risk Right.
How to Measure Risk.
Asset Mix and Short-Term Loss.
Risk and Portfolio Outcomes
Risk and Time Horizon.
Factors to Consider in Selecting a Risk Level.
Examples of Informed Investor Behavior.
Chapter 6. An Unnecessary Gamble.
A Different Sort of Beast.
The Risk of Individual Stocks.
The Implications of Individual Stock Risk.
Expected Growth Rates.
The Biggest Mistake in 401(k).
What about More than One?
Do You Feel Lucky?
How to Do It Safely.
Hidden Costs.
Dealing with Unwanted Stock Risk.
Chapter 7. How Fees Eat Your Lunch.
It's Basic Arithmetic.
Big Business.
For Every Winner There Has to Be a Loser.
It Still Adds Up to Dollars.
A Wide, Wide World.
How Fees Eat Your Lunch.
It's a Heavy Load to Bear.
Fees and the Bigger Picture.
Practical Considerations.
Chapter 8. Smart Diversification.
The Goals of Diversification.
The Big Picture.
Why Hierarchy Is Bad for Portfolios.
The Value of Asset Class Diversification.
Diversification Ain't What It Used to Be.
Diversification and Investment Choices.
The Big Picture: Part II.
The Search for Better Diversification.
Chapter 9. Picking the Good Ones.
The Stuff That Matters.
It's About the Future.
Risk Tolerance and Fund Choice.
Investment Style.
Fund Expenses.
Predicting Mutual Fund Performance.
Rating Funds.
Putting the Pieces Together.
What it Takes to Rank Among the Best.
Chapter 10. Funding the Future.
The Benefits of Being Flexible.
Taxable and Tax-deferred Savings.
How Much Do You Need?
From Wealth to Income.
The Myth of Absolutes.
Risk, Time, and Savings.
What it Takes to Get There.
Chapter 11. Investing and Uncle Sam.
Why You Don't Want to Minimize Taxes.
How Taxes Impact Investment Returns.
The Impact of Personal Tax Rates.
Tax-Efficiency of Asset Classes.
Asset Placement.
Mutual Fund Tax-Efficiency.
Municipal Bonds.
Capital Gains and Losses.
Putting It All Together.
Chapter 12. Wrapping It Up.
Appendix. Getting Started with the Personal Online Advisor Service.
Notes.
Glossary.
About the Author.
Index.