Are the authors claiming that these premia are new and different from others already discussed, or that they are the old premia in new packaging? Swedroe also doesn't give a good explanation of the risks of investing in an interval fund. How do the authors suggest we achieve it? These alternative sources of return—such as momentum, reinsurance, and the variance risk premium—are equity like but with low or no correlation to the Fama—French factors. Based on an overwhelming amount of hard data and research, Swedroe and Grogan make their case for reducing the risk of black swans. We save and invest today, hoping our money will grow. So What Is a Black Swan? A large chunk of stock returns—about a third—was unexplained by beta alone. In particular, a black swan could send stock markets into a tailspin. In assembling portfolios via funds with style tilts, the authors use round-number increments such as 5% or 10%.
Kevin Grogan is director of investment strategy at the same firm. According to Reducing the Risk of Black Swans, co-authored by Larry Swedroe and Kevin Grogan, there is a credible way to increase the odds of achieving your financial goals. The authors also emphasize that nobody knows what will actually happen. Do we have 50 years of data showing us correlations? Larry Swedroe is an experienced financial professional, author of a number of investment books, and currently principal of Buckingham Asset Management. Taking it one step further, they provide specifics on what it takes to build a more efficient portfolio, in particular using new alternative investments. The reader isn't even given enough information to evaluate alternative funds.
Taking it one step further, they provide specifics on what it takes to build a more efficient portfolio. Swedroe and Grogan describe how these challenges are being met and, in some instances, overcome. But you can hedge out the market beta. Kevin Grogan is director of investment strategy at the same firm. Based on an overwhelming amount of hard data and research, Swedroe and Grogan make their case for reducing the risk of black swans. Swedroe notes in passing that you can get exposure to reinsurance simply by buying stocks from insurance company. From factor-based investing to newly available alternatives, they an offer in-depth look at portfolio construction ideal for those interested in refining their portfolio.
Disclosures: Certified Financial Planner Board of Standards Inc. The way today's investors hold risk is changing, and Swedroe and Grogan bring you an essential resource for making the informed and prudent investment decisions necessary to help secure your financial future. For many investors, it may be worth considering. But what if you could improve on these basics without sacrificing any of the essential principles of a sound, evidence-based investment approach? Guiding the reader through these developments up to the present, the authors show how each step along the way has enabled investors to approach the ideal of maximizing return per unit of risk. At the end of the day my biggest disappointment is that all of the strategies are essentially presented as black boxes. But these gripes are minor for a book with many strengths.
These developments, according to the authors, have made possible investment vehicles that embody uncorrelated return factors beyond the Fama—French set. Taken as a whole, this is evidence-based investing. Reducing the Risk of Black Swans is a compact handbook by practitioners for practitioners on how portfolio managers and investors can use the empirical findings of financial research to optimize portfolio construction. That said, it takes a relatively deep dive into portfolio construction theory. What's the actual track record on alternative lending or reinsurance? We encourage you to read this little book for yourself. In most cases you can read articles that Swedroe has published elsewhere alphaarchitect.
Financial industry practitioners know that theoretical and empirical research over the past half-century or so has created the tools to construct portfolios according to far more scientific principles than the seat-of-the pants methods from prior eras. In addition to refreshing the data and returning to the themes that made their original work so influential with experienced investors and practitioners alike, the authors add an entirely new section on alternative investments. What if another reinsurance fund launches in 2019. Even if you were able to remain disciplined and participate in the recovery that followed, you likely yearned for some other way to earn decent returns without having to tolerate such deep, dark dives along the way. Our history of serving the public interest stretches back to 1887.
That's understandable because a lot of it is repeating the same advice investors have been hearing for 20 years now. If you experienced it, you know how bad it was. The latest book from authors Larry Swedroe and Kevin Grogan. No mathematics is needed to understand Reducing the Risk of Black Swans other than a basic knowledge of statistics. All of them get unsatisfying treatments. Short but poignant Not exactly a handholding book.
No one was able to put together a dataset showing anything about it? Designed for professional financial advisors and educated investors alike, Swedroe and Grogan wrote this book especially for those looking to expand their technical knowledge of the evidence-based investing world. Is that basis risk more than the fees you'd need to pay Stone Ridge and and advisor to get access to this fund? Are we relying on manager skill to run these kinds of funds? Put simply, adding alternatives in an evidence-based manner is a continued tale of the power of diversification, including the potential to create a portfolio that is stronger than the sum of its parts. Financial industry practitioners know that theoretical and empirical research over the past half-century or so has created the tools to construct portfolios according to far more scientific principles than the seat-of-the pants methods from prior eras. If you're looking for specifics on portfolio construction look elsewhere. The focus throughout is on actionable tools and instruments that enable practitioners to translate theory into practice.
We act on our aspirations for a bright financial future. © 2017 Aspire Planning Associates. Elsewhere I've seen Swedroe say without any data that doing so exposes you to basis risk. Because each of the alternative investments they discuss has attractive expected returns that show low to no correlation to the stocks and bonds dominant in traditional portfolios, including an allocation to them can result in superior portfolio efficiency and greater diversification. They also co-authored the 2014 edition of Reducing the Risk of Black Swans: Using the Science of Investing to Capture Returns with Less Volatility. It explains the work of such pioneers as William Sharpe and Harry Markowitz in the 1950s and 1960s, Eugene Fama and Kenneth French on the three risk factors in the 1990s, and more recent work that has uncovered additional risk factors. This advance shrank the unexplained portion of equity returns to less than 10%.