Smarter Investing

By Tim Hale
Financial Times / Pearson Education
August 2006
ISBN: 0273708007
392 Pages
$59.50 paper original

The Smarter Investor cuts through the noise of conflicting investment advice to show you how to translate your investment goals into a personal portfolio that plays the probabilities in your favour with every investment decision you make. It’s easier than you think to help yourself to higher returns.

“What should I do with my money?” It’s a simple question, you’d think, but one that has generated a bewildering array of complex and costly answers. Answers which take the average investor ever more time and effort to understand and apply, and which deliver distinctly average results.

Most investors spend a lot of time trying, and failing, to beat the average. Many more pay other people – the professionals – to try, and fail, to beat the market for them. There is a smarter way, and it’s a simpler way. Instead of working hard, or paying more, to achieve average results, why not make your money work harder on your behalf?

The Smarter Investor will introduce you to a simple and powerful approach to investing, helping you to build an investment portfolio that suits your needs and quietly gets on with the job of generating higher returns and greater wealth. At its heart is a set of rules that cut through the noise of the investment world and put you back in control. It’s all about focusing on a few key things and making decisions that improve your chances.

Mixing clear principles, simple techniques and a wealth of uncommon sense, The Smarter Investor will show you how to translate your personal investment goals into an investment portfolio and play the probabilities in your favour with every investment decision you make.
Smarter investors know that, sometimes, less really does mean more.


Introduction.. 1
I.1 What should I do with my money?
I.2 Ten eye-openers to get you thinking.
I.3 How this book will help you
I.4 How this book works
I.5 A few points to notes

Part 1: Smarter investing basics

Chapter 1: Simplifying the confusion
1.1 Choices, choices, choices
1.2 How did we get here?
1.3 Battling for investors’ money
1.4 Reducing confusion and complexity

Chapter 2: Covering the basics
2.1 What is a Smarter Investor?
2.2 Ten points of focus of Smarter Investors
2.3 The two distinct phases of investing
2.4 There are no perfect answers
2.5 Summary: smarter investing basics

Chapter 3: It only takes a minute
3.1 Twenty tips to becoming a Smarter Investor

Part 2: Smarter thinking

Chapter 4: Get smart - find your philosophy
4.1 Without a smart investment philosophy you are lost
4.2 The foundations of your philosophy
4.3 The path to establishing your philosophy
4.4 Can active managers beat the markets after costs?
4.5 Do a few managers outperform consistently?
4.6 Can you reasonably identifying them in advance?
4.7 Leading active managers endorse index investing
4.8 Summarising what you now know
4.9 In conclusion on the active versus index debate
4.10 A personal philosophy
4.11 Your investment philosophy rules
Anthony Bolton – The exception that proves the rule

Chapter 5: Get smart - have a word with yourself
5.1 You are your own worst enemy
5.2 Investment decision making challenges
5.3 Thirteen questions for you to answer – unlucky for some?
5.4 Ms. Rational versus Mr. Irrational
5.5 Wise words to leave you with
5.6 Behavioural rules and tips
Part 3: Building smarter portfolios

Chapter 6: Sorting out your goals
6.1 Well thought-out goals underpin success
6.2 Five key steps in defining your goals
6.3 The nitty-gritty of Basic Financial Survival goals
6.4 A working example
6.5 Useful calculations
6.6 Summary: investment goals

Chapter 7: Building a smart but simple portfolio
7.1 Choices, choices
7.2 The two key steps to building a your portfolio
7.3 Understanding the spectrum of return and risk
7.4 Step 1: Picking your spot on the risk/return spectrum

Chapter 8: Equity and bond building blocks in brief
8.1 Equities in brief
8.2 Bonds in brief
8.3 Why use High Quality Domestic Bonds as market trauma protection?
8.4 By and large bonds help dampen market trauma
8.5 Summary: rationale for owning some bonds

Chapter 9. Getting your equity/bond mix right
9.1 Try and focus on your end goal, not bumps in the road
9.2 Using ‘Rules of Thumb’ to decide your Level 1 mix
9.3 Making an informed choice about your mix
9.4 A thirty-year investment horizon
9.5 A twenty-year investment horizon
9.6 A ten-year investment horizon
9.7 A five-year investment horizon
9.8 A ‘Lifecycle’ approach to investing
9.9 Drawing an income from your portfolio
9.10 Finally, wise words from a highly respected investor
9.11 Summary: getting the equity bond mix right

Chapter 10: Building a portfolio for all seasons
10.1 Creating a diverse portfolio
10.2 A free lunch from Harry Markovitz
10.3 A practical framework for adding building blocks
10.4 A paragraph on each
10.5 Simple rules for constructing your portfolio
10.6 Possible portfolios
10.7 Summary of the portfolio construction process

Chapter 11. Fancy tools - getting technical
11.1 Using optimisation to define ‘efficient’ portfolios
11.2 Using probability based models to select portfolio
11.3 Summary: getting technical
Part 4: Smarter Implementation

Chapter 12. Six steps to a smarter portfolio
12.1 Step 1: Choosing your market benchmarks
12.2 Step 2: Decide on whether to go index or active
12.3 Step 3: Funds, separately managed accounts or brokers?
12.4 Step 4: Selecting the best index funds
12.5 Step 5: Administering your investments
12.6 Step 6: Ongoing portfolio maintenance
12.7 Market valuation levels and lump sum investing
12.8 Tip 1: Selecting the best active managers
12.9 Tip 2: Where to find information on indices
12.10 Tip 3: Where to find useful information on funds
12.11 Tip 4: Don’t forget about tax
12.12 Ten tips for smarter practical investing

Chapter 13: Costs – what a drag
13.1 Why do we throw our money away?
13.2 More than just management fees
13.3 Summary: costs – what a drag

Chapter 14. Standing firm on index funds
14.1 Common arguments used to put-down index funds
14.2 Bond investing: active or index?
14.3 Summary: the active versus index debate
Part 5: Smarter building block insights

Chapter 15: The thrills and spills of equities
15.1 Why the thrills and spills?
15.2 The thrills of equity investing
15.3 The spills of equity investing
15.4 What about future equity returns?
15.5 Summary: the thrills and spills of equities

Chapter 16. The ins and outs of bonds
16.1 The ins and outs of bonds
16.2 Taking a closer look at bond returns
16.3 Bond markets crash too!
16.4 The outlook for bond returns
16.5 Summary: bonds

Chapter 17: Spotlight on Return Smoothers
17.1 Index linked Gilts a.k.a. ‘Linkers’ (Level 2)
17.2 Property – the misunderstood asset class
17.3 Hedge Funds – Are they all they are cracked up to be?
17.4 Commodities
17.5 International equities

Chapter 18: Spotlight on Return Enhancers
18.1 Smaller companies – higher returns?
18.2 Value and growth: what’s that all about?
18.3 Emerging market equities make sense in theory

Websites and Internet based resources
Insightful books
Data oriented books
Asset allocation software
Additional sources

• The Smarter Investor offers a simple approach to help you get the probability and time working in your favour. More wealth for less effort.
• An uncommon mix of rigorous research and professional insight, delivered in simple, accessible and honest language.
• Offers a simple set of rules to make your investment decisions by.
• Offers practical pointers about using investment managers and products.
• An Author with many years experience “on the inside”, now shares his golden rules.
• Includes tables that coach you through your investment decisions from defining your objections through to analysing risk.

Tim Hale has spent 15 years in the active investment management industry, working for the global investment management firm of one of the world’s largest investment banks, in both sales and corporate strategy roles, and now as a consultant to the industry. He is tehrfore in a unique position to be able provide real perspective on the issues that readers face as they try to get to grips with their investing.
His willingness to stand up for what is in the best interests of the investor, and his true insight and understanding of the business, differentiates him from many writers in this field.
Prior to his MBA at Cranfield School of Management in 1991, he worked for Standard Chartered Bank in Hong Kong for five years in the Corporate Banking Division in the role of Account Relationship Manager handling industrial and property related Asian multi-nationals. Tim holds an honours degree from Oxford University.

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