Product Description

The book explores the controversies that surround the management of wealth and provides guidance on how to construct investment strategies that are appropriate for each investor. With its detailed analysis, supported by data and anecdotes drawn from investment experiences, it is intended above all to be a practical guide. It shows how the insights of behavioural analysis are widely reflected in investor behaviour. It also emphasises the importance of basing recommendations for investment strategy on the principles of traditional finance. And it takes into account new research into behavioural and traditional finance which has created new understandings of what investors want to achieve and investors' customary mistakes. Part one considers the basics of investor objectives, behaviour, risk and investment allocation in terms of stocks, bonds and cash. Part two considers the things on which investors, their advisers and investment managers spend most of their time - the choice of money manager, bonds, equities, hedge fund strategies, private equity and real estate.

Product Details

• Amazon Sales Rank: #234768 in Books
• Published on: 2006-07-06
• Original language: English
• Binding: Hardcover
• 272 pages

Review
European Business (Magazine) - 'Stanyer targets both the professional and amateur investor and he does it with an enviably informative, accessible style.' Securities & Investment Review - 'provides an interesting explanation of the subject, written in a style appealing to both those seeking to understand investment strategy from a limited knowledge base and to more experienced readers.'

Chris Cheetham, CEO, HSBC Halbis Partners
"An invaluable reference for wealth managers."

European Business (Magazine)
Stanyer targets both the professional and amateur investor and he does it with an enviably informative, accessible style.

Customer Reviews

A good guide to investment strategy
This is a thoughtful, balanced and well-informed work by an author (a former colleague of this reviewer) with extensive practical experience of his subject and an interest in its theoretical foundations. He discusses both the characteristics of the main conventional and alternative asset classes and how different types of investor should combine these in an investment portfolio. He considers both traditional approaches to asset allocation and new thinking from `behavioural finance'.

At a practical level the author stresses the importance of each investor first finding their `safe haven' portfolio; even for an individual investor this is not necessarily cash. The safe haven portfolio should form the base from which an investor should venture only to the extent that higher average returns are available from diversified exposure to other more risky but potentially more remunerative assets and to the extent that the associated level of risk is acceptable. The author discusses in some detail the construction of low risk `ladder' portfolios of bonds to generate a stable income (though I would see a greater potential role for annuities as a means of dealing with uncertainty about future lifespan).

The author discusses a range of views held within academia and the investment industry on the level of the long-run `equity risk premium' - the future average outperformance by equities over government bonds or cash. He believes that such a premium exists, but includes both historical and simulated return data to show how even over very extended periods equities can nevertheless underperform. (He also notes, however, that there is some evidence of long-run equity market `mean reversion'; if this exists it would lower the long-run risk of equities.) Separately, I appreciated the author's discussion of the historical outperformance of `small cap' and `value' stocks, and possible reasons for these phenomena.

The discussion of liquidity - the ability to buy and sell assets quickly and cheaply - is another strength of the book. `Liquidity ...is not captured by off the shelf risk models... This is because it is hard to model, not because it does not matter' (p79). Some investors require liquidity and will be prepared to pay for it; other investors without this requirement can `sell' them liquidity by tilting their portfolios towards illiquid assets. (Interestingly, the author sees the provision of liquidity to other investors as a significant contributor to hedge fund returns.)

Finally, there is a nice selection of historical and personal anecdotes, from Isaac Newton's disastrous financial speculations in the South Sea bubble to the 500 thousand Reichsmark note framed on the author's wall - a present from a client with a particularly strong aversion to inflation risk.

Nicholas Miller Smith

Enlightening
I was very grateful to read a "friendly" readable exposition of influential investment psychology, particularly dealing with the perceptions of the individual investor. It's a magisterial survey of modern investment theory and practice which suits the individual as much as it informs the professional - an essential "vade mecum" through the investment jungle.