The Flexible Investing Playbook E-Book

Robert Isbitts

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 360

Veröffentlichungsjahr: 2010

Beschreibung

How to make sensible investment decisions during these turbulenttimes 2008 changed everything. Now, more than ever, investors need tobe proactive in planning for their retirement. To do so, they mustlook beyond simply investing in stocks and bonds, while avoidingwhat may be overwhelming and even misleading investment advice. InThe Flexible Investing Playbook: Asset Allocation for Long-TermSuccess, Robert Isbitts-mutual fund manager, investmentstrategist, newsletter writer, and author of Wall Street'sBull and How to Bear It-shares the strategies he createdand uses with his clients. This approach can potentiallyallow their portfolios to withstand the volatility of the stockmarket and subdue the emotional impact of investing, to increasethe chances of reaching their investment goals. Along the way, thebook: * Reviews the events of the 2008 financialmarket debacle, and identifies key lessons investors should learnfrom that experience * Discusses how traditional approaches todiversification are fraught with risks, and how they may endangerthe pursuit of a secure retirement * Details why he believes investors cannotlive on stocks and bonds alone, while also describing how toproperly diversify, without sacrificing precious liquidity The Flexible Investing Playbook, he presents a proactiveapproach to investing that's based on the strategies Isbittscreated, designed and currently manages.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Acknowledgments

Introduction

In Case of Fire, Use Stairs

PART I - SETTING THE STAGE TO BE REEDUCATED

CHAPTER 1 - Tired . . . but Not Retired

Bulls, Bears, and Pigs

CHAPTER 2 - 2008: What the Hell Happened?!

Where’s “Voldo?”—August 1, 2007

“Wimpy”—September 19, 2007

Counting Backwards—February 1, 2008

Two Wild and Crazy Guys—August 8, 2008

It’s All About the U(-Shaped Recovery)—October 21, 2008

Hot ’N Cold—December 9, 2008

Not Suitable for All Ages?—March 17, 2009

CHAPTER 3 - What Have We Learned?

Lessons from Stock Market History

“Renting” the Stock Market—the Ballad of Babe and Yogi

The 60/40 Approach to Investing—My Version

There Must Be 50 Ways to Invest Your Assets

Style Boxes: Out of Style?

Unwrapping the Box

“Rearview Mirror” Investing

Finding Bull Markets Wherever They Exist

PART II - GETTING OLD IDEAS OUT OF YOUR HEAD

CHAPTER 4 - Identifying the Issues and the Enemy

What Makes Today Different from the 1980s and 1990s?

Where Does This Lead Us?

Do You Think You Can Be Effective in Market Forecasting?

Investment Football

More Bad Habits to Kick

An Obsession with Risk Avoidance

Performance Contests

Shooting the Weak Performer

“Rearview Mirror Investing”

The Other Enemy

CHAPTER 5 - Wall Street’s Bull

Shortcuts and Overkill

Taking the Shortcut

Are You Being Advised or Sold To?

Conventional Wisdom: Not So Smart

A Shocking Fact

Overlap

10 Investment Ideas that Still Don’t Work

“Moderately Constructive” and Other Indecipherable Comments from “Talking Heads”

Congratulations!

PART III - INVESTING IN THE TWENTY-FIRST CENTURY

CHAPTER 6 - Keys to Successful Asset Allocation

An Investment Philosophy Is Born

The 10 Keys to Asset Allocation

Other Key Factors to Consider in Asset Allocation

Hedge Funds: A Limited Solution

What Holding Period/Time Horizon to Target?

The True Cost of Investing

Portfolio Turnover: Far More Irrelevant Than “Experts” Would Have You Believe

Diversification and “De-Worse-ification”

When to Say Bye to Your Buy (Sell Discipline)

Volatility: How To Make It Your Friend Instead of Your Enemy

Five Ways to Whip Inflation Now (or Whenever It Arrives)

Game Time! Meet the Portfolio Strategies

CHAPTER 7 - Hybrid Investing

How Hybrid Came to Be

The Objective of the Hybrid Allocation Strategy

Hybrid Mutual Fund Styles

Constructing Hybrid Portfolios

The Hybrid Investment Process

Where Hybrid Investing Fits into Your Portfolio

Risk Management in the Hybrid Strategy

Hybrid Investing: A Flagship Strategy for Twenty-First-Century Asset Allocation

Why Not Just Pick One Alternative Mutual Fund and Call It a Day?

CHAPTER 8 - Concentrated Equity Investing

My Favorite Article on Concentrated Mutual Fund Investing

When Does Diversification Lose Its Benefits?

Sell Discipline

CHAPTER 9 - Global Cycle Investing

Types of Business Cycles

The Global Cycle Strategy in Action

PART IV - YOU’VE COME THIS FAR, NOW SCORE! (PUTTING THE STRATEGY TO WORK)

CHAPTER 10 - Evaluating Your Performance—the Right Way

Capturing Investment Success

“Capture Ratio”: What Is It, and How Does It Help You?

Capture Ratios—A Simple Example

Consistency Counts (If You’re Into That Sort of Thing)

Using Rolling Returns for Better Analysis

Don’t Let the Market Be Your Evil Twin (R-Squared)

CHAPTER 11 - Putting It All Together

Mixing the Strategies—without Food Analogies

The Golden Ticket for the Next Decade and Beyond

Chasing Tails: How to Play Defense against a “Market Event”

“Gray Investing” Is Better Than “Black-and-White” Investing

Market History: Know It and Learn from It

From Boring to Number One in 20 Weeks!

Replacing Your Old Investment Playbook (Reprise)

The Last Word(s)

About the Author

Index

Copyright © 2010 by Robert A. Isbitts. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Isbitts, Robert A.

The flexible investing playbook: asset allocation strategies for long-term success/ Robert A. Isbitts. p. cm.

Includes index.

ISBN 978-0-470-63616-9 (cloth); 978-0-470-87556-8 (ebk); 978-0-470-87555-1 (ebk)

1. Investments. 2. Securities. 3. Finance, Personal. I. Title.

HG4521..6—dc22

2010008454

To Dana, Jordann, Tyler, and Morgan Isbitts. Everything I do, I do for you.

Acknowledgments

There are so many people who have influenced the thoughts and opinions that led to the creation of this book. First, there are the investors and financial advisors who had the courage to be early adopters of my investment philosophy. Now that this genre of investing has matured from a set of basic ideas into a formalized, sustainable, investment process, those who have come along for the ride have been rewarded for their patience.

The mutual fund managers whose investment styles piqued my curiosity starting in the mid-1990s were the true inspiration for this book. Just as a good team coach needs to effectively use his players and put them in positions to help the team win, so it is with the outstanding and innovative fund managers I have had the pleasure to spend time with over the years. They do the day-to-day security selection, and I use my strategic approach to determine how to set and maintain the team’s “lineup.” Mutual funds have been around since 1924 and I don’t see them going away anytime soon. Thus, I am excited about the prospect of finding additional funds to blend into the portfolios for the next many years.

My parents, Joyce and Carl Isbitts, are the ones who instilled in me the discipline, energy, and persistence to make the concept of Flexible Investing a reality. I owe my inner strength to them.

My brother Mark and his family, while many miles away, have been a constant reminder that one’s support network and family bond is more important than any financial victory or defeat.

My in-laws, Max and Vicki Rosen, transcend (nearly) every stereotype about “in-laws.” They have been among my biggest fans, and they have completed the family picture that provides the backbone for all great ideas.

My aunt and uncle, Myrna and Paul Fruitt, and cousins Lisa Fruitt, Gary Markowitz, and Sid Krex have taught me so much and have been longtime supporters of the goals and dreams that are described in this book. I can truly say that when it comes to family, I don’t have quantity, but boy do I have quality!

John Lohr, my mentor in the writing business, shares the accolades for this book. My first book, Wall Street’s Bull and How to Bear It was published by John’s publishing company, Isle Press in 2006. Before and since that time, John’s perspective on the investment management business has been both thought-stimulating and very enjoyable. He is one of the unsung heroes of fair play in the investment business, and I am grateful for having the opportunity to know him.

My career has had numerous twists and turns and at each bend, I accumulated some knowledge and relationships that allowed me to eventually put together the “playbook” you are now reading. People like Donna Naitove, Scot Hunter, Allan Budelman, Medon Michaelides, Denise Karp, Pamela Nelson, and Leana Alu have all played a role in moving the process forward. In particular, I wish to thank those who have gone to battle alongside me in the day-to-day effort to uncover investment ideas and analyze their potential: Keith Stoloff, Michael Kahn, Suzie Dean, and Matthew MacEachern.

And most significantly, my wife Dana, and our three fantastic children have been the meaning behind everything I do. As any parent will tell you, one reaches a certain point in life where as much as you enjoy your professional accomplishments and free time, it just means more when you have your family there to share the joy with you. There is no shortage of that in our family, and I could not ask for anything more than I have at home. As a country song says, “the view I love the most is my front porch looking in.”

INTRODUCTION

Replacing Your Old Investment Playbook

When a football player is cut from his team or traded to another team, his former team immediately asks him to turn in his “playbook,” which shows diagrams of all the different ways his team will try to move the ball forward to score (if on offense) or how to defend when the other team has the ball. When the player arrives at his new team, one of the first things they give him is his new playbook. They ask him to go learn it. One reason why many rookie quarterbacks don’t play very much is that they play the position responsible for leading the execution of that playbook on the field. That is a huge undertaking, and the training process can last months or years until the coaches feel he is ready to take on that role.

Whether you are an investor or a financial advisor helping investors, I am asking you right now to turn in your old playbook. In other words, I want you to put aside any preconceived ideas you have about how to protect and grow wealth inside an investment portfolio. By reading this book, you have been traded to a new team. This new team does not run the same, typical plays that most of the other teams run. In investor terms, that means that I will show you the weaknesses in traditional approaches to allocating and managing assets, and introduce you to a genre of investing I created. Your new “team” (investment strategy) realizes that success starts with a solid defense (i.e., a plan to limit losses when the financial markets are busy destroying value in other people’s portfolios) and then tries to score enough points on offense to win games (producing solid long-term performance without a lot of flash and sizzle, and by staying out of the deep hole many investors dig for themselves).

There is an old saying in many sports that “defense wins championships.” Start thinking that way, even if your investment objectives require you to achieve a fairly high long-term return. You will understand why I say this as you continue to read the book.

Your new team takes tremendous pride in not beating themselves as they have observed other teams do. I will point out common mistakes that I have seen investors make during my quarter-century in the investment industry. Your teammates are by no means mistake-free or perfectionists. They just don’t tend to make big mistakes (i.e., they have a strategy to avoid major losses when markets are destroying value in their neighbors’ portfolios). Big mistakes may force the team to change strategies during a game to play “catch up,” and that is not desirable.

Your new team has a history of being very competitive no matter who the opponent is (I will show you how to keep your portfolio from being ruined, regardless of the market environment). They don’t win every game, but they are one tough team to play against, no matter what the outcome.

While the playbook your new team uses may appear complex at times, the more you understand it, the more simple, logical, realistic, and purposeful it is to you. The strategies I will introduce you to are likely different from the traditional approaches you have seen—and in this case, different is better! But, like playing football, the exhilaration of a game plan well executed is tremendous. Welcome to your new team!

Later in this book, I’ll get more specific about how to run the plays (use the strategies I created and manage today), so to speak. You may continue to follow my work at www.flexibleinvesting.net.

In Case of Fire, Use Stairs

A sign just like this was next to the hotel elevator, and I noticed it one morning while making my way down to present at an investment conference:

At that moment, it struck me that this sign and its instructions are a beautiful metaphor for the primary message I am communicating to you: The method you take to get up to your hotel room may not be the method you take on the way down. While you don’t think a fire in the hotel is likely, you do want to know what to do if one occurs. If it does, you may not be able to use the elevator. In that case, your escape route is the stairs.

What does this have to do with the approach one takes to researching and allocating investments? Everything! Investors have been conditioned to use the same approaches they used on the way “up” (i.e., in a strong stock market) when the market is going “down a few floors.” But that may not work. There may be fires to navigate around. You may have to do what is less convenient and less comfortable—take a different approach, a different route to your goal. You may have to take the stairs instead of the elevator.

Perhaps this was so poignant to me because I was reminded of a time when I took the stairs to get down . . . 97 floors. I was working near the top of the World Trade Center in 1993 when the building was bombed. This, of course, was when terrorists “missed,” and limited damage and casualties resulted. For a few hours, however, we did not know what was going to happen to us. Naturally, when a true tragedy occurred in that building on September 11, 2001, and some of my former colleagues lost their lives while others escaped death by taking the stairs, it brought back memories of that day in 1993. And years later, when I noticed that sign next to the elevator in that small hotel, the investment/elevator metaphor was obvious to me. Now, I hope it is to you, too.

In this book, I plan to point out how what you can learn from the experience of the past decade, how to avoid many common investment pitfalls, and how to allocate your assets to take advantage of the realities and opportunities of today’s markets. Along the way, I will help you identify, as I said in my first book, Wall Street’s “bull.” I intend to show you not only how to “bear it” but persevere through it. After the events of 2008, that should be a welcome sight for your eyes.

I hope this book helps you.

Rob Isbitts Weston, Florida June 2010

PARTI

SETTING THE STAGE TO BE REEDUCATED

CHAPTER1

Tired . . . but Not Retired

That’s what a majority of Americans predict for themselves. This book offers investors and financial advisors an investment philosophy and process to avoid that predicament. For advisors and for the do-it-yourself investor (by definition you are your own financial advisor), it allows insight into approaches and techniques that might just change the way you look at the investment markets . . . for the benefit of you and your family, for this generation and beyond.

While investors save and invest for many financial goals, in my experience the most common one is retirement. While retirement means different things to different people, the common piece of each different person’s retirement definition seems to be this: the point in life at which your desired lifestyle can be paid for without your having to work. That does not necessarily mean that you don’t work; many have adopted the idea of a “second career” as something they always wanted to do, but were so entrenched in their current industry that they could not afford to give up their high income level. Retirement is as much a state of mind as anything else. It’s a feeling that the pressure is off, that you can comfortably afford to support yourself and those you are financially responsible for, now and in the future.