Investing demystified_ How to invest without speculation and sleepless nights PDF

Investing demystified_ How to invest without speculation and sleepless nights

Investing demystified_ How to invest without speculation and sleepless nights PDF Don’t spend your time worrying whether you can beat the markets: you don’t need to beat them to be a successful investor. By showing you how to build a simple and rational portfolio and tailor it to your specific needs, Investing Demystified will help you generate superior returns.

Category: Personal finance

Author: Lars Kroijer

Language: English

Free download link: At the end of the post


Don’t spend your time worrying whether you can beat the markets: you don’t need to beat them to be a successful investor. By showing you how to build a simple and rational portfolio and tailor it to your specific needs, Investing Demystified will help you generate superior returns.

With his straightforward and jargon-free advice, Lars Kroijer simplies the often complex world of finance and tells you everything you need to know – and everything that you don’t need to worry about – in order to make the most from your investments.

In Investing Demystified you will:

• Discover the mix of stocks, bonds and cash needed for a top performing portfolio

• Learn why the most broadly diversi_ ed and simplest portfolio makes the most sense

• Understand the right level of risk for you and how this affects your investments

• Find out why a low cost approach will yield bene_ ts whilst leaving you with a higher quality portfolio

• Understand the implications of tax and liquidity


Today, most literature or other media on finance tell us how to make money. We are bombarded with stock tips about the next Apple or Google, read articles on how India or biotech investing are the next hot thing, or told how some star investment manager’s outstanding performance is set to continue. The implicit message is that only the uninformed few fail to heed this advice and those that do end up poorer as a result. We wouldn’t want that to be us!

This book starts with a very different premise. It starts with the idea that markets are actually quite efficient. Even if some people are able to outperform the markets, most people are not among them. In financial jargon, most people do not have an edge over the financial markets, which is to say that they can’t perform better than the financial markets through active selection of investments different from those made by the market. Embracing and understanding this absence of an edge as an investor is a key premise of the investment methods suggested in this book, and something I will discuss at length.

Who is this book for?
It is for investors everywhere who have several things in common:

  • They feel that they are not getting value for money from the finance industry and find it opaque, but realise how important investments are to their lives. They read about phenomenally wealthy finance types, but feel that in paying fees, for example, the results are poor. Thinking about the great phrase ‘Where are the customer’s yachts?’, they don’t even have a rowing boat.
  • Ideally, they would like a simple portfolio of investments, but also want to feel that they can expect the best possible return for the risk they are willing to take.
  • They may well have investments with typical investment managers as (despite themselves) they fell for the snazzy ads that showed great historical performance, which perhaps wasn’t matched post-investment.
  • They may have shares in blue chip companies like Google, Apple, Exxon or Vodafone, but at the same time recognise they are not expert stock pickers and consider that is something best left to the professionals.
  • They may also know a lot about finance and have a genuine interest in it, but with a busy day job are unable to devote a lot of time to their personal portfolio. They need a portfolio that helps them sleep better at night, knowing that their savings are well looked after without having to spend too much time on it.
  • They may have been directed by an adviser who they had retained to help simplify the jungle of investment products and were left unable to understand their portfolio mix. Perhaps without knowing if the adviser took a share of the high fees they were paying.
  • They probably also think about investing longer term. While this book certainly has many immediate action items it is the opposite of the ‘Spot the next hot stock’ or ‘Make $10,000 a day without getting out of bed’ genre.
  • They want a book on how to do a little bit better every year financially, with a big cumulative impact over time. If a hedge fund manager is a turbocharged Ferrari, this book is akin to the grey Volkswagen that is a far better bet to get you safely to your destination in one piece.

So this book is about taking something as opaque and impenetrable as the financial market sector and demystifying it; thus Investing Demystified. Once investors realise that they do not have the investing edge to outperform the markets, and know that this is perfectly acceptable, the rational next step is quite logical and simple. I call this next step being the rational investor and the portfolio for that investor the rational portfolio.

Table of Contents- Investing demystified_ How to invest without speculation and sleepless nights PDF

About the author

Part 1 Introduction
1 Introduction to markets and portfolios
Where do we hope to end up?
2 What is an edge over the markets and do you have it?
The competition
You just have to pick your moment
The costs add up
Should we give our money to Susan and Ability?
You need to pick the best mutual fund out of 10 for it to make sense!
Outside stock markets
Being rational
3 What are the key components of the rational portfolio?
Asset split in a rational investment portfolio
Understand the level of risk you are comfortable with
Don’t put all your noninvestment eggs in one basket
Reducing tax has a large impact on longterm returns
Paying too much in fees destroys asset growth
Speculate less, sleep better!

Part 2 The rational portfolio
4 The minimal risk asset – safe, low-risk returns
Buy government bonds in your base currency if credit quality is high
Perhaps diversify even the potentially very low risk that your domestic government fails
Matching time horizon
Inflationprotected bonds
What will the minimal risk bond earn you?
Buying the minimal risk asset
5 World equities – increased risk and return
Buy equities from around the world
The advantage of diversification
What are world equities?
Expected returns: no promises, but expect 4–5% after inflation
Lars’s predictions
In summary
6 The risk of equity markets
Understanding the risk you take to get returns
The standard deviation
You can lose a lot!
Don’t assume that markets always bounce back
Diversification and the false sense of security
Risk rethought
7 Adding other government and corporate bonds
Adding government bonds
Only add government bonds if they increase expected returns
The government bonds we should add to the rational portfolio
Adding corporate bonds
If history is any guide …
Getting practical
Corporate bond returns also depend on credit quality

Return expectations of the rational portfolio
Adjusting the rational portfolio
Using equity risk insights in the context of a full rational portfolio
The rational portfolio allocations
Special case: if you want a lot of risk
8 Incorporating other assets
What else do you have?
Other assets
Not just geography
The institutional investor
Other assets rethought
9 What is omitted from your rational portfolio and why
Avoid investments that require an edge or those you already have exposure to
Property – don’t do it unless you have an edge
Private equity, venture capital and hedge funds
Private investments (or ‘angel’ investing)

Part 3 Tailoring and implementing the rational portfolio
10 Financial plans and the risks we take
Building your savings
The supercautious saver
Generalising the examples
Keeping it real
Reacting to disaster
A few ways to think about portfolio allocations
Stages of life

A few rules of thumb
Adding government and corporate bonds
11 Tax
Tax adviser or accountant
Ask your adviser
Rational portfolio adjustment
12 Liquidity
Selling your investment
Minimal risk liquidity
The equity portfolio and ‘risky’ bonds are highly liquid
Getting paid – illiquid investments should generate better returns
Liquidity rethought
13 Expenses
An expensive, active choice
Believing in an edge can be expensive
14 Products and implementation
Total expense ratio tells you the cost of owning the product
The best ETFs: liquid, tax efficient and low cost
Index-tracking funds
Comparison sites
Trading is expensive
Rebalancing your portfolio

Part 4 Other things to think about
15 Pension and insurance
Defined contribution pension plans
Annuities and insurance

16 Apocalypse investing
Gold as security
If not gold, then what?
How could 2008 and 2009 have happened?
17 A wish list aimed at the financial sector
Enhanced independent comparison sites
Risk expertise
Tax advice
Do you need a financial adviser?
18 Conclusion


‘Lars Kroijer takes a refreshing look at how everyday people can improve their fortunes by taking some simple investing steps.’

Dr David Kuo, The Motley Fool

‘In a world of the next big investment fad, Lars Kroijer takes us back to the essence of smart investing: diversify, diversify, diversify. And don’t overpay for that either.’

Coenraad Vrolijk, Managing Director of Blackrock

‘An important book that debunks common myths about investing. A must-read for ordinary investors.’

Anita Raghavan, New York Times and author of “The Billionaire’s Apprentice”

About the author

Lars Kroijer graduated Magna cum Laude from Harvard University with a degree in economics and received a MBA from Harvard Business School. Lars is the author of Money Mavericks – Confessions of a Hedge Fund Manager (second edition, 2012, FT Publishing). He currently serves on the Board of Directors of OVS Capital, Linden Grove Capital, Northlight Capital, Steadview Capital and Maj sinAI (London, Mumbai/Hong Kong and Copenhagen-based hedge funds), and ShipServ Inc. (the leading online platform for shipping supplies with annual sales of about $4 billion). He has frequently appeared as a finance expert on a broad range of media, including the BBC, CNN, CNBC, Bloomberg, the New York Times and Forbes magazine.

Lars was the CIO of Holte Capital Ltd, a London-based, market-neutral, special situations hedge fund which he founded in 2002 before returning to external capital in the spring of 2008. Prior to establishing Holte Capital, he served in the London office of HBK Investments focusing on special situations investing and event-driven arbitrage. In addition, he previously worked at SC Fundamental, a value-focused hedge fund based in New York, and the investment banking division of Lazard Frères in New York. Whilst at graduate school, he held internships with the private equity firm Permira Advisors (then Schroder Ventures) and management consulting firm McKinsey & Co. A Danish national, Lars Kroijer lives in London and is married with twin daughters.

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