DIY Financial Advisor: A Simple Solution to Build and Protect Your Wealth

DIY Financial Advisor: A Simple Solution to Build and Protect Your Wealth

Wesley R. Gray, Jack R. Vogel, David P. Foulke

Language: English

Pages: 200

ISBN: 111907150X

Format: PDF / Kindle (mobi) / ePub

DIY Financial Advisor: A Simple Solution to Build and Protect Your Wealth

DIY Financial Advisor is a synopsis of our research findings developed while serving as a consultant and asset manager for family offices. By way of background, a family office is a company, or group of people, who manage the wealth a family has gained over generations. The term 'family office' has an element of cachet, and even mystique, because it is usually associated with the mega-wealthy. However, practically speaking, virtually any family that manages its investments—independent of the size of the investment pool—could be considered a family office. The difference is mainly semantic.

DIY Financial Advisor outlines a step-by-step process through which investors can take control of their hard-earned wealth and manage their own family office. Our research indicates that what matters in investing are minimizing psychology traps and managing fees and taxes. These simple concepts apply to all families, not just the ultra-wealthy.

But can—or should—we be managing our own wealth?

Our natural inclination is to succumb to the challenge of portfolio management and let an 'expert' deal with the problem. For a variety of reasons we discuss in this book, we should resist the gut reaction to hire experts. We suggest that investors maintain direct control, or at least a thorough understanding, of how their hard-earned wealth is managed. Our book is meant to be an educational journey that slowly builds confidence in one's own ability to manage a portfolio. We end our book with a potential solution that could be applicable to a wide-variety of investors, from the ultra-high net worth to middle class individuals, all of whom are focused on similar goals of preserving and growing their capital over time.

DIY Financial Advisor is a unique resource. This book is the only comprehensive guide to implementing simple quantitative models that can beat the experts. And it comes at the perfect time, as the investment industry is undergoing a significant shift due in part to the use of automated investment strategies that do not require a financial advisor's involvement. DIY Financial Advisor is an essential text that guides you in making your money work for you—not for someone else!

















Santa Claus until the age of 14—and he still does believe at times. Physics be damned! 5. B. F. Skinner, “Superstition in the Pigeon,” Journal of Experimental Psychology 38 (1948): 168–172. 6. B. Graham and D. Dodd, Security Analysis (New York: McGraw-Hill, 1934). 7. B. Graham, “A Conversation with Benjamin Graham,” Financial Analysts Journal 32 (1976): 20–23. 8. W. Buffett, “Chairman’s Letter,” Berkshire Hathaway Inc. Annual Report, 1989. 9. “Buffett’s Alpha,” a 2013 working paper by Frazzini,

always easy to make things simpler, especially when it comes to investing. Simplicity requires the discipline of not falling victim to the idea that complexity and activity necessarily add value. Adding bells and whistles is fun, and nobody wants to sit around and “do nothing.” A great example of a simple, do-nothing trade is Van Hoisington’s 30-year zero-coupon bond trade—buy-and-hold. Van described his trading activity, or more accurately the lack thereof, at the October 2012 Grant’s A Simple

(US government bonds): ■ ■ Private, foreign, and domestic equity in the Yale model Bonds and cash in the Yale model Real assets: Real estate and commodities. Assets are traditionally thought to track inflation growth over time: ■ Real estate and natural resources in the Yale model Now that we have our three core asset classes, the next step is to determine how to invest. Do we buy individual stocks? A mutual fund? In our view, exchange-traded funds (ETFs), while not a panacea, offer a

all investors know and love. To explore the benefits of MA, TMOM, and ROBUST, we look elsewhere for additional data. Specifically, we examine the following data sets: ■ ■ ■ SPX = S&P 500 Total Return Index (January 1928 to December 1975, which is prior to time period previously examined) NKY = Nikkei 225 Index (January 1971 to December 2014—Japanese Stocks) DAX = Deutsche Boerse AG German Stock Index (October 1960 to December 2014) The empirical results presented are gross, and no fees are

strategies we tested from January 1, 1992, until December 31, 2014: ■ ■ ■ ■ Ultimate DIY = 60% Equity (15% US Value, 15% US Momentum, 15% international Value, 15% international Momentum); 20% Real (10% alpha commodities, 10% enhanced real estate); 20% Bonds. Risk-managed with ROBUST. DIY_MOD_RM = 60% Equity (15% US Value, 15% US Momentum, 15% international Value, 15% international Momentum); 20% Real (10% commodities, 10% real estate); 20% Bonds. Risk-managed with ROBUST. 60/40 = 60% Equity

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