Details

<p>Foreword ix</p> <p>Preface xi</p> <p>Acknowledgments xvi</p> <p>Introduction to Financial Engines xviii</p> <p><b>Chapter 1 Now it’s Personal 1</b></p> <p>A Changing World 2</p> <p>The Grand Social Experiment: 401(k) 6</p> <p>The Knowledge Gap 7</p> <p>The Traditional Advice Model 8</p> <p>Institutional Tools of the Trade 10</p> <p><b>Chapter 2 No Free Lunch 25</b></p> <p>I’ll Take the one with the Highest Return. . . 26</p> <p>A Little Bit of Latin: Ex-Ante and Ex-Post 28</p> <p>How are the Prices of Risky Assets Set? 29</p> <p>The Link Between Risk and Return 31</p> <p>When High Risk does not Mean High Return 34</p> <p>Hidden Risks and the Peso Problem 36</p> <p>How Much Risk Am I Taking? 38</p> <p>Risks and Returns of Different Assets 42</p> <p>Does it Pass the Blush Test? 47</p> <p><b>Chapter 3 History is Bunk 49</b></p> <p>History and Expected Returns 51</p> <p>The Past is not the Future 52</p> <p>History is Sometimes not What it Seems 55</p> <p>Investing with Perfect Hindsight 57</p> <p>The Lucky and the Skillful 60</p> <p><b>Chapter 4 The Wisdom of the Market 73</b></p> <p>The Efficient Market? 74</p> <p>What is the Market Portfolio? 78</p> <p>What does the Market Portfolio Look Like? 79</p> <p>There’s no Place Like Home 81</p> <p>History of the Market Portfolio 83</p> <p>Betting Against the Market 85</p> <p>Avoiding Unintentional Bets 87</p> <p>Risk and the Market Portfolio 89</p> <p>The Market’s View of Future Returns 91</p> <p>Market Portfolio Simulations 97</p> <p>Final Thoughts 98</p> <p><b>Chapter 5 Getting the Risk Right 101</b></p> <p>How to Measure Risk 103</p> <p>Asset Mix and Short-Term Loss 106</p> <p>Risk and Portfolio Outcomes 109</p> <p>Risk and Time Horizon 113</p> <p>Factors to Consider in Selecting a Risk Level 120</p> <p>Examples of Informed Investor Behavior 121</p> <p><b>Chapter 6 An Unnecessary Gamble 125</b></p> <p>A Different Sort of Beast 128</p> <p>The Risk of Individual Stocks 130</p> <p>The Implications of Individual Stock Risk 132</p> <p>Expected Growth Rates 136</p> <p>The Biggest Mistake in Retirement Investing 142</p> <p>What About More Than One? 144</p> <p>Do You Feel Lucky? 149</p> <p>How to Invest in Stocks Safely 150</p> <p>Hidden Costs 152</p> <p>Dealing with Unwanted Stock Risk 154</p> <p><b>Chapter 7 How Fees Eat Your Lunch 157</b></p> <p>It’s Basic Arithmetic 158</p> <p>Big Business 160</p> <p>For Every Winner there Has to Be a Loser 161</p> <p>It Still Adds Up to Dollars 164</p> <p>A Wide, Wide World 167</p> <p>How Fees Eat Your Lunch 168</p> <p>It’s a Heavy Load to Bear 175</p> <p>Fees and the Bigger Picture 176</p> <p>Practical Considerations 179</p> <p><b>Chapter 8 Smart Diversification 183</b></p> <p>The Goals of Diversification 184</p> <p>The Big Picture 185</p> <p>Why Hierarchy is Bad for Portfolios 189</p> <p>The Value of Asset Class Diversification 193</p> <p>Diversification Ain’t What it Used to Be 197</p> <p>Diversification and Investment Choices 198</p> <p>The Big Picture: Part II 205</p> <p>The Search for Better Diversification 211</p> <p><b>Chapter 9 Picking the Good Ones 221</b></p> <p>The Stuff that Matters 224</p> <p>It’s About the Future 227</p> <p>Risk Tolerance and Fund Choice 227</p> <p>Investment Style 228</p> <p>Fund Expenses 232</p> <p>Predicting Mutual Fund Performance 233</p> <p>Rating Funds 236</p> <p>Putting the Pieces Together 257</p> <p>What it Takes to Rank Among the Best 259</p> <p><b>Chapter 10 Funding the Future 263</b></p> <p>The Benefits of Being Flexible 264</p> <p>Taxable and Tax-Deferred Savings 266</p> <p>How Much do you Need? 269</p> <p>From Wealth to Income 271</p> <p>The Myth of Absolutes 275</p> <p>Risk, Time, and Savings 281</p> <p>What it Takes to Get there 291</p> <p><b>Chapter 11 Investing and Uncle Sam 295</b></p> <p>Why you don’t Want to Minimize Taxes 297</p> <p>How Taxes Impact Investment Returns 298</p> <p>The Impact of Personal Tax Rates 301</p> <p>Tax Efficiency of Asset Classes 303</p> <p>Asset Placement 306</p> <p>Mutual Fund Tax Efficiency 308</p> <p>Municipal Bonds 312</p> <p>Capital Gains and Losses 316</p> <p>Putting it All Together 319</p> <p><b>Chapter 12 Wrapping it Up 321</b></p> <p>Appendix The Personal Online Advisor 331</p> <p>Notes 335</p> <p>Glossary 347</p> <p>About the Author 357</p> <p>Index 359</p>

"The irreverence [Jones] displays toward history as a predictor for investment is one of dozens of viewpoints that fly in the face of conventional portfolio-building wisdom." --<i>The Star-Telegram</i> <p>"A very comprehensive book which covers risk versus rewards, past performance versus future expected returns, market timing versus long term investing, and investing in individual stocks versus investing in mutual funds. He also discusses diversification, fees and expenses, and the tax consequences of investing. All of his recommendations are backed up with extensive research and presented in an easy-to-understand manner."--<i>Stockerblog</i></p>

<P><B>CHRISTOPHER L. JONES </B>is Chief Investment Officer and Executive Vice President of Investment Management for Financial Engines. Working closely with founder William F. Sharpe, Jones built and led the team of experts in finance, economics, and mathematics that developed the financial methodology for Financial Engines’ personalized investment advice and management services. Jones has led the investment management function at Financial Engines for more than a decade. He holds an MS in business technology, an MS in engineering-economic systems, and a BA in quantitative economics, all from Stanford University.</P> <P><B>FINANCIAL ENGINES, INC.,</b> is a leading provider of personalized investment advisory and management services to investors in workplace retirement plans. The company provides advisory services to more than 6.8 million employees, including workers at 109 Fortune 500 companies. In addition, Financial Engines manages more than $16 billion in defined contribution assets for individual employees as of year-end 2007. All advisory services are provided by Financial Engines Advisors L.L.C., an independent registered investment advisor and subsidiary of Financial Engines, Inc. Financial Engines does not receive compensation based on the investments it recommends.

<P>The key to good investment decisions is making informed choices. And while you cannot predict the future, it is possible to create investment strategies that can maximize your chances of success. In <i>The Intelligent Portfolio</i>, author Christopher Jones shows you how this can be accomplished.</P> <P>Written with the thoughtful investor in mind, <I>The Intelligent Portfolio</I> draws upon the extensive insights of Jones and Financial Engines—a leading provider of investment advisory and management services founded by Nobel Prize-winning economist William F. Sharpe—to reveal the time-tested institutional investing techniques that individuals can use to help improve their investment performance. Throughout these pages, Financial Engines’ Chief Investment Officer, Christopher Jones, uses state-of-the-art simulation and optimization methods to demonstrate the often-surprising results of applying modern financial economics to personal investment decisions. By illustrating the realistic range of possible investment outcomes, Jones skillfully reveals how the decisions you make today can impact your financial future. <P> <P>Challenging conventional wisdom that often leads both novice and experienced investors astray, <I>The Intelligent Portfolio</I> builds from basic intuition on how financial markets function to practical tips on evaluating investment trade-offs and real-world advice on selecting investments to better reach your goals. <P>Along the way, you’ll be introduced to the proven principles—a mix of common sense and counterintuitive concepts—that will put you in a better position to succeed, including: <UL><LI>Recognizing the link between risk and reward</LI> <LI>Leveraging the wisdom of the market</LI> <LI>Minimizing losses due to investment fees</LI> <LI>Avoiding the risks of stock picking</LI> <LI>Selecting funds using relevant forward-looking criteria</LI> <LI>Understanding how to realistically fund financial goals</LI> <LI>Investing tax-efficiently</LI> <LI>And much more …</LI></UL> <P>In addition to the information outlined throughout this book, you’ll also receive a fee waiver for a one-year investment advisory account at FinancialEngines.com, so that you may apply what you’ve learned here to your own investment endeavors. <P>Through simple explanations of powerful investment ideas and real-world examples that bring them to life, <I>The Intelligent Portfolio</I> reveals what you need to know when making personal investment decisions. With this book as your guide, you’ll quickly discover how you can effectively implement the strategies that institutional investors have known for decades—helping you achieve a brighter financial future.

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