1 Introduction to markets and portfolios
2 What is an ‘edge’ over the markets – and do you have it?
It is hard to pick the right moment
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!
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 non-investment eggs in one basket
Reducing tax has a large impact on long-term returns
Paying too much in fees destroys asset growth
Implementation of the rational portfolio
4 The minimal risk asset – safe, low-risk returns
Buy government bonds in your base currency if credit quality is high
Consider diversifying even the very low risk that your domestic government fails
What will the minimal risk bond earn you?
5 World equities – increased risk and return
Only buy world equity index trackers
The advantage of diversification
Expected returns: no promises, but expect 4–5% after inflation
Understanding the risk you take to get returns
Don’t assume that markets always bounce back
Diversification and the false sense of security
7 Adding other government and corporate bonds
Adjusting the rational portfolio
The rational portfolio allocations
Return expectations of the rational portfolio
Special case: if you want a lot of risk
8 Thinking about non-portfolio assets
9 What is omitted from your rational portfolio and why
Avoid investments that require an edge or those you already have exposure to
Residential property – don’t do it unless you have an edge
Private investments (or ‘angel’ investing)
Part 3 Tailoring and implementing the rational portfolio
10 Financial plans and the risks we take
A few ways to think about portfolio allocations
Do you need a financial adviser?
Believing in an edge can be expensive
Tax and the rational portfolio adjustment
12 Products and implementation
Total expense ratio tells you the cost of owning the product
The best ETFs: liquid, tax efficient and low cost
Trading is expensive and pulling the trigger can be nerve wracking
Part 4 Other things to think about
Defined contribution pension plans
How could 2008 and 2009 have happened?
15 A wish list aimed at the financial sector
Enhanced independent comparison sites
A For the brave: portfolio theory and the rational investor
D Adding government bonds to the rational portfolio
E Adding corporate bonds to the rational portfolio
F Asset classes left out of the rational portfolio
G Portfolio risk when adding government and corporate bonds
H Tax considerations for the rational portfolio