MARKET CRASHES CAN RUIN EVERYTHING, IF YOU′RE NOT ADAPTIVE
You think your portfolio is diversified, your investment returns will mirror what′s been observed through history, and your retirement is secure.
It may not be.
It probably won′t.
It probably isn′t.
Adaptive Asset Allocation can help. Building on a strong philosophical and research–driven foundation, the book demonstrates how a potent combination of global diversification, risk management, and alternative sources of returns can deliver steady performance regardless of economic and market environment.
Praise for ADAPTIVE ASSET ALLOCATION
"The ReSolve crew at their best Those enlightened advisors who understand the power of active asset allocation and risk management should read this book."
Mebane Faber, Author of The Ivy Portfolio and Global Asset Allocation
"This book is relevant and recommended for investors who wish to learn more about harvesting factor premia."
Jason Hsu, PhD, Co–Founder and Vice Chairman, Research Affiliates
"This book is dense with novel insights earning it a prominent place on my own financial bookshelf."
Doug Short, PhD, Advisor Perspectives
"Adaptive Asset Allocation merges empirical analysis and common sense to illustrate fundamental lessons in financial markets. The book has something for everyone: from retail investors to financial professionals. Read it!"
Wesley R. Gray, PhD, Alpha Architect
PART I THE PHILOSOPHY OF SUCCESSFUL INVESTING 1
CHAPTER 1 The Most Important Concepts in Wealth Management 5
CHAPTER 2 The Narrative Is Reality 11
CHAPTER 3 Tightly Grouped Arrows Nowhere Near the Bull s–eye 15
CHAPTER 4 What Is Gestalt? 19
CHAPTER 5 Measuring the Relative Value of Portfolios 23
CHAPTER 6 The Whole Is Greater than the Sum of Its Parts 27
CHAPTER 7 Our Process Is a Financial Gestalt 29
PART II SAVING AND WITHDRAWING FROM PORTFOLIOS 31
CHAPTER 8 Beware of Those Pesky Volatility Gremlins 33
CHAPTER 9 It s Not Just the Destination, It s Also the Journey 37
CHAPTER 10 In a Perfect World 39
CHAPTER 11 Home on the Range 41
CHAPTER 12 Timing Is Everything 43
CHAPTER 13 Longevity Risk 47
CHAPTER 14 Plan for the Worst, Hope for the Best 49
CHAPTER 15 Sequence of Returns for Savers 53
CHAPTER 16 Individual Rate of Return for Savers 57
CHAPTER 17 Sequence of Returns for Retirees 59
CHAPTER 18 Do You Feel Lucky? 63
PART III CURRENT HIGH VALUATIONS MEAN LOWER FUTURE RETURNS 65
CHAPTER 19 A Simple Model to Forecast Equity Market Returns 67
CHAPTER 20 Implied Future Returns over the Next 20 Years 73
CHAPTER 21 How Do We Do It? 75
CHAPTER 22 Forecasts 80 Percent More Accurate than Always Assuming Long–Term Averages 81
CHAPTER 23 Roller Coasters Are for Amusement Parks 83
CHAPTER 24 The Last Five Years Have Been a Triumph for the Ostriches 87
PART IV AN INVESTMENT FRAMEWORK FOR STABILITY, GROWTH, AND MAXIMUM INCOME 89
CHAPTER 25 A Word about Asset Allocation 91
CHAPTER 26 The Optimization Machine 93
CHAPTER 27 Garbage In, Garbage Out 95
CHAPTER 28 All We Know Is That We Know Nothing 103
CHAPTER 29 If We Know How Assets Should Behave 107
CHAPTER 30 A Structurally Diverse Investment Universe 119
CHAPTER 31 If We Can Estimate Volatility 121
CHAPTER 32 If We Can Estimate Volatility and Correlation 125
CHAPTER 33 If We Can Estimate Volatility, Correlations, and Returns 129
CHAPTER 34 Summary of the Optimization Machine 133
CHAPTER 35 Building to Adaptive Asset Allocation 135
CHAPTER 36 Integration of Adaptive Asset Allocation 141
PART V WHY YOU SHOULD TRUST THE RESEARCH 145
CHAPTER 37 The Usefulness and Uselessness of Backtests 147
CHAPTER 38 Tactical Alpha and the Quantitative Case for Active Asset Allocation 155
CHAPTER 39 Sensitivity of Safe Withdrawal Rates to Longevity, Market, and Failure Risk Preferences with Implications for Asset Allocation 181
CHAPTER 40 Winning by Not Losing. Or, Bootstrapping to Estimate Risk 203
Final Thoughts 207