About the Book

Written by a high-profile investment adviser, this book reveals a practical portfolio management framework and new approach to portfolio construction based on four key market forces: macro, fundamental, technical and behavioural. It is an insight that takes the focus off numbers, looking instead at the role of risk and behavior in finance. As we have seen with the recent finance meltdown, traditional portfolio management techniques are flawed. Investors need to understand those flaws and learn how to incorporate risk management and behavioral finance into their asset management strategies.

About the Author

Lukasz Snopek has been working for many years as a wealth manager and investment consultant in the private banking sector. His qualifications include a Master of Law and a Master's degree in Business Administration (HEC), the Swiss Federal Diploma for Experts in Finance and Investments and the International Wealth Manager Certificate (CIWM). Lukasz Snopek is also a corrector for the Swiss Financial Analysts Association and teaches portfolio construction and management at the Institut Supérieur de Formation Bancaire (ISFB) in Geneva

Table of Contents:
Foreword About the Author Acknowledgements Introduction Part I Investors and Risk 1 Basic Principles 1.1 Investors 1.2 Inflation 1.3 Choices for Investors in Terms of Investments 2 Measures of Risk 2.1 Volatility or Standard Deviation 2.2 Beta as a Measure of Risk 2.3 Value-at-Risk (VaR) 2.4 Investor Behaviour Towards Risk Part II Asset Classes and Their Degree of Risk 3 Asset Classes and Associated Risks 3.1 Money Market Investments 3.2 Bonds 3.3 Stocks 3.4 Real Estate 3.5 Commodities and Metals 3.6 Private Equity 3.7 Other Asset Classes 4 Particular Forms of Investment within Asset Classes 4.1 Hedge Funds 4.2 Structured Products 4.3 Options 5 Classification of Asset Classes According to their Degree of Risk 5.1 Selected Criteria for Classification of Asset Classes 5.2 Classification of the Different Asset Classes Part III The Market 6 Market Efficiency 6.1 Weak Form Market Efficiency 6.2 Semi-strong Form Market Efficiency 6.3 Strong Form Market Efficiency 6.4 Conclusion on Market Efficiency 7 Fundamental Analysis 7.1 Discounted Cash Flow 7.2 Relative Measures 7.3 Strategic Analysis 7.4 Criticism of Fundamental Analysis 8 Technical Analysis 8.1 The Three Fundamental Principles of Technical Analysis 8.2 Conclusion on Technical Analysis 9 Investment Approach Based on "Psychological Principles" Part IV Valuation of Financial Assets 10 Valuation of Money Market Investments 11 Valuation of Bonds 12 Valuation of Stocks 13 Valuation of Options 14 Valuation of Real Estate 15 Valuation of Commodities and Metals 16 Conclusion on Valuation Part V Three Practical Approaches to Security Selection: Buffett, Graham and Lynch 17 Warren Buffett's Value Investing Approach 18 Benjamin Graham's Approach 18.1 The Defensive Investor 18.2 The Enterprising Investor 18.3 Security Analysis 18.4 The Margin of Safety Concept 19 Peter Lynch's Approach 19.1 Stock Categories 19.2 The Perfect Company According to Lynch 19.3 Earnings and Earnings Growth 19.4 Selection Criteria 19.5 Conclusion on Peter Lynch's Approach Part VI Behavioural Finance 20 Investors in Behavioural Finance 21 Heuristics and Cognitive Biases 21.1 Information Selection 22 Investment Approach Based on Behavioural Finance 22.1 Momentum Strategy 23 Criticism of Behavioural Finance Part VII Forecasting Market Movements 24 Investment Approach Based on Probabilities 25 Random Walk Theory 26 Market Timing 27 Macroeconomic Investment Approach 27.1 State Interventions 27.2 The Major Macroeconomic Forces 27.3 Sectorial Analysis 27.4 Peter Navarro's Approach 27.5 Criticism of the Macroeconomic Approach Part VIII Modelling Market Movements 28 Suggested Investment Approach 29 The Forces 29.1 The Macroeconomic Force 29.2 The Fundamental Force 29.3 The Technical Force 29.4 The Behavioural Force 29.5 The Luck Force 30 The Forces' Strength 31 The Beauty of the Approach Part IX Portfolio Construction and Management 32 Modern Portfolio Theory According to Markowitz 32.1 David Swensen's Approach 33 The Capital Asset Pricing Model (CAPM) 34 The Minimum Variance Portfolio 35 Value-at-Risk (VaR) 36 Discretionary Mandates 37 The Dollar-cost Averaging Approach 38 Our Portfolio Construction Method 38.1 Basic Principles of Portfolio Construction 38.2 The Portfolio Construction Process 38.3 A Practical Example of Portfolio Construction Part X Attractiveness of The Different Asset Classes 39 Asset Classes 39.1 Money Market Investments 39.2 Bonds 39.3 Stocks 39.4 Real Estate 39.5 Commodities and Precious and Industrial Metals 40 The Four Forces of the Investment Model 40.1 The Macroeconomic Force 40.2 The Fundamental Force 40.3 The Technical Force 40.4 The Behavioural Force 41 Table Summarizing the Different Forces 42 A Final Example: Analysis of the Subprime Crisis Conclusion Bibliography Index