Académique Documents
Professionnel Documents
Culture Documents
March 3, 2009
Subject/Market
Investing, individual and institutional
Description
Individual and institutional investors have been badly burned in the last decade. Many are
on the verge of ruin because of poor investment practices based on bad advice from Wall
Street and lax regulatory oversight. This book explains what went wrong and how to
invest in the future to ensure a reliable cash flow.
The book is finished; the Contents and Chapter Outline are included here; (161 pages in
Microsoft Word using 12pt Times New Roman font, single-spaced; 40,000 words, 50
images, 22 tables). Title: “Investing for Cash Flow”. SubTitle: “Individual and
institutional investors must change their investment style to survive financial crises”.
Author
Economist and Certified Financial Planner™ who has spent 30 years on Wall Street …
Managing Director at Morgan Stanley; EVP and CIO at Fidelity Investments; on the
Board of Prudential Securities responsible for their merger with Wachovia.
George R. Fisher
5 Pier 7
Charlestown, MA 02129-4225
Cell 917-514-8204
Fax 215-689-4880
email george@georgefisher.com
Similar books
Asset Allocation Roger C. Gibson
Common Sense on Mutual Funds John C. Bogle
The Four Pillars of Investing William Bernstein
The Intelligent Investor Benjamin Graham
Unconventional Success David F. Swensen
Winning Investment Strategy Larry E. Swedroe
• Introduction
The purpose of investing is to produce a reliable cash flow.
• Modern Portfolio Theory (MPT)
A primer on the basics of portfolio construction.
• Process
The steps to take
1. Choose the asset classes
2. Active management or indexing?
3. Specific security, closed-end, mutual fund, ETF?
4. Pick the specific investments
5. Choose the asset allocation
6. Manage the investment portfolio using Portfolio Rebalancing
7. Produce a Reliable Cash Flow
8. Become a Lobbyist
• Appendixes
Bibliography
Disclaimers
Index
Chapter Outline
• Introduction
The purpose of investing is to produce a reliable cash flow. Of the thousands of
books and conferences on investing not one reflects on this vital fact: every
investor needs to produce a reliable cash flow. This applies to charitable
foundations, university endowments and municipal pension funds just as much as
it does to individuals. While chasing yields during bull markets, most investors
forget that come the inevitable downturn they will still be required to cover their
expenses.
Starting in 2007, this lesson was brought brutally home (again) to the whole
world. Every single major financial institution failed its clients and the regulators
were entirely absent. Successful investing seems like a bad joke during such a
time but it always does when the market turns down.
Investors need to take an entirely new approach going forward to establish their
independence from the financial services industry and to focus on producing the
one thing that ultimately matters: reliable cash flow.
• Process
The steps to take: there is a logical sequence of steps every investor must take to
construct a portfolio that will produce a reliable cash flow year in and year out.
The basics are drawn from Modern Portfolio Theory and avoid any reliance on the
financial services industry. There is nothing revolutionary in all of this, except for
the fact that very few investors have actually followed these precepts. Much of
this process involves following the advice of Benjamin Graham in 1939, updated
for modern circumstances & products and with the benefit of 70 more years of
experience and academic study upon which to draw.
8. Become a Lobbyist
Capitalism may not be dead but it has become anesthetized recently. For
over a decade the risk-free US Treasury has produced a better total return
than any equity market. The risk/return tradeoff of MPT has not been
working.
This is upside down and it is the result of the twin failures of the financial
services industry and Governmental oversight. If equity investing does not
start producing a better return than Treasuries, what rational person would
invest? Investors must insist that certain basic principles be enforced going
forward or investing will wither.
• Appendixes
o Geometric vs. Simple Average
How are investment returns measured?