The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio [Hardcover]

Frank Armstrong III (Author)

Book Description

Publication Date: April 22, 2002 | ISBN-10: 0814406769 | ISBN-13: 978-0814406762 | Edition: 1st

This title replaces "voodoo investing" methods with proven real-world strategies and provides a thorough education in financial economics. It explains how to allocate assets to achieve specific goals and simplifies difficult subjects with clear language and straight-shooting advice.

Editorial Reviews

From Publishers Weekly

Geared to the skittish novice investor who may have been spooked by the September 11 fallout, The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio guides readers through the basics of investing with a reassuring tone and a relatively conservative long-term strategy. Frank Armstrong III, a former contributor to CNNMoney, explains how to assess risk, choose a mutual fund and interpret the advice of financial soothsayers. He weighs the relative advantages of mutual fund alternatives (like real estate investment trusts and variable annuities) and offers specific tips for parents worried about college tuition.
Copyright 2002 Cahners Business Information, Inc.

From Library Journal

According to Armstrong, when it comes to investing in "Mother Market," there is no free lunch, and beware of the "performance fairies, voodoo priests, shamans, witch doctors, false profits and charlatans" who offer high returns but shrug their shoulders when the stock market goes south. A financial adviser and founder of Investor Solutions, Inc., Armstrong advises average investors to take responsibility for educating themselves, even when they use the help of stockbrokers. He offers some insight into how brokerage houses operate and cautions investors about reading popular money magazines and listening to what "Wall Street wants you to know." When it comes to stock selection, Armstrong recommends abandoning outmoded ideas. For example, he does not believe that timing the market and past-manager performance are criteria for making sound investments. Instead, he suggests replacing old thinking with new strategies for assessing risk tolerance, focusing more on asset allocation, and considering various types of mutual funds as a way to build a diverse portfolio. Combined with the additional resources listed, this book offers the average investor an adequate background in how to formulate a meaningful investment plan. Recommended for public libraries. Bellinda Wise, Nassau Community Coll. Lib., Garden City, NY
Copyright 2002 Cahners Business Information, Inc.

See all Editorial Reviews

Product Details

• Hardcover: 288 pages
• Publisher: AMACOM; 1st edition (April 22, 2002)
• Language: English
• ISBN-10: 0814406769
• ISBN-13: 978-0814406762
• Product Dimensions: 9.1 x 6.1 x 1.3 inches
• Shipping Weight: 1.4 pounds
• Average Customer Review: 4.3 out of 5 stars  See all reviews (16 customer reviews)
• Amazon Best Sellers Rank: #2,108,070 in Books (See Top 100 in Books)

More About the Author

Frank Armstrong, III, CLU, CFP(tm), AIFA(R) is the founder and principal of Investor Solutions, Inc. (www.InvestorSolutions.com), a fee-only registered investment advisor. He holds a B.A. in Economics from the University of Virginia, and designations as Chartered Life Underwriter (CLU), Accredited Investment Fiduciary Analyst (AIFA) and a Certified Financial Planner (CFP) (tm). He has more than 35 years' experience in the securities and financial services industry.

He joined Connecticut General Life in 1973 as a dual registered life, health and annuity agent, and securities representative. In 1983 he co-founded and served as NASD Principal of Moring-Armstrong & Company, Inc., a Registered Investment Advisor, and Broker-Dealer Representative of Royal Alliance.

In 1993 Mr. Armstrong founded Investor Solutions, Inc. to provide investors with fiduciary level objective advice and leading edge investment management. He is a pioneer in integrating academically driven portfolio management techniques with institutional best practices for individual investors around the world. Frank is the Chairperson of the Investor Solutions Investment Committee.

Investor Solutions, Inc. serves individuals, trusts, pensions, not for profit organizations and one foreign government. Currently the firm has discretion or advises assets approaching $400 million.

A prolific author, his bestselling book The Informed Investor was cited by Business Week as one of the best investment books of 2002. His initial publication, Investment Strategies for the 21st Century, is one of the first books ever published and serialized on the internet in multiple languages. His most recent book just published January 2009, The Retirement Challenge: Will You Sink or Swim has received rave reviews. Rescue Your Retirement was released in May 2009. Investor Solutions also hosts a retirement resource website www.Sink-Swim.com.

Frank Armstrong was also a featured columnist on Morningstar.com for a number of years and is a frequent contributor to The CPA Journal, Accountant's World, and Physicians Financial News, CNNfn.com, and AccountsWorld.com. He has also appeared on "CNN Headline News", "Your Money with Stewart Varney", "PBS Morning Business Report", and Net Financial News. He has also been featured on numerous radio shows around the country including CNBC, Money Life with Chuck Jaffee, and Public Radio stations. Frank is widely quoted in the media and lectures nationwide on principles of investment management.

Frank is certified by the Florida Bar to teach a four hour course for CE credit covering development of fiduciary law, practice standards, and ethics for fiduciaries.

Mr. Armstrong has served a number of times as an Expert Witness in arbitrations, mediations and Federal lawsuits involving fiduciary standards, suitability, asset allocation, risk control, portfolio construction, sustainable withdrawal rates, and market returns.

Frank also served as Chief Investment Strategist for Direct Advice and has served on several boards of directors including the Advisory Board of Florida International University's (FIU) International MBA Program and the United Way of Miami Dade Professional Advisory Board and currently contributes professional education courses to Nova University.

Mr. Armstrong is a Vietnam veteran and former Air Force pilot, and instructor. Mr. Armstrong flew 250 combat missions in Southeast Asia. He currently lives in Coconut Grove with his wife, Gabriele, and enjoys boating, deep sea fishing, scuba diving, windsurfing, reading and travel.

Francis C. Armstrong III, CLU, CFP(R), AIFA(R) (year of birth 1944)

Formal Education and Licenses:

BA in Economics, University of Virginia, Charlottesville, VA
Chartered Life Underwriter (CLU)
CERTIFIED FINANCIAL PLANNER TM Practitioner (CFP(R))
Accredited Investment Fiduciary Analyst (AIFA(R))
NAPFA-Registered Financial Advisor
General Securities Representative Licensed through the NASD (1983-1994)
General Securities Principal Licensed through the NASD (1983-1994)

Business Background:

President & Founder, Investor Solutions, (1993-Present)
Managed Account Services, Inc. d/b/a Investor Solutions, President, (1993 - Present)
Principal, Moring-Armstrong & Company, Inc. (1983-1995)
Managing Executive, Royal Alliance Associates, Inc. (1983-1994)

Books by Frank Armstrong:

Investment Strategies for the 21st Century
The Informed Investor
The Retirement Challenge: Will You Sink or Swim?
Save Your Retirement

Customer Reviews

Most Helpful Customer Reviews

36 of 36 people found the following review helpful:

4.0 out of 5 stars Practical Introduction To Asset Allocation, August 18, 2002

By 

L. Masonson (Monroe, New York USA) - See all my reviews
(REAL NAME)   

This review is from: The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio (Hardcover)

For the uninitiated investor, The Informed Investor, provides a solid grounding in the basics of investing in index funds and mutual funds using an asset allocation approach. Armstrong does not provide earth shattering revelations or trade secrets of the markets, but does provide a methodical way of evaluating your investment needs and then showing you how to put together a practical mutual fund-type diversified portfolio.

Most individual investors have no game plan or written investment goals. They may have a lofty goal of obtaining 10 - 20% annual returns over the long-term. Now that we've experienced a significant bear market-which may get worse - the investor needs to sit down and realistically assess his/her financial needs and use a time-tested investing approach.

Armstrong's book offers a systematic approach to understanding the investment scene. He covers long-term trends and returns in the various investment categories from 1926 - 2000 and shows that stocks were the way to go - especially small company stocks. He then provides a 32-page informative discussion on assessing the risk of investing - a subject that many investors don't know too much about. Unfortunately, most investors pay little attention to this vital subject and end up losing their shirts because they don't understand the elements of risk.

Armstrong then covers modern portfolio theory, the efficient frontier, and the overwhelming importance of proper asset allocation (e.g., stocks, bonds, and cash) compared to individual stock selection or market timing. Other topics covered include: whether managers add value (not really), benchmarks, controlling costs and taxes, and some investing horror stories.

Armstrong provides interesting statistics on building a portfolio first with an allocation of 60% in the S&P 500 and 40% in long-term bonds from 1975- 2000. This portfolio provided and annual return of 14.43% with a standard deviation of 11.42%. He then provides different portfolio mixes and ends with a portfolio of investment vehicles that provide an annual return of 14.71% with a standard deviation of 9.09% -- a significant improvement in lowering its riskiness. Armstrong provides guidelines in investing for retirement using a global equity exposure and bonds.

Once the allocation is determined the next step is to actually select the investment vehicles. Here, Armstrong focuses on selecting mutual funds, closed end funds unit investment trusts, REITs, variable annuities, ETFs, and index funds. He points out the differences of using investment advisors or doing it yourself.

There is an appendix with a sample investment policy statement for individuals that can serve as a model for most individuals with appropriate adjustments, as necessary.

In conclusion, Armstrong provides a practical, easy-to-implement asset allocation approach using no-load mutual funds and other vehicles. For individuals that need an advisor, he provides helpful hints in selecting one. The new and average investor will greatly benefit from the wisdom provided in this book.

51 of 54 people found the following review helpful:

5.0 out of 5 stars A born again informed investor, April 22, 2002

By 

Richard C. Zimmerman MD, MBA (Portland, OR USA) - See all my reviews

This review is from: The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio (Hardcover)

I have been a practicing orthopedic surgeon for the last 45 years. As you might expect, colleagues who are overly confident, high-risk takers surround me. In my years at the surgeon's lunch table, I have listened to a multitude of schemes; systems; sure things known only to a select few; or guaranteed ways to become a millionaire by forty. Physicians, especially surgeons, are a target audience for financial salesmanship because they are high risk takers; quick decision makers; have excess income to invest; they need a large pot of capital to retire because the day they quit work there is no more business to bring in money; and finally because they have gone to school for such a long time they believe that they are well educated in all fields.

In 1989 I returned to the University of Oregon to study for an MBA. I have always loved going to school. During my years in school, two events came together that would became my epiphany for handling any investments in the future. The first was a course in corporate finance; the second was Frank Armstrong and the monthly writing he was publishing online for AOL.
The textbook: Principals of Corporate Finance Third edition, authored by Richard Brealey and Stewart Myers; published by McGrawHill had a page with two unlabeled charts (Pg. 283). Both charts looked the same, yet the legend indicated that one was the Standard & Poor's Index for a 5-year period; the other recorded the results a weekly coin-toss for 5 years with a .25% drift to the positive. The reader was left to decide which was which. The chapter listed several sources for the statistical concepts illustrated by the two charts. I found the two listed below to be fascinating.

1.Theorie de La Speculation, Gauthier-Villars, Paris, 1900. Reprinted in English The Random Character of Stock Market Prices, M.I.T. Press, Cambridge, Mass 1964

2.The Analysis of Economic Time-Series, Part I. Prices, Journal of the Royal Statistical Society 1953

At the same time I read the articles Mr. Armstrong was publishing on-line. These essays would become the basis of his book The Informed Investor. His writing was a delight to read. Frank's articles were witty, full of allegories, and his explanations of a rather complex statistical theory were understandable.

Even if you do not enjoy reading books about investing, or market theory, The Informed Investor is fun to read because of the metaphors and imagery. You will recognize people you know who will fit perfectly with Franks descriptions of various investing personalities.

Personally, the biggest change The Informed Investor has brought to me is a lowering of my anxiety level. I no longer have to take Zantacs very time I look at the stock quotes. I no longer take part, or become upset, with the daily rehashing of the latest stock market tips. During the discussions at the surgeons' lunch table I now have a big smile and truly enjoy the conversation for just its entertainment value.

Someone once asked me: "If indexing is such a good idea, why doesn't everyone follow the strategy?" I said that I had no fear that this would happen because human greed would always combined with "I know more than the other guy" to perpetuate the random walk of the market place.

21 of 21 people found the following review helpful:

5.0 out of 5 stars Sound, successful, long-term investing, August 15, 2002

By 

"gwmesaaz" (Mesa, AZ USA) - See all my reviews

This review is from: The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio (Hardcover)

How does the disclaimer go, "Past performance is not necessarily a predictor of future returns?" If that is the case, how is an investor supposed to decide on any investment strategy? They all are based on "past performance." The key is to base your decisions on peer reviewed published research from the most respected financial scholars in the field. Frank Armstrong does just that in his book, "The Informed Investor."
In a relaxed conversational narrative, he presents a simple yet academically sound approach to investing. He offers evidence that dismisses the notion that stock picking is a skill and contends that stock-pickers add only additional costs, increased risk and lower returns when compared to appropriate indexes. Mr. Armstrong introduces the Nobel Prize winning concept of Modern Portfolio Theory, and how it is used to construct a portfolio that minimizes risk for a given level of return. He advocates controlling costs at every turn, including the use of low expense index mutual funds whenever possible and suggests ways to minimize the tax consequences of investing.
In the end you won't be left holding a basket of theory with no place to lay it all out. He answers the questions necessary to put together an investment plan. "How much do I need to accumulate if I need this much to live on in retirement? What assets and in what mix should I put in my portfolio? How do I raise or lower the risk in my portfolio and how might that affect return? How do I choose specific mutual funds? Who should I use for the custodian of my portfolio? How and when do I rebalance my portfolio? How much cash should I have as a minimum? How much can I safely withdraw after retirement and not run out in 20 to 30 years?"
From market timing to Motley Fool, it has taken me 15 years of reading and investing to understand that the approach of Frank Armstrong is the one I should have entrusted my financial future to all along. I have been following his advice for three to four years, through earlier publications, and have not been disappointed. Now, it's nice to have that advice in a single, clearly written book.