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43 of 44 people found the following review helpful
on July 24, 2014
Format: Paperback
This is a very short book. I read the whole thing in 40 minutes. It has one main idea: what if you could create a less variable portfolio that returns as much as the traditional 60% S&P 500, 40% Barclays Aggregate blend? Wouldn't you want that?

Most of us would want that. I would want earning more at the same level of volatility as the market, but that is another matter.

The authors take us through a variety of backtests, showing us portfolios that did well in the past, if you had invested in them.

They show how investors could have done better by tilting their portfolios toward value socks, small stocks, and international stocks, eventually showing a portfolio invested 60% in 5-year Treasuries, and 40% in stocks that tilt small, value, and international.

Voila! Same returns, with less volatility than the 60% S&P 500, 40% Barclays Aggregate blend.

But there is a catch here. This is the past being amplified -- will the future be the same? Value stocks are undervalued on average, and small stocks outperform on average, but what if you are in an environment like now, where small stocks are overvalued, value is neutral to undervalued? Tilt to value, yes, but maybe don't tilt small.

Also, with yields so low on five-year Treasuries at 1.65%, that should be reflected into the future for the strategy, so maybe the amount of bonds should be reduced?

The biggest weakness that the book has, and this is true of many books, is that it follows a mean-variance framework. The market is far more volatile than a normal distribution, with crises happening far more frequently than a normal distribution would anticipate.

Quibbles

Investing is not a science; it is an art. Our principles are vague and subject to many forces beyond our recognition and control.

They make the rookie mistake of describing the calculation of long-term investment returns as a arithmetic mean (Page 16). Pros do a geometric mean, which calculates the continuously compounded average return of a buy-and hold investor.

On page 18, their explanation of correlation is weak. That said, even great publications like The Economist have blown that in the past, then using my explanation of correlation verbatim (back in the mid-90s).

Summary

This is a good book as it teaches you to tilt you portfolios to value and small companies on average. The person who would benefit most from this book is someone who wants to get more out of his investments, but doesn't want to spend a lot of time on it.
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16 of 17 people found the following review helpful
on May 24, 2014
Format: PaperbackVerified Purchase
Reducing the Risk of Black Swans (Swedroe & Grogan, 2014) is a winner. I have received the paperback version of this book and it makes for a great reading. With only 85 pages, it took me one afternoon to read the whole book. This is what I like about it: the format is easy to follow, it is easy to understand, and it is not packed with a bunch of senseless formulas designed to impress or frustrate the reader. Caveat emptor, for market timers, this is not your book; for those trying to make an easy buck in the market, this is not your book; for those in retirement or reaching retirement, this book is FOR you (Appendix D of the book is good for this group).

Appendix D (titled "Enough") caught my attention, this appendix is good for an investor with a low marginal utility of wealth, in other words, the investor has accumulated sufficient wealth and there is no need to continue taking "the risk that must be accepted in order to achieve expected return." At this point in the investing career, when going "from having enough to not having enough is unthinkable" the best course of action is to change to a plan designed to provide for some gains while preserving capital and preventing losses--this is what the Larry Portfolio (which is discussed in the book) is all about.

Thanks to Amazon for delivering my book on time, and thanks to YOU for reading my review.
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13 of 14 people found the following review helpful
on June 28, 2014
Format: PaperbackVerified Purchase
This book by Larry Swedroe takes indexing to an advanced level. The reader will learn to diversify by risk factors beyond just Beta. it's a quick read and gets right to the point. I gave it 4 stars only because the retail investor can only access the funds recommended through an investment advisor.
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6 of 6 people found the following review helpful
on October 8, 2014
Format: PaperbackVerified Purchase
This book is extremely short. I was shocked. It is physical small and double or triple spaced type. It really is a pamphlet. It would be a chapter or two in a standard investment book. It is something Dr. Bernstein would either give away or charge a $1 as an e-book. I have a feeling it was written as a freebie for their clients and prospective clients.

Having said that the content is good. Just not much off it. But the idea is to explain a technique to reduce risk and increase expected return through a low beta high tilt portfolio (the Larry Portfolio). The problem is that this book is not for a beginner. However, an advanced person will probably not get a lot new from the book.

I've learned a lot from Larry through his books (such as The only Guide to a Winning Investment Strategy You'll ever need). Also from his prolific posts on the Bogleheads website. I recommend you try those first.
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4 of 4 people found the following review helpful
on May 25, 2014
Format: Kindle EditionVerified Purchase
This book clearly and concisely presents an investment concept that may be useful to many people who seek to reduce their investment portfolio downside risk. I would recommend the book to anyone. It may be especially useful to people about to transition (or recently transitioned) from accumulation to decumulation and who want to stay on the market but who also avoid a major sequence of return risk early in their retirement.

The book starts with a good explanation of the portfolio goals, then the concepts on which it is based, and then clearly illustrates one way to implement it. Importantly, it focuses on the concept and does not pretend to offer "the one" perfect portfolio that everyone should use. The book presents the concept and illustrations so that one can then think about how one might apply the concept to their own needs.

And what really makes this even more useful is that the author (Larry Swedroe) also participates in excellent,public conversations on the Boglehead forums [...] answering questions and expanding on the book so one can better understand how to tailor the concept to their own portfolio, if they want to.

Highly recommended
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9 of 11 people found the following review helpful
on May 17, 2014
Format: Kindle EditionVerified Purchase
Larry Swedroe walks the reader through the development of an investment portfolio that reduces the likelihood of very low returns. He starts with a conventional 60:40 portfolio and develops a low equity/high fixed income portfolio with similar average returns but much less volatility. Along the way he parries likely accusations of insufficient diversification (no large cap, no midcap, no small growth) by showing that his portfolio includes equity, size, value, and term risks, which are the factors which largely determine portfolio returns. The book also challenges the reader to explore his investment makeup to determine his capacity for maintaining this high tracking-error portfolio over the long term. Order this book and, at the very least, you won't be perplexed in the future when you begin to hear references to the "Larry Portfolio".
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6 of 8 people found the following review helpful
on May 18, 2014
Format: Kindle EditionVerified Purchase
I own several of Larry Swedroe's books and find them all to be great reads. He is definitely one of my two or three favorite financial authors and this book was no exception. For those who already understand the importance of passive/rule-based investing (index funds, etc.), this book takes you to the next level. Larry shows how an investor can construct a portfolio that should work to limit your downside yet not greatly sacrifice upside. Basically provide the investor with a smoother, less volatile ride. Are there guarantees? Of course not and I would run away if there was. However, Larry arms the investor with the latest in academic finance research, explains the difference between basic beta and factor investing, and shows how portfolios with tail-reducing benefits can be constructed. Importantly, he addresses the crucial concept of tracking error regret along with other behavioral tics. This book makes a great compliment to his more broad based efforts like Right Financial Plan and Bond Strategy.
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2 of 2 people found the following review helpful
on September 7, 2014
Format: PaperbackVerified Purchase
An excellent explanation about how diversification done smartly (by math and statistics) may move your portfolio away from the "left tail" bad returns. This is nothing new - but concisely states what investors should be doing instead of throwing darts to select their investments. A thin book that provides the essence of what you should be doing when you invest. And yes, you can get those DFA index funds (or Vanguard indexes work - but not as broadly constructed as DFA).
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6 of 8 people found the following review helpful
on May 23, 2014
Format: Paperback
Reading Larry's (and Kevin Grogan's) latest little book reminds me all over again how lucky I am to have been investing according to his insights ever since he published his first, ironically entitled "Only Guide To a Winning Investment Strategy You'll Ever Need."

Black Swan builds on the essentials by refining the timeless, evidence-based wisdom on how to build and maintain an effective and efficient, globally diversified portfolio. Here, Larry and Kevin show us how to further max out the powers of market risk diversification by shoring up the safer, bond portion of the portfolio while amping up the return factors to be captured over on the equity side.

Ingenious! It's one of those "Why didn't we think of this sooner?" sort of concepts. That's Larry for you. As he likes to say, investing is simple, but it's not easy.
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2 of 2 people found the following review helpful
Format: Kindle EditionVerified Purchase
I wish all books were written this way ! A crisp, data-backed, no-nonsense guide to understand how you can improve your returns without increasing your risks or keep your returns the same but reduce your risks or in short, how to construct the "Larry Portfolio".
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