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Reducing the Risk of Black Swans: Using the Science of Investing to Capture Returns with Less Volatility Paperback – April 30, 2014
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Top Customer Reviews
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.
Investing is not a science; it is an art.Read more ›
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.
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.
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.
Most Recent Customer Reviews
Easy to read. Some duplicate information from previous books of his. Learned more about small and value, using Monte Carlo analysis and the advantages of core fundsPublished 6 days ago by mwh
Very Short - This “book” has 55 “pages” of main text plus 30 more “pages” in four appendices. But instead of a standard 35 lines per page, it only has 20 lines per page. Read morePublished 2 months ago by Michael Schatzki
Excellent book for those interested in advanced topics in portfolio design. My only complaint is that the book is too short.Published 3 months ago by Dale East
This book has a nice review of efficient frontier investing and shows how you can reduce volatility for the same gain. This is straight forward mean-variance analysis. Read morePublished 4 months ago by Michael
Have read dozens of books on investing but this book really makes you think about risk in a new way. Short and powerful readPublished 4 months ago by adam jackson
New investors should not order this book - it's too short and concepts are introduced too quickly to really sink in. Read morePublished 9 months ago by Inept
Not exactly a handholding book. If you're looking for specifics on portfolio construction look elsewhere. Otherwise this is a useful manual on philosophy and approach. Read morePublished 12 months ago by Byron Kay
As other reviews have stated, this book is brief. It dispenses with the fluff and gets straight to the point. Read morePublished 13 months ago by yogiyoda
I have all Larry's books and make it a habit to convert his online interviews and articles in pdf format and save in Kindle to read multiple times. Read morePublished 14 months ago by Rodger Frego