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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

4.4 out of 5 stars 42 customer reviews

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Editorial Reviews

About the Author

Larry E. Swedroe is a principal and the Director of Research for the BAM Alliance. He has also held executive-level positions at Prudential Home Mortgage, Citicorp, and CBS. Swedroe frequently speaks at financial conferences throughout the year and writes the blog "Wise Investing" at CBSNews.com.
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Product Details

  • Paperback: 102 pages
  • Publisher: Buckingham (April 30, 2014)
  • Language: English
  • ISBN-10: 0615992978
  • ISBN-13: 978-0615992976
  • Product Dimensions: 5.5 x 0.2 x 8.5 inches
  • Shipping Weight: 3.2 ounces (View shipping rates and policies)
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (42 customer reviews)
  • Amazon Best Sellers Rank: #484,059 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By David Merkel on July 23, 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.
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Format: Paperback Verified 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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Format: Paperback Verified 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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Format: Paperback Verified 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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Format: Kindle Edition Verified 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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