50 of 52 people found the following review helpful:
5.0 out of 5 stars
Two books in one, January 10, 2008
This review is from: Yes, You Can Supercharge Your Portfolio!: Six Steps for Investing Success in the 21st Century (Hardcover)
This is like two books in one. Depending on how you approach the financial markets, it's very likely at least one of them will help you a great deal.
Maybe because I retired at 56 after a perfectly ordinary job with a negligible pension, people ask me about investing. A week ago, I was asked by someone with more money than I what percentage of his portfolio he should invest in international stocks. My answer was that he should read the first 60 pages of this book (what I call "Book 1" out of 2). He wasn't asking the right question(s).
It is apparent that very few people know how to diversify their portfolios properly. ("Properly" to me means getting the return you require for the least volatility and risk.) The first 60 pages explain this in easy to understand language and provide lots of useful examples. In fact, I expect many people will latch onto one of the example portfolios and live more happily ever after. For people who really want detail, this isn't the right book - I suggest Roger Gibson's Asset Allocation (a new edition is just out, but be warned that if it's like the third edition, it is much more difficult reading than Supercharge).
"Book 2", the other two-thirds of Supercharge Your Portfolio, discusses how to construct a proper portfolio that meets the reader's individual needs (vs. the generic portfolios of "Book 1"). This is more complicated, as you'd expect, and requires a tool. The book uses the quantext tool, QPP, for its examples. Armed with the book and the tool (I did the free trial and now have it on order - I used to rely on a weaker tool on Fidelity's web site), I expect to be able to take my current portfolio, use my investing preferences, and improve my portfolio to perform at least a little better with less volatility. Remember, I depend on my portfolio for retirement.
Two more notes, sorry for the long review. This book does not address how to determine what your individual needs are - my current favorite here is Lucia's Ready, Set . . . Retire! However, Supercharge DOES encourage you to combine mutual funds and ETFs with individual stocks, which may help those who find mutual funds too boring to become both more successful while being adequately entertained.
The content is good overall and the content of "Book 1" is excellent. That said, this book seems less tightly written than the authors' earlier books and many of the analogies are downright awful. I will continue to recommend Supercharge to my friends, anyway.
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32 of 34 people found the following review helpful:
5.0 out of 5 stars
For anyone who wants to understand their investments as a whole (a portfolio), February 1, 2008
This review is from: Yes, You Can Supercharge Your Portfolio!: Six Steps for Investing Success in the 21st Century (Hardcover)
Ben Stein and Phil DeMuth are very good friends for the those of us working to get our finances ready to meet the obligations of the mature life. In their several books explaining various facets of our finances, they urge decisions and behaviors that are sound, practical, and in our long-term best interest. Most of us know full well that we aren't the next Warren Buffett and understand that active trading is for the professionals and costly to our future prospects. This wonderful book explains how you can build a great portfolio that provides best for what you need. That is, some folks want returns and can bear more risk, some are closer to retirement and need to lower their risk, others want income more than capital gains, and so forth.
The book opens with a TV show where Ben Stein and one of Jimmy Kimmel's friends picked investments. Stein and DeMuth use these portfolios and how they performed to tease out the basic principles of this book. Of course, Stein's did well and the other guy's did not. But it is WHY one performed well and the other did not that is the point of this book. It wasn't luck; it was statistics. Let me hasten to add that you do NOT need to be a statistician or even schooled in statistics to use the method Stein and DeMuth present or to read and enjoy the book. The few concepts they use are clearly and simply explained to the level required.
Let me also point out that this book will be very helpful to you even if you don't want to create and manage your own portfolio because it will help you become informed about what your financial adviser is suggesting, what to look out for, and what to ask about.
The book presents six steps and adds in a couple of special topics, two appendices, a glossary, an index, some info about the authors, and also points you to a few free websites that will be immensely helpful to you including the one run by the authors.
Step 1: Evaluate your needs. That is, pursuing maximum returns is not enough. You have to decide what you are after and develop the right portfolio to deliver that. Where you are in life, your present financial circumstances, and your goals will all influence the course of action that is BEST FOR YOU, not some financial planner or stockbroker.
Step 2: It's your whole portfolio that matters. Your investments will vary in their performance and it is the way they behave when taken as a whole that matters. If all your stocks go up or down at the same time you are in for a wild ride. However, if you can build a portfolio that delivers more consistent returns because some zig while others zag, well, now you are on to something. The authors show you how to do this in simple and pretty safe ways.
Step 3: Take on risk intelligently. The authors do a great job in explaining how to combine investments with a clear understanding of their individual and, what is more important, their combined risk versus return. If two portfolios have the same expected return, you will want to choose the one with lower risk, right?
Step 4: Diversify. This is not simply getting as many companies in your portfolio as possible. The authors show you how combining different sectors changes your risk-return balance. I found their explanation about supercharging your portfolio by carefully combining different balances of indexes to be especially interesting. Again, this is about getting more return for a similar risk exposure.
Step 5: Use the Monte Carlo Simulator to test drive your portfolio. The authors use the QPP simulator and explain why. The point is that by running tens of thousands of simulations on a portfolio you tease out its range of behaviors. This technique is quite important as you consider how to combine your portfolio. The authors caution you about spending too much time trying to fit historical data into a "perfect" portfolio. The future isn't going to be exactly like the past. What you are after is an understanding of the range of possible outcomes rather than predictions. The authors also point out that the more extreme the components you have in your portfolio the more suspect the outcomes of the simulator will be.
Stein and DeMuth then talk about how people use Bonds to alter their risk exposure and how you can sue other investments to similar effects with a likely better return. They also show you how to build your own simple hedge fund to balance your portfolio without having to be a high net worth investor. They also spend a chapter for people nearing or in retirement or other circumstance where they prefer income to capital gains return.
Step 6: Do a portfolio reality check. This is a series of common sense evaluations. For example, don't worry about maximizing a small return on $10,000 in savings while you have several times than in expensive credit card debt. The section on the value versus costs of rebalancing is quite interesting and important to consider.
Appendix A shows you how to simulate something like "Berkshire Hathaway" using substitutions for the pieces that you can't get on the market. This is an exercise not a recommendation. Appendix B takes you through a method to carefully correct a portfolio that is too concentrated in one investment (for example, your company stock).
This is an excellent and helpful book for anyone who wants to think responsibly about his or her investments in aggregate and I think it is something you should get, read, and think about. You should also consider these helpful books from Stein and DeMuth:
Yes, You Can Time the Market!Yes, You Can Become a Successful Income Investor! Reaching for Yield in Today's MarketYes, You Can Get A Financial Life!: Your Lifetime Guide to Financial PlanningYes, You Can Still Retire Comfortably!: The Baby-Boom Retirement Crisis and How to Beat ItReviewed by Craig Matteson, Ann Arbor, MI
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31 of 33 people found the following review helpful:
5.0 out of 5 stars
Stuff that every investor should know, October 29, 2007
This review is from: Yes, You Can Supercharge Your Portfolio!: Six Steps for Investing Success in the 21st Century (Hardcover)
First, let me acknowledge that I am not an unbiased reviewer. I am the author of the portfolio management software used for the examples in this book (more information at www.quantext.com). That said...
It is hard to believe but it has been about two years or so since I first sent Phil DeMuth a review copy of Quantext Portfolio Planner (QPP). Since then, he has become an avid user and I have had the pleasure to get to know Phil. We have spent quite a few hours discussing the key issues that investors and advisors need to understand, as well as how modern tools like forward-looking Monte Carlo analysis can dramatically improve how the vast majority of investors operate. We both believe passionately that investors are missing the most important piece of knowledge to effectively manage their money: taking a portfolio-focused approach to money management rather than trying to pick the next hot fund or stock. I was thrilled when Ben Stein and Phil decided to write a book about this topic---and especially because Quantext Portfolio Planner is used heavily in the book. If you want a clear and well-written approach to how to use modern methods to manage a portfolio, read this book! This book will be valuable to those who already use QPP as well as to the interested investor who simply wants to understand the best methods for managing his or her portfolio. The key issues revolve around using standard financial metrics to see if your portfolio is well-diversified and whether you are getting as much return as possible for the risk that you take on. Many investors think that they are diversified because they buy lot's of different funds. Not so! Rather than just buying a 'pie chart' allocation, this book explain how investors and advisors can rationally construct their best portfolios.
Note: I have written a much more detailed review that is published on SeekingAlpha:
http://seekingalpha.com/article/59991-book-review-stein-and-demuth-s-supercharge-your-portfolio
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