The Only Guide to Alternative Investments You'll Ever Need : the Good, the Flawed, the Bad, and the Ugly

336 Pages·2009·1.86 MB·English

by  Swedroe

Table of Contents

Praise
Other titles from BLOOMBERG PRESS
Title Page
Copyright Page
Dedication

List of Tables
Acknowledgements
Introduction
A TRAVEL GUIDE TO ALTERNATIVE INVESTMENTS
MODERN PORTFOLIO THEORY
THE GOOD, THE FLAWED, THE BAD, AND THE UGLY

PART 1 - The Good
Chapter 1 - Real Estate

HISTORICAL RETURNS AND RISK: U.S. REAL ESTATE, U.S.
EQUITIES, AND INTERNATIONAL EQUITIES
THE DIVERSIFICATION BENEFITS OF REITS
ASSET LOCATION AND REAL ESTATE
RECOMMENDED INVESTMENT VEHICLES
INTERNATIONAL REAL ESTATE
YOUR HOME AND THE ASSET ALLOCATION DECISION
SUMMARY

Chapter 2 - Inflation-Protected Securities

REAL OR NOMINAL RETURN BONDS: WHICH ARE RISKIER?
TIPS: DOING THE MATH
CORRELATIONS WITH EQUITIES AND INFLATION
INFLATION, PRICE, AND INTEREST RATE RISK
TIPS: PROS AND CONS
ALLOCATING BETWEEN REAL AND NOMINAL RETURN FIXED-
INCOME ASSETS
A SHIFTING ALLOCATION APPROACH
A SHIFTING MATURITY STRATEGY
I BONDS
SUMMARY

Chapter 3 - Commodities

CORRELATION WITH STOCKS, BONDS, AND INFLATION
EVENT RISK
A RISK-REDUCTION TOOL
PORTFOLIO EFFICIENCY
GAINING EXPOSURE TO COMMODITIES
THE ARGUMENT AGAINST INVESTING IN COMMODITY
PRODUCERS
IMPLEMENTATION
SUMMARY

Chapter 4 - International Equities

EMERGING MARKET EQUITIES
CORRELATIONS
SAMPLE PORTFOLIOS
THE RISKS OF INVESTING IN EMERGING MARKETS
SMALL-CAP AND VALUE STOCKS
WRAP-UP: EMERGING MARKETS
INTERNATIONAL SMALL-CAP STOCKS
SUMMARY

Chapter 5 - Fixed Annuities

HOW LONG DO PAYMENTS CONTINUE?
DETERMINANTS OF PAYMENT SIZE
THE BENEFITS OF ANNUITIZATION
MORTALITY CREDITS MAKE IT POSSIBLE
WHEN ANNUITIES CAN BE THE RIGHT CHOICE
EVIDENCE FROM ACADEMIA
WHEN TO PURCHASE A FIXED ANNUITY
INFLATION-INDEXED IMMEDIATE ANNUITIES
SUMMARY

Chapter 6 - Stable-Value Funds

UNIQUE RISK AND RETURN CHARACTERISTICS
INVESTMENT PORTFOLIOS
RISKS
COSTS
RESTRICTIONS
RETURNS CHANGE SLOWLY OVER TIME
CASH FLOWS CAN AFFECT RETURNS
SUMMARY

PART 2 - The Flawed
Chapter 7 - High-Yield (Junk) Bonds

EXPLAINING THE LOW CORRELATION
IS HIGHER YIELD WORTH HIGHER RISK?
THE IMPORTANCE OF EQUITY RISK
DO HIGH-YIELD BONDS HAVE A ROLE?
THE NEED FOR DIVERSIFICATION
THE HISTORICAL EVIDENCE
MORE EFFICIENT ALTERNATIVES
SUMMARY

Chapter 8 - Private Equity (Venture Capital)
ORIGINS
THE ATTRACTION
THE HISTORICAL EVIDENCE
CHARACTERISTICS OF PRIVATE EQUITY RETURNS
VENTURE CAPITAL VERSUS PUBLICLY TRADED SECURITIES
PERCEPTION VERSUS REALITY
PRIVATE EQUITY’S ROLE IN A PORTFOLIO
NONMONETARY EXPLANATIONS FOR PRIVATE EQUITY
INVESTING
SUMMARY

Chapter 9 - Covered Calls

TAXES MATTER
TRANSACTIONS COSTS
AN ALTERNATIVE STRATEGY
SUMMARY

Chapter 10 - Socially Responsible Mutual Funds

DEFINING SRI
DOES SOCIALLY RESPONSIBLE INVESTING COME AT A PRICE?
SUMMARY

Chapter 11 - Precious Metals Equities

RISK
RETURNS
CORRELATIONS
THE HEDGING VALUE OF PME
POSITIVE ATTRIBUTES OF PME
OTHER CONSIDERATIONS
IMPLEMENTING THE STRATEGY
SUMMARY

Chapter 12 - Preferred Stocks
LONG MATURITIES
CALL RISK
CREDIT RISK
LONG MATURITIES AND CALL RISK
DIVIDEND SUSPENSION
PREFERENTIAL TREATMENT FOR CORPORATE BUYERS
OTHER CONSIDERATIONS
TAX ADVANTAGES
SUMMARY

Chapter 13 - Convertible Bonds

THE REALITIES OF CONVERTIBLE BONDS
CONSIDERATIONS
SHIFTING ASSET ALLOCATION
ASSET LOCATION
COMPLEXITY
SUMMARY

Chapter 14 - Emerging Market Bonds

RISKS
RETURNS
CORRELATIONS
POTENTIAL POSITIVES
ADDITIONAL CONSIDERATIONS
SUMMARY

PART 3 - The Bad
Chapter 15 - Hedge Funds

EXCLUSIVE NATURE
WHY HEDGE FUNDS AREN’T MUTUAL FUNDS
FACTS VERSUS FANTASIES
HEDGE FUND RISKS
WISDOM AND EXPERIENCE, OR HOPE AND HYPE?
LONG-TERM CAPITAL MANAGEMENT
SUMMARY

Chapter 16 - Leveraged Buyouts

SUMMARY

Chapter 17 - Variable Annuities

DEFERRED VARIABLE ANNUITIES
VARIABLE IMMEDIATE ANNUITIES
POSSIBLE REASONS TO BUY A VARIABLE ANNUITY
SUMMARY

PART 4 - The Ugly
Chapter 18 - Equity-Indexed Annuities

CAVEAT EMPTOR
MINIMUMS THAT AREN’T MINIMUMS
PENALTIES FOR EARLY WITHDRAWAL
TAX INEFFICIENCY
SUMMARY

Chapter 19 - Structured Investment Products

MONDO NATIONAL BANK PRINCIPAL PROTECTION NOTES:
PRODUCT FEATURES
MORE EFFICIENT ALTERNATIVES
A CLOSER LOOK AT HYPOTHETICAL FRATS
BEING CAREFUL OUT THERE
SUMMARY
Chapter 20 - Leveraged Funds

THE PROOF IS IN THE PUDDING
SUMMARY

Final Thoughts
Notes
Glossary
Recommended Reading
Sources of Data
Index
About the Authors
About Bloomberg