Asset Allocation: Balancing Financial Risk

by Roger C. Gibson

Book Overview

This text provides a comprehensive overview of the capital market theory behind asset allocation as well as systematic guidelines for designing and implementing appropriate asset allocation... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0071478094
• ISBN13: 9780071478090
• Release Date: December 2007
• Publisher: McGraw-Hill
• Length: 366 Pages
• Weight: 1.53 lbs.
• Dimensions: 1.1" x 6.5" x 9.3"

Customer Reviews

Most solid advice on asset allocation ever

I had to read this book when I was taking a course to get a CIMA designation. I thought the book would be dullsville. But to the contrary, his strategies when tested are nothing short of amazing. To move away from the simple stock bond mix that every other book pimps out, is brave, but more importantly, he is right. Since reading the book I have obtained as many of his writings as possible. If you take the advice in this book and implement it, it will create a low stress, high return strategy. Good near term and long term advice. I will look to by more of this book to give to others. BEST BOOK ON ASSET ALLOCATION I HAVE EVER READ.

Very important read on diversification.

There are many ways to look at a portfolio, thus a long-term investment strategy, so there are many ways a book's author can add value to the portfolio-making process. Graham adds it through the analysis of stock-level capital appreciation, Malkiel adds it through the deep understanding of the overall market, Siegel adds it through the analysis of the power of time, Edleson adds it through the analysis of persistent equity acquisition, Bogle adds it through the analysis of portfolio implementation, Bernstein adds it through the analysis of an individual investor's psychological background. Yet, IMHO, Gibson is the only one who truly adds value to the portfolio-making process through the analysis of the mechanics of high-level asset allocation. Every investor should read this book to understand the portfolio development process in general, and the rewards of multiple-asset-class investing in particular. Gibson's is the only book I found that very clearly and with due emphasis explains that, contrary to common sense, a portfolio including non-top performers for a period can actually outperform a single top-performer for the same period, and that a portfolio ignoring a worst-performer for a period can actually be penalized and underperform portfolios that intentionally include it. In short, you might not have to time the market and/or always hold only the winners to actually do better than most of the winners themselves, and with less volatility. No other author makes that point as well as Gibson (with Bernstein coming up a somewhat distant second), and no other author makes it a point to consider commodities as a building block of an aggressive portfolio. The only problem I have with this book is what other reviewers have already mentioned: the book, at times, leaves you yearning (if that's the right word...) for more information. For example, I would like to have seen more examples of model portfolio performance vs. various fixed-income asset allocations ("taming" volatility through the degree of diversification vs. loading up blind on fixed-income), a more thorough discussion of rebalancing (Gibson suggests "once a year", Bernstein tries to ride trends and suggests "once every 2 to 3 years"), a more thorough discussion of market cap and investing style impacts on modeled asset classes (micro-caps, value- oriented indexes, etc.) Other than that, this book is worth every penny paid for it, and every minute spent studying it.

What your investment advisor should be doing.

There are many things to like about this book. The emphasis is on providing investment advisors with the information on asset allocation they need to connect successfully with clients. The only real flaw I see in the book is the watering down of material so that clients can understand it. I understand the necessity of doing this but it does leave open the door for dishonesty of the car salesman variety. Every investor even comtemplating using an investment advisor or even a broker should read this book from cover to cover. If he/she hears anything from the selected advisor that deviates much at all from what is here he/she should run not walk out the door. Perhaps the most important contribution of the book is the emphasis on the interaction of portfolio components to produce higher returns than undiversified or underdiversified portfolios. Gibson uses the Commodities Index as one of the portfolio components along with the EAFE, S & P 500, and REITs to show this. This index component is available in practical form as the Oppenheimer Real Assets fund. If you have net investment assets that allow private money management this is not a problem as the money management firm can buy more than 1 million dollars worth and distribute it among the clients. If you do not qualify for a typical money management firm the mutual fund charges a 5.75% load thereby making rebalancing something of a problem. Perhaps infrequent rebalancing would work. Therein lies the problem with the book. Even though Gibson is as honest as the day is long, the information presented is designed to handle the clients expectations and fears. All kinds of techniques and information are presented most of it assuming very little brains from the people who made all that money ( all of whom we would normally be assured are brilliant not just at making money but in all aspects of their lives ). A,B,C,D are all presented but when portfolio design time comes E is recommended and not just due to tailoring to the individuals needs or risk tolerance. Gibson tells the reader that it is necessary to manage the clients expectations and to make the portfolio more like that of the clients friends or more in keeping with clients prior expectations and thereby more acceptable. This may be true. But Berstein does the same thing in The Intelligent Asset Allocator. His reasoning is a little different:many of the models primarily rely on data mining or make certain assumptions and he believes in the use of index funds almost exclusively. So Bersteins portfolios also rely a great deal on judgement. Both believe that tracking error from the S & P 500 may be an issue. When all is said and done this is very much an art form. It is also very much a sales technique albeit an important one. Nevertheless, both this book and The Intelligent Asset Allocator are required reading for any serious investor. Gibson's book also has the best discussion of client risk assessment I have seen.

Good jumping off point.

I found this books very useful. I've been trying to find an intelligent investing style. Read things like "The Intelligent Investor" by Graham and "A Random Walk Down Wall St." by Malkiel and found them dry and somewhat inaccessible. I much prefered Evans and Malkiel's "Earn More (Sleep Better) : The Index Fund Solution" (cheesy title) and Bernstein's "The Intelligent Asset Allocator". Both small and intelligible books. The only problem is they seemed to state the solution to a problem I didn't know. That's where Gibson's "Asset Allocation" I think fits in. It describes what the problem is when trying to invest well. He makes very good arguments on what you can expect and what you'll have to understand. Things that Berstein and Malkiel go into more depth but Gibson gives you the big picture. I started looking for the solution to a problem and found that the last piece I need was to know what the problem was. Gibson's book reads fast and it is interesting. It's well illustrated and is a great jump off point to all sort of other books.

GREAT BASIC BOOK ON ASSET ALLOCATION FOR INVESTMENT ADVISORS

Roger Gibson's book on Asset Allocation has always been the best basic book on the subject written for use by investment advisors. It is well-balanced between the technical issues and the emotional/psychological issues faced by clients. It is a book that challenges much of the "conventional wisdom" of the industry. Spending a few hours to read this book will be repaid many times over.