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

ISBN-10: 1576603105
ISBN-13: 9781576603109
Edition: 2008
List price: $29.95 Buy it from $4.74
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Book details

List price: $29.95
Copyright year: 2008
Publisher: John Wiley & Sons, Incorporated
Publication date: 11/1/2008
Binding: Hardcover
Pages: 320
Size: 6.50" wide x 9.50" long x 1.00" tall
Weight: 1.342
Language: English

Larry E. Swedroe graduated from New York University with an MBA in finance. He is the author of "What Wall Street Doesn't Want You to Know, Rational Investing in Irrational Times," and "The Successful Investor Today," Swedroe lives in St. Louis, Missouri, where he is a principal in the firm of Buckingham Asset Management.

Acknowledgments
Introduction
A Travel Guide to Alternative Investments
Modern Portfolio Theory
The Good, the Flawed, the Bad, and the Ugly
The Good
Real Estate
Historical Returns and Risk: U.S. Real Estate, U.S. Equities, and International Equities
The Diversification Benefits of REITs
Benefits of Diversification: Sample Portfolios
Asset Location and Real Estate
Recommended Investment Vehicles
International Real Estate
DRW, RWX, and WPS
DFA International Real Estate Securities Portfolio
Tax Considerations
The Wrap-Up on International REITs
Your Home and the Asset Allocation Decision
Wrap-Up on the Home as an Investment
Wrap-Up on Direct Ownership
Summary
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
Inflation Risk
Price Risk
Interest Rate Risk
TIPS: Pros and Cons
Pros
Cons
Allocating Between Real and Nominal Return
Fixed-Income Assets
A Shifting Allocation Approach
Developing a Strategy
Implementation
A Shifting Maturity Strategy
I Bonds
Summary
Commodities
Correlation with Stocks, Bonds, and Inflation
Event Risk
A Risk-Reduction Tool
Portfolio Efficiency
Gaining Exposure to Commodities
Mutual Funds: QRAAX and PCRIX
Commodity-Related ETFs
Commodity-Related ETNs
CTAs
The Argument Against Investing in Commodity Producers
The Equities of Oil Producers
Implementation
Summary
International Equities
Emerging Markets Equities
Correlations
Sample Portfolios
The Risks of Investing in Emerging Markets
Small-Cap and Value Stocks
Recommended Vehicles
Wrap-Up: Emerging Markets
International Small-Cap Stocks
Sample Portfolios
Recommended Vehicles
Summary
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
Stable-Value Funds
Unique Risk and Return Characteristics
Investment Portfolios
Risks
Costs
Restrictions
Returns Change Slowly Over Time
Cash Flows Can Affect Returns
Summary
The Flawed
High-Yield (Junk) Bonds
Explaining the Low Correlation
Is Higher Yield Worth Higher Risk?
The Importance of Equity Risk
Hybrid Securities and Asset Allocation
Evidence Supported by Theory
Do High-Yield Bonds Have a Role?
Illiquid Securities
Other Negative Characteristics
Distribution of Returns Matters
High-Yield Bonds and Efficient Frontier Models
Inflation Risk
Asset Location
The Need for Diversification
The Historical Evidence
Vanguard High-Yield Corporate Fund
More Efficient Alternatives
Summary
Private Equity (Venture Capital)
Origins
The Attraction
The Historical Evidence
Characteristics of Private Equity Returns
Venture Capital Versus Publicly Traded Securities
Inefficient Diversification
Bias in the Data
Perception Versus Reality
Private Equity's Role in a Portfolio
Nonmonetary Explanations for Private Equity Investing
Summary
Covered Calls
Taxes Matter
Transactions Costs
An Alternative Strategy
Summary
Socially Responsible Mutual Funds
Defining SRI
Rapid Growth
Does Socially Responsible Investing Come at a Price?
The "Price" of Principles
Summary
Precious Metals Equities
Risk
Returns
Correlations
The Hedging Value of PME
Positive Attributes of PME
Other Considerations
Implementing the Strategy
Summary
Preferred Stocks
Long Maturities
Risks and Rewards of Long Maturities
Call Risk
Credit Risk
Long Maturities and Call Risk
Dividend Suspension
Preferential Treatment for Corporate Buyers
Other Considerations
Tax Advantages
Summary
Convertible Bonds
The Realities of Convertible Bonds
Considerations
Shifting Asset Allocation
Asset Location
Complexity
Summary
Emerging Market Bonds
Risks
Returns
Correlations
Potential Positives
Additional Considerations
Summary
The Bad
Hedge Funds
Exclusive Nature
Why Hedge Funds Aren't Mutual Funds
Facts Versus Fantasies
Hedge Fund Risks
Wisdom and Experience, or Hope and Hype?
The Cost of Folly
How High an Alpha Does a Hedge Fund Need?
How Funds of Funds Increase Hurdles to Outperformance
The "Ill-Logic" of Hedge Funds
Long-Term Capital Management
The Death of Genius
LTCM's Downfall: The Tyranny of Market Efficiency
Risk Versus Uncertainty
Fooled by Randomness
Summary
Leveraged Buyouts
Summary
Variable Annuities
Deferred Variable Annuities
Tax-Deferred Growth of Earnings
The Life Insurance Component
Ability to Annuitize
Other Negative Features
Are VAs Really That Bad?
Sold or Bought?
The Art of Deception
Variable Immediate Annuities
How Payments Are Determined
The Purpose of Immediate Annuities
Possible Reasons to Buy a Variable Annuity
1035 Exchanges
Other Considerations
Summary
The Ugly
Equity-Indexed Annuities
Caveat Emptor
Minimums That Aren't Minimums
Penalties for Early Withdrawal
Tax Inefficiency
Summary
Structured Investment Products
Mondo National Bank Principal Protection
Notes: Product Features
More Efficient Alternatives
A Closer Look at Hypothetical FRATS
Why Such "Attractive" Terms?
More Efficient Alternatives
Being Careful Out There
Summary
Leveraged Funds
The Proof Is in the Pudding
Summary
Final Thoughts
Notes
Glossary
Recommended Reading
Sources of Data
Index

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