Books help you understand investing and the implement your strategy.
An important part of investing is having a basic knowledge of what you are doing. It is your money and your future wealth that are at stake so it is best not to enter the markets blindfolded.
Reading is therefore a highly valued routine for any investor. You should always be gathering new information and understanding, and with the internet, there are now so many resources available for the ones who are eager to learn more.
To better understand investing, and why risk parity investing strategies, such as the All Seasons Portfolio Strategy, are important, I have collected my 5 favorite books on the topic. These have all helped me better understand the importance of not being all out invested in stocks, but to diversify across asset classes.
Then you are prepared for black swan events – events that are unpredictable, have huge consequence and always are describable in hind sight – as described by author Nassim Taleb in his book. By adopting a strategy as promoted by Benjamin Graham in The Intelligent Investor or Bridgewater Associates’ The All Weather Retirement Portfolio, will help you prepare your portfolio for such great drawdowns on the stock market and to limit your losses. Just look at what happened to global stocks in the wake of the Covid-19 coronavirus.
Do you have any good reading tips on your own? Share them in the comment section at the bottom of the page for others to benefit.
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Balanced Asset Allocation
Alex Shahidi, the writer of Balanced Asset Allocation, is the co-founder of ARIS consultants, who manages that RPAR ETF – an ETF that follows the All Seasons Portfolio and Risk Parity strategy.
The conventional portfolio is prone to frequent and potentially devastating losses because it is NOT balanced to different economic outcomes. In contrast, a truly balanced portfolio can help investors reduce risk and more reliably achieve their objectives. This simple fact would surprise most investors, from beginners to professionals. Investment consultant Alex Shahidi puts his 20 years of experience advising the most sophisticated investors in the world and managing multi-billion dollar portfolios to work in this important resource for investors. You will better understand why nearly every portfolio is poorly balanced and how to view the crucial asset allocation decision from a deeper, more thoughtful perspective.
The concepts presented are simple, intuitive and easy to implement for every investor. Author Alex Shahidi will walk you through the logic behind the balanced portfolio framework and provide step-by-step instructions on how to build a truly balanced portfolio. No book has ever been written that discusses asset allocation in this light.
- Provides insights from a top-ranked investment consultant using strategies from the industry’s brightest minds
- Proposes a balanced asset allocation that can achieve stable returns through various economic climates
- Introduces sophisticated concepts in very simple terms
For those who want to better manage their investment portfolio and seek a more advanced approach to building a balanced portfolio, Balanced Asset Allocation: How to Profit in Any Economic Climate provides an in-depth treatment of the topic that can be put to use immediately.
With this book, you will learn about why different asset classes behave the way they do in different economic environments. For the investor interested in the All Seasons Portfolio strategy, I personally find that this book should be at the top of your reading list, so that you can better comprehend the value of diversification between asset classes.
The Permanent Portfolio: Harry Browne’s Long-Term Investment Strategy
An up close look at an investment strategy that can handle today’s uncertain financial environment
Market uncertainty cannot be eliminated. So rather than attempt to do away with it, why not embrace it? That is what this book is designed to do. The Permanent Portfolio takes you through Harry Browne’s Permanent Portfolio approach–which can weather a wide range of economic conditions from inflation and deflation to recession–and reveals how it can help investors protect and grow their money.
Written by Craig Rowland and Mike Lawson, this reliable resource demonstrates everything from a straightforward four-asset Exchange Traded Fund (ETF) version of the strategy all the way up to a sophisticated approach using Swiss bank storage of selected assets for geographic and political diversification. In all cases, the authors provide step-by-step guidance based upon personal experience.
* This timeless strategy is supported by more than three decades of empirical evidence
* The authors skillfully explain how to incorporate the ideas of the Permanent Portfolio into your financial endeavors in order to maintain, protect, and grow your money
* Includes select updates of Harry Browne’s Permanent Portfolio approach, which reflect our changing times
The Permanent Portfolio is an essential guide for investors who are serious about building a better portfolio.
Risk Parity Fundamentals
Discover the Benefits of Risk Parity Investing
Despite recent progress in the theoretical analysis and practical applications of risk parity, many important fundamental questions still need to be answered. Risk Parity Fundamentals uses fundamental, quantitative, and historical analysis to address these issues, such as:
- What are the macroeconomic dimensions of risk in risk parity portfolios?
- What are the appropriate risk premiums in a risk parity portfolio?
- What are market environments in which risk parity might thrive or struggle?
- What is the role of leverage in a risk parity portfolio?
An experienced researcher and portfolio manager who coined the term “risk parity,” the author provides investors with a practical understanding of the risk parity investment approach. Investors will gain insight into the merit of risk parity as well as the practical and underlying aspects of risk parity investing.
The Intelligent Investor
This timeless classic on investment strategy and diversification between asset classes is a must read in every investor’s collection.
Written by one of the sharpest investment advisers of the 20th century, Benjamin Graham has taught and inspired people all over the world to become better investors.
Graham was the mentor for Warren Buffett, one of the world’s most famous and successful investors, and he builds this book on his idea of value investing, the strategy he is considered the father for and the same strategy as Buffett has adopted in his iconic Berkshire Hathaway.
I’m sure that by absorbing these pages, you will learn valuable lessons to take the step towards becoming a better investor. Your future self will thank you dearly.
The Black Swan
I started reading this book just before the utbreak of the Covid-19 coronavirus, and I finished it in March when the virus had hit Europe hard. Cn you imagine that timing for me picking up this book? On the other hand, it really helped me understand the meaning with the book, when I had an actual black swan happening around while reading about the concept.
This book, by Nassim Taleb, explains how we cannot anticipate everything that will happen in the world and in the financial sector – there is simply too much information and too much we do not know about the future. Who could have anticipated the 9/11 terrorist attack, the 2008 financial crisis or the coronavirus outbreak of 2020? That is impossible, but therefore you have to prepare yourself and your portfolio for the eventual black swan. Even though we do not know what black swan will happen or when, we can be very certain that one day, one will come.
I took this as a sign that my choice in portfolio with the All Seasons Portfolio strategy was wise, and that if I would be completely invested in stocks, that would hurt me a lot. Instead, I have been better prepared for a black swan and a quick economic downturn by diversifying my assets.
If you haven’t done so already, you should read this book to broaden your understanding of the importance of diversification and preparation for the unknown. Of course it has been easy to be a stock investor the last 13 years without drawdowns, but now that a crash came, you better have been prepared, or you would have lost a lot of money.
While there are a great flora of books about investing on the stock market, there are very few good reads on how to invest in commodities.
As commodities play an important part of the All Seasons Portfolio Strategy, and gives you exposure to seasons of high inflation and high growth, it is wise to learn a little bit about how commodity investing works. As trading commodities are built entirely by futures contracts instead of physical assets, this adds another level of complexity when compared to stock market investing.
The best book about commodities is, hands down, Hot Commodities, written by Jim Rogers, a successful commodity trader and co-founder of the Quantum Fund. In this book, Rogers shares great advice for commodity trading and detailed tips on how to invest in this huge global market place.
With this great book, you will better understand how to trade in commodities like crude oil, or soft commodities such as coffee, wheat or sugar. You will enhance your knowledge about how the 7.5% commodity portion of your All Seasons Portfolio adds value.