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Asset Rotation: The Demise of Modern Portfolio Theory and the Birth of an Investment Renaissance

توضیحات

PRAISE FOR ASSET ROTATION

“If you have time to read only one investment book, this should be the one. It will forever change the way you think about investing.”
—Dr. BOB FROEHLICH, bestselling author and Retired Vice Chairman of Deutsche Asset Management

“Matthew Erickson has set a new standard in formulating the optimal portfolio strategy in this post-crisis world. In essence, a guide-post in staying ahead of the curve, maintaining a disciplined 30,000 bird’s-eye view, and blocking out the noise that often gets investors into trouble.”
—DAVID ROSENBERG, Chief Economist and Strategist, Gluskin Sheff + Associates

“Successful investing often comes down to three things—a sound investment strategy, an unemotional, disciplined implementation of that strategy, and the ability to ignore short-term noise that forever distracts investors from their true long-term goals. Matt’s book provides readers with the tools to accomplish all three.”
—JAMES P. O’SHAUGHNESSY, author of What Works on Wall Street and Chairman & CEO, O’Shaughnessy Asset Management LLC

“Erickson goes against the trend by going with the trend in Asset Rotation. A fresh, timely read for all investors, Erickson lays the groundwork by exploring timeless investing principles such as the importance of controlling losses and the value of low-cost investing. Challenging conventional portfolio theory, Erickson shows how investor psychology and the burgeoning ETF market form the ingredients necessary to produce dynamic trading strategies designed to produce higher returns with lower risk.”
—JIM BESAW, Chief Investment Officer, GenTrust Wealth Management

“What distinguishes Matt’s book from most others is how he provides the reader the tools, process, and examples necessary to operate an investment portfolio using tactical strategies. Matt has provided the reader with what any reader craves—explanations and answers to untold truths. This is by far one of the best investment strategy books I have ever read.”
—CHRISTOPHER NEUDECKER, JD, MBA, EdD in-progress, Chief Investment Officer and Investment Portfolio Manager

“Great read! Matthew manages to convey a complicated message into a simple to understand investment theory. From understanding the need and the process to carrying the reader through implementation and execution, this book delivers the necessary tools to establish the investment discipline necessary to be a successful investor.”
—ROBERT ROMAN, President, Managing Partner, Legacy Private Client Group


MATTHEW P. ERICKSON is the CEO and Chief Investment Officer for Renaissance Capital Management, LLC, a boutique investment management firm located in Metropolitan Detroit, Michigan. Concurrently, Matt also serves as the CIO for Legacy Planning & Associates, Inc., an affiliated financial planning firm based out of Grand Rapids, MI. Among Matt’s primary functions is the day-to-day oversight and portfolio management of the firms’ proprietary investment portfolios.

Each of the Renaissance Portfolios are managed in accordance to Matt’s proprietary systematic and tactical methods of asset management, blending together three stylistically different approaches to investment management, including tactical managed ETF portfolios, opportunistic individual stock portfolios, and traditional Modern Portfolio Theory based allocations with a “beta-rotation” overlay. By combining these three unique approaches into one overarching portfolio, investors are provided with a higher degree of diversification. Prior to starting his own asset management firm, Matt was a partner in a successful wealth management advisory practice at UBS Financial Services, overseeing more than $350 million in private client assets. Matt and his wife Jill currently reside in Canton, Michigan with their daughter Mackenzie and son Jacob.

Acknowledgments xi

Prologue: David & Goliath xiii

Preface: We Stand on the Precipice of an

Investment Renaissance xv

Chapter 1: taking the 30,000-Foot View 1

Where We Are Today

The Individual Investor 1

Ockham’s razor 3

Our Current economic Landscape 6

The Bottom Line 11

Chapter 2: When the paradigm shifts 13

Why What Worked in the Past May No Longer

Work in the Future

A primer on Modern portfolio theory 15

The treasury run 19

Losing Money in Bonds 29

The Bottom Line 32

Chapter 3: shooting stars 35

The Performance Realities of Mutual

Fund Ownership

The persistence of Manager performance 38

The Bottom Line 53

Chapter 4: Beyond the Stars 55

Suggestions for Investment Selection Criteria

The Cost of Investing 58

Identifying Risk 64

Assessing the Investment Environment 73

The Bottom Line 76

Chapter 5: The Landscape Has Changed 79

The Proliferation of the ETF

The ETF: What Is It? 80

A Brief History 83

The Use of ETFs in a Portfolio 86

The Bottom Line 94

Chapter 6: Challenging Convention 97

An Introduction to Asset Rotation

A Time-Tested Approach 106

The 2000s 108

The 1990s 110

The 1980s 112

The 1970s 113

The 1960s 114

The 1950s 115

The 1940s 117

The Great Depression 118

From the Great Depression to Today 119

The Bottom Line 121

Chapter 7: Building a Better Mousetrap 123

Advanced Asset Rotation

Building a Better Mousetrap 124

The 1990s 134

The 2000s 136

From 2010 to 2012 138

23 Years: 1999-2012 140

Going Toe to Toe with the Best 141

The Bottom Line 143

Chapter 8: Choose Your Own Adventure 147

Building Your Own Asset Rotation Portfolio

Choose Your Own Adventure 148

Additional Factors to Consider: Eligible Risk Assets 149

Additional Factors to Consider: Eligible Flight to

Safety/Fixed-Income Assets 159

Additional Factors to Consider: Criteria for Investment

Selection 163

Creating a Scoring System 165

Required Due Diligence 167

The Bottom Line 168

Chapter 9: The Anatomy of Change 171

Setting Appropriate Expectations

Benchmarking Success 172

The Four Seasons 175

When Equity Markets Rise 176

When Equity Markets Fall 177

When Equity Markets Move Sideways 180

When Equity Markets Move Sideways with Volatility 183

The Bottom Line 186

Chapter 10: Letting Go of Your Crutch 189

Integrating Asset Rotation into Your

Overall Approach

Citius, Altius, Fortius 190

Asset Rotation as a Core Approach 191

Baby Steps 195

Supplementing Either Equities or Fixed Income 195

Adopting a Core/Satellite Approach 198

The Bottom Line 200

Chapter 11: The Road Ahead 203

Real-World Solutions for a Changing Landscape

The Bottom Line 205

About the Author 207

Index 209