Book Review: Upside Downside
Upside, Downside
Simple Rules of Risk Management for the Smart Investor
Written by Ron Dembo and Daniel Stoffman
Rule #1 - Know what you own: most investors don't. Ignorance is costly. Mutual funds are "products" that cost money to maintain unlike stocks or ETF: all can go up or down but mutual funds have fees.
Rule #2 - Forecasts are guaranteed to be wrong - use multiple scenarios and ensure your regret with the worst case scenario is acceptable to "you". Forecasts by famous experts fails "very" often.
Rule #3 : anticipate regret - look forward never backwards and use realistic benchmarks.
Rule #4 : Buy portfolio insurance - derivatives when appropriate to minimize catastrophic loss. Cap your downside then maximize your upside.
Simple Rules of Risk Management for the Smart Investor
Written by Ron Dembo and Daniel Stoffman
Rule #1 - Know what you own: most investors don't. Ignorance is costly. Mutual funds are "products" that cost money to maintain unlike stocks or ETF: all can go up or down but mutual funds have fees.
Rule #2 - Forecasts are guaranteed to be wrong - use multiple scenarios and ensure your regret with the worst case scenario is acceptable to "you". Forecasts by famous experts fails "very" often.
Rule #3 : anticipate regret - look forward never backwards and use realistic benchmarks.
Rule #4 : Buy portfolio insurance - derivatives when appropriate to minimize catastrophic loss. Cap your downside then maximize your upside.
posted by financeblog at
5/26/2006 09:03:00 PM
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