Smart Portfolios: A Practical Guide to Building and Maintaining Intelligent Investment Portfolios (Robert Carver, 2017)

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  • Geometric means: consistent return that gives the same final account value
  • Standard deviation: a measure of how dispersed some data is around its average
  • Gaussian normal distribution: bell curve
  • Sharpe ratio: measure the risk-adjusted returns of an asset, the higher the better
  • Type of costs: brokerage fees, taxes, annual management fees, other fund management fees, execution costs, trading costs inside funds, initial costs, holding costs, rebalancing costs
  • Relative momentum is 100% invested even when prices are falling, absolute momentum holds cash on hand when market is falling
  • Smart beta: fully optimised, equal weighting, volatility parity, risk parity, maximum diversification, maximum variance, handcrafted, market cap weighted
  • Portfolio maintenance: annual review, reacting to external events, period portfolio reweighting, tax implication
  • Portfolio repair: emergency diversification > cut costs > get your asset allocation right > get your emerging / developed, regional and country allocation right > get your equity sector (and bond type and credit) allocation correct > consider individual shares or funds


Asset classes

Traditional equities

  • Developed equities
  • Emerging equities
  • Regions
  • Countries
  • Sectors
  • Individual equities


Equity-like alternative

  • Private equity & venture capital
  • Real estate
    • Infrastructure
    • Real assets
    • Asset-backed securities
  • Commodities (ex precious metal)
    • Agricultural
    • Energies
    • Non-precious metals
  • Equity-like hedge funds
    • Equity neutral
    • FX carry
    • Fixed income relative value
    • Short volatility


Bonds

  • Traditional bonds
  • Developed
  • Emerging
  • Regions
  • Countries
  • Type
  • Maturity and credit


Bond-like alternatives

  • Private debt
  • Peer-to-peer lending
  • Infrastructure, real assets and asset backed securities
  • Hedge funds with long bias in bonds


Genuine alternatives

  • Standalone, managed futures
  • Insurance-like
    • Safe haven currencies
  • Precious metal


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