Success in a Low-Return World Using Risk Management and Behavioral Finance to Achieve Market Outperformance

Following the Great Financial Crisis, the S&P 500 advanced more than 17 percent annualized from February 2009 through June 2018. At this pace, a buy-and-hold investor in the stock market would see their money double in 5 years and more than triple in 7 years. This performance has lulled many investors into thinking that such above-average returns will be with us into perpetuity. Unfortunately, this may not be the case. Far more likely, the return an investor may receive from the stock market will be slightly better than half the long-term average, about 5% to 7%.

Most investment portfolios hold a greater allocation to stocks than any other class of investment asset. Massive amounts of wealth were created from the bull market since early 2009 providing institutions and individuals with a rising tide that lifted their portfolios above their goals without much effort. The environment of the future stands to be far less accommodating, so finding suitable investments (other than U.S. stocks) that can achieve the necessary returns (or make up the shortfall) will be a critical component of achieving goals in years to come. This book will explore those solutions.

Table of Contents

PART ONE: CHALLENGES IN INVESTING

Chapter 1: The Future Isn’t What it Used to Be   

Chapter 2: An Obsolete Fundamental Philosophy

Chapter 3: As a Group, Professional Investors Are the Market

Chapter 4: The Specifics of Market Efficiency

Chapter 5: Fund Manager Fees

Chapter 6: To Err Is To Be Human. To Make a Behavioral Error Is To Be a Human Investor

Chapter 7: How Regulations Impact Investment Managers

Chapter 8: Performance Doesn’t Tell the Whole Story

PART TWO:  SOLUTIONS

Chapter 9: Intuition

Chapter 10: Focus on Asset Allocation

Chapter 11: Indexing

Chapter 12: Active Share and Private Equity

Chapter 13: Momentum

Chapter 14: Smart Beta

Chapter 15: Risk Management

Chapter 16: Buy-Write

Chapter 17: Put Selling

Chapter 18: The Options Income Index

Chapter 19: Portable Alpha

Chapter 20: Epilogue

Michael J. Oyster, CFA, CAIA is an investment strategist, researcher and creator of the Options Income Index. He began his professional investment career in 1994 with options advisory firm Schaeffer’s Investment Research. As Schaeffer’s senior quantitative analyst, he conducted detailed analysis of options and volatility metrics while managing product offerings including an S&P 500 Index options spread strategy.

Upon joining Fund Evaluation Group, LLC (FEG) in 1999, Michael began researching traditional, hedge fund and options-based investment strategies as well as conducting and publishing independent research. As FEG’s Chief Investment Strategist, he served as a thought leader and frequent presenter on markets and the economy. His first book, Mission Possible, was published in 2005, and he was twice commissioned by the Chicago Board Options Exchange (Cboe) to conduct research on and provide summary analysis regarding suites of their proprietary options indexes. He serves as a board member on the Freestore Foodbank Foundation and on the Lincoln W. Pavey Educational Foundation.