The SEC established these requirements to protect the average investor from
some of the worst and most risky investments in the world. The problem is, these
investor requirements also shield the average investor from some of the best
investments in the world, which is one reason why rich dad’s advice to the average
investor was, “Don’t be average.”
Market efficiency prevails when many investors are willing to depart from maximum
diversification, or a passive strategy, by adding mispriced securities to their portfolios in
the hope of realizing abnormal returns. The competition for such returns ensures that prices
will be near their “fair” values. Most managers will not beat the passive strategy on a riskadjusted
basis. However, in the competition for rewards to investing, exceptional managers
might beat the average forecasts built into market prices....
Though some pension funds – mostly larger, more sophisticated investors - are able to invest at the
riskier end of the spectrum (i.e. in start-up, venture capital type projects focusing on clean tech and other
innovations), this will only ever constitute a small percentage of their portfolios. The broad mass of
pension funds will be more interested in lower risk investments (i.e. in deployable renewables etc.
Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With ofﬁces in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Finance series contains books written speciﬁcally for ﬁnance and investment professionals as well as sophisticated individual investors and their ﬁnancial advisors.
This book not only does an outstanding job of introducing basic bond concepts, but also introduces the reader to more sophisticated investing strategies. Sharon Wright does a fantastic job demystifying a subject many people ﬁnd intimidating—this book is not only understandable, but also entertaining and fun. —Brian M. Storms, President, Prudential Investments Ms. Wright has produced an excellent, easy-to-read guide for the novice bond investor. The book is well organized and allows its readers to identify and focus in on the security types most suitable for them....
The increasing globalisation of financial markets led companies in many countries to apply
from 2005 the IFRS principles. The main goal of IFRS is to safeguard investors by achieving
uniformity and transparency in the accounting principles. One of the most challenging aspects
of the IFRS rules is the accounting treatment of derivatives, a challenge that has strengthened
the relationship between risk management and accounting.
In addition to testing for the presence of smart money, the disaggregated na-
ture of our fund f low data allows us to examine two key hypotheses with respect
to mutual fund investor behavior. Specifically, we are in a position to compare
the quality of fund selection decisions made by individual and institutional
investors, and likewise to compare fund buying and selling decisions.
When considering demand side factors, we find that wealthier countries, measured by GDP per
capita, and countries with a more educated population have a larger mutual fund sector. These effects are
particularly pronounced for the equity sector, which may require a higher level of investor sophistication.
Internet penetration is also positively related to the size of the mutual fund sector, but it is highly
correlated with the other demand size variables.
The smart money hypothesis states that investor money is “smart” enough
to f low to funds that will outperform in the future, that is, that investors have
genuine fund selection ability.
1 Research into smart money in the mutual fund
context was initiated by Gruber (1996). His aim is to understand the continued
expansion of the actively managed mutual fund sector despite the widespread
evidence that on average active fundmanagers do not add value.
An investor in a forex fund should be sophisticated enough to understand the risks associated
with forex trading. Many investors would be interested in forex funds if they had the
opportunity. Because advertising of the fund and any other non-personal communications are
prohibited, and the media has touted the risks over the benefits, investors must be sought in more
direct and creative ways. A trader may find that in addition to family and close friends, many
colleagues and casual acquaintances may be potential investors.
This environment could change if the downward shift of yield curve continues. Anecdotal
evidence suggests that institutional investors are becoming more sensitive to changes in
financial market conditions and therefore are increasingly interested in higher-return
generating assets and more sophisticated styles in fund management. Indeed, the fall in the
short term interest rate since last August appears to have been gradually affecting investors’
behavior. Clients’ requests for daily liquidity have decreased at the margin. ...
Another argument why public capital markets can create incentives to reduce the
informativeness of earnings in specific situations is based on earnings targets. Beatty et al.
(2002) argue that small investors in stock markets are more likely to rely on simple
heuristics such as earnings targets than fairly sophisticated private investors (e.g., banks),
which makes public firms more likely to engage in earnings management to exceed targets.
Similarly, public firms may manage earnings to meet or beat capital market expectations as
expressed in analyst forecasts.
As business leaders look for the best places to locate operations, raise capital, and source talent and ideas, prudence demands that they invest wisely throughout the world. To be successful with their geographic strategy, however, they must build a portfolio that reflects a sophisticated understanding of five underlying fundamentals. Successful investors recognize the wisdom of holding a diversified portfolio. The approach isn’t failsafe—the recent downturn destroyed value across the board—but it’s usually a sensible way to earn stable returns while limiting risk.
(BQ) Investments (8th edition) - Zvi Bodie, Alex Kane, Alan J. Marcus, is intended primarily as a textbook for courses in investment analysis. This text will introduce you to major issues currently of concern to all investors. It can give you the skills to conduct a sophisticated assessment of current issues and debates covered by both the popular media as well as more-specialized finance journals. Whether you plan to become an investment professional, or simply a sophisticated individual investor, you will find these skills essential.
(BQ) In the 8th Edition, we have further extended our systematic collection of Excel spreadsheets that give tools to explore concepts more deeply than was previously possible. These spreadsheets are available on the Web site for this text, and provide a taste of the sophisticated analytic tools available to professional investors.
The Commission should follow the same path here: begin with a prohibition, gain experience,
and ultimately consider development of a detailed rule that would promote comparability of
performance figures through the imposition of standardized methodologies. Private funds may argue
that the general anti-fraud provisions in Section 206(4) and Rule 206(4)-8 are sufficient to protect the
“sophisticated” accredited investors that are targeted by the advertisements.