Andrew L. Berkin - Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today

Copyright 2016 by Larry E. Swedroe & Andrew L. Berkin

978-0-692-33651-9 (paperback)

978-0-692-33652-6 (ebook)

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed Attention: Permissions Coordinator, at the address below.

BAM ALLIANCE Press

8182 Maryland Ave.

Suite 500

St. Louis, MO 63105

thebamalliance.com

Design by Alan Dubinsky

Ebook conversion by Digital Bindery

Here is everything you ever wanted to know about factor investing in one book. The authors do an excellent job of summarizing all the relevant research by both academics and practitioners. Whether this is smart (after-tax) investing compared with broad-based, cap-weighted, low-cost indexing is controversial, but every smart investor should understand the case for this alternative approach.

Burton Malkiel, Author of "A Random Walk Down Wall Street"

Berkin and Swedroe hit a home run! As a Ph.D., CFA, and author of 180+ articles and several books, I seldom learn a lot from reading an investment book. This book is an exception. They summarize research on the ability of seven factors that meet five strict criteria persistence, pervasive, robust, investable, and logically explainable which strongly suggest that they will continue to enhance long-run portfolio returns. Berkin and Swedroe then explain how we can use these factors to either enhance portfolio expected return or reduce risk for a given level of expected return. This book will make me a better investor and a better teacher.

Dr. William Reichenstein, Pat and Thomas R. Powers Chair in Investment Management, Hankamer School of Business, Baylor University

Fantastic! In addition to a masterful and comprehensive discussion of market factors, Berkin and Swedroe provide specifics for how a practitioner might implement what is, in effect, Warren Buffetts secret sauce. This book is very likely to change your practice for the better. Dont make a mistake by not reading it.

Harold Evensky, Chairman, Evensky & Katz/Foldes Financial Wealth Management

Heres a book for investors who want to take a deep dive into the new, technical thinking about asset allocation. If youre a professional or an aficionado, youll discover the latest research in measuring risk and balancing investments for the best long-term returns.

Jane Bryant Quinn, Author of "How to Make Your Money Last"

Berkin and Swedroe guide us through up-to-date, practical research on smart mutual fund investing. They report on what works and what doesnt and explain why. My students and I love Swedroes books. This book takes us to the next level.

Ed Tower, Professor of Economics, Duke University

Welcome to the world of investing factor factories, where innumerable attributes have been identified to improve the risk/return attributes of diversified portfolios. Berkin and Swedroe provide the research and evidence showing that the secret sauce of properly diversified portfolios includes just eight. I highly recommend it.

John A. Haslem, Professor Emeritus of Finance, Robert H. Smith School of Business, University of Maryland

The typical finance professional or student is exposed to a bewildering array of investment strategies that are claimed to deliver substantial alphas. For the first time, Berkin and Swedroe present a lucid exposition of what strategies are the most pertinent, and how these strategies should be implemented. The work is an invaluable tool for both financial advisors as well as students aiming to achieve a better understanding of how excess returns can be generated in portfolios.

A. Subrahmanyam, Goldyne and Irwin Hearsh Distinguished Professor of Finance, UCLA

What makes this book so valuable and so unlike the vast majority of books on investing is that its conclusions are firmly based on independent, peer-reviewed evidence. I highly recommend it.

Robin Powell, Founder of The Evidence-Based Investor Blog

Berkin and Swedroe apply a novel framework to evaluate the markets most profitable anomalies and offer a roadmap that any investor can follow to better market outcomes. Ill be referencing this for years to come.

Adam Butler, CEO, ReSolve Asset Management

An incisive study that offers clarity to your investing decisions. With expected returns on major asset classes near all-time lows, understanding market factors is essential to accentuating portfolio returns and reaching financial goals. Berkin and Swedroe have delivered a must-read book for todays investor.

Bill Schultheis, Author of "The Coffeehouse Investor"

A whirlwind tour de force along the frontiers of modern finance. A comprehensive guide to factor investing: what they are and which ones are the most useful. Your tour concludes with how a prudent investor might use them to improve a portfolio through diversification into the factors that drive returns while mitigating market risk. Thoroughly researched and clearly presented. Highly recommended.

Frank Armstrong, president and founder, Investor Solutions Inc.

Larry E. Swedroe and Andrew L. Berkin are co-authors of "The Incredible Shrinking Alpha: And What You Can Do to Escape Its Clutches" (2015).

Mr. Swedroe has authored nine other investment books:

"The Only Guide to a Winning Investment Strategy Youll Ever Need: Index Funds and Beyond The Way Smart Money Invests Today" (1998)

"What Wall Street Doesnt Want You to Know: How You Can Build Real Wealth Investing in Index Funds" (2000)

"Rational Investing in Irrational Times: How to Avoid the Costly Mistakes Even Smart People Make Today" (2002)

"The Only Guide to a Winning Investment Strategy Youll Ever Need: The Way Smart Money Invests Today" (2005 revised edition)

"The Successful Investor Today: 14 Simple Truths You Must Know When You Invest" (2006)

"Wise Investing Made Simple: Larry Swedroes Tales to Enrich Your Future" (2007)

"Wise Investing Made Simpler: Larry Swedroes Tales to Enrich Your Future" (2010)

"The Quest for Alpha: The Holy Grail of Investing" (2011)

"Think, Act, and Invest Like Warren Buffett: The Winning Strategy to Help You Achieve Your Financial and Life Goals" (2012)

Mr. Swedroe has co-authored five other books:

"The Only Guide to a Winning Bond Strategy Youll Ever Need: The Way Smart Money Preserves Wealth Today," co-author Joe H. Hempen (2006)

"The Only Guide to Alternative Investments Youll Ever Need: The Good, the Flawed, the Bad, and the Ugly," co-author Jared Kizer (2008)

"The Only Guide Youll Ever Need for the Right Financial Plan: Managing Your Wealth, Risk, and Investments," co-authors Kevin Grogan and Tiya Lim (2010)

"Investment Mistakes Even Smart Investors Make and How to Avoid Them," co-author R.C. Balaban (2011)

"Reducing the Risk of Black Swans: Using the Science of Investing to Capture Returns with Less Volatility," co-author Kevin Grogan (2014)

For all their support and encouragement, Larry thanks his colleagues at Buckingham and The BAM ALLIANCE, with special thanks to Dan Campbell, Sean Grover, and Kevin Grogan for their help with all the data. In addition, Sean provided the analysis for Appendix I. Larry also thanks Mark McLennan of AQR Capital for all his help in providing source material. Larry would also like to thank the research staff at Dimensional Fund Advisors for their help and support over the years, while specifically acknowledging Jim Davis, Marlena Lee, and Weston Wellington. He especially thanks his wife, Mona, the love of his life, for her tremendous encouragement and understanding during the lost weekends and many nights he sat at the computer well into the early morning hours. She has always provided whatever support was needed and then some. Walking through life with her has truly been a gracious experience.