Martin - Dollarlogic : a six-day plan to achieving higher investment returns by conquering risk

Praise for Dollarlogic

Andy Martin takes a difficult subject like asset allocation and risk reduction, and offers practical, sustainable, and compelling advice for investors old and young. While people often understand the concept of risk in their everyday lives, as investors they often get it completely wrong, focusing on short-term performance or mistaking short-term price fluctuations for long-term risk. Andy Martins practical advice and entertaining anecdotes make for a good read, one that can be beneficial to both investors and financial advisors.

Jack Tierney
Executive Director, Invesco Unit Trusts

Discard the time-worn admonition that the only path to higher returns is through higher risk. As Andy Martin admirably explains, successful investingachieving ones financial goalsrequires lowering ones risk. And, unlike many human endeavors, you can get better at investing, even as you age. You dont have to agree with everything Andy says, but you will be well-served if you follow his recommendations about key topics such as diversification, why you must divorce your emotions from your investment decisions, and the value of a good financial advisor.

Robert Huebscher
CEO, Advisor Perspectives;
former president and CEO, Thomson Financial

What is investment risk and why do we automatically assume that it always leads to reward? This book answers those crucial questions. It also effortlessly assassinates populist conventional wisdom. Open any page of this book and you will be simultaneously educated and enlightened. Both individual investors and financial professionals will greatly benefit from Andys wisdom.

Ron DeLegge II
Founder and Chief Portfolio Strategist, ETFguide.com

Andy Martin has a gifted way with words and advice when it comes to the fundamentals of investments and investment strategies. Dollarlogic is a book that investors of all ages and sophistication levels can benefit from.

Susan Woltman Tietjen
Chairman & Chief Executive Officer, Girard Securities, Inc.

Andy Martins book is highly enjoyable and readable for the individual investor and investment professional. He provides a unique perspective of profitable investing that we can all learn from.

Victor Ricciardi
co-editor of the book Investor Behavior: The Psychology of Financial Planning and Investing

Andy Martin presents some very useful investing advice, such as the shocker that riskhowever measureddoes not buy you higher returns. Like Odysseus tying himself to a mast to avoid the tempting Sirens, we benefit from anticipating our biases doing simple things like outsourcing our investment tactics. Most people who are good at making money are inefficient investors, and would be better served by the few principles covered in this book.

Eric Falkenstein,
PhD, Portfolio Manager and author of The Missing Risk Premium

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A Six-Day Plan to Achieving Higher Investment Returns by Conquering Risk

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By

ANDY MARTIN

Copyright 2016 by Andy Martin

All rights reserved under the Pan-American and International Copyright Conventions. This book may not be reproduced, in whole or in part, in any form or by any means electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system now known or hereafter invented, without written permission from the publisher, The Career Press.

DOLLARLOGIC

EDITED BY JODI BRANDON

TYPESET BY EILEEN MUNSON

Cover design by Howard Grossman

Printed in the U.S.A.

To order this title, please call toll-free 1-800-CAREER-1 (NJ and Canada: 201-848-0310) to order using VISA or MasterCard, or for further information on books from Career Press.

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Library of Congress Cataloging-in-Publication Data

CIP Data Available Upon Request.

Dollarlogic in One Page

by Arthur B. Laffer, PhD

Understand Risk: It Is Not What You Think

Your Objectives, Not the Investment, Determine the Investments Risk

Reducing Losses Is More Important Than Increasing Returns

Establishing Your Goals Is More Important Than Guessing the Market

Hiring an Advisor Is the Best Investment Plan You Can Make

DiversifyBut Diversify Wisely and Widely

On Money and Happiness

You have heard it your entire life, and it is wrong. Risk does not equal reward. If it did, why would you wear a seat belt?

What is risk? Risk is not only the worst that can happen, but what is most likely to happen. If negative results equal higher risk, positive results equal lower risk.

Because stocks are likelier to earn higher long-term returns than bonds (4% yearly average for 40-year rolling periods) stocks are less risky than bonds.

Short term, however, stocks are unpredictable; math is against you. A loss of 10% has more impact than a gain of 10%, so the key is to reduce losses, not to increase returns.

Does that mean that as a stock investor you now have to predict the markets? No. No one can do that, not even the experts. You only have to predict yourself, such as when do you want to retire, what are your objectives, and how much income do you need? Success or failure, therefore, is dependent on you, not your investments.

So, what should you do? Do as the ultra-wealthy do: Hire an advisor to help you predict you and your future, and diversify properly. Do-it-yourselfers have only a map; those with advisors have a GPSthey know where they are on the map.

Result? Your future is not dependent on chance or luck because you have systematically reduced risk with diversification and dedicated professional help. Managing risk in this new, more productive way is what I call dollarlogic.

Risk equals reward. Well, maybe not. Andy Martin makes compelling arguments here that could change your mind.

The good news is that if you agree, you may be on your way to less volatility, less disruption from your monthly routine of opening your brokerage statements, but more restful sleep. However, his lower-your-risk strategy is not a call to surrender but a call to measure risk by probable outcomes instead of by infrequent negative events, which is how risk is usually defined. Therefore, if you increase your chances of reaching your investment goals, you are reducing your riskeven if this means owning more stocks. Ill bet you have never thought of risk this way.

Andy quotes approvingly Shelby Davis, who said, You make most of your money in a bear market; you just dont realize it at the time. Warren Buffett might have said the same. I would agree with both. It is not just that you buy low; it is also that you do not sell low. Why not? Because the stock market is nothing to fear. You dont move out of your house if real estate values fall. Andy imagines your investment portfolio as your virtual home that provides warmth, protection, security, and stability. Perhaps you should think of this the next time you are ready to jettison a blue chip stock or well-managed fund the next time it drops in value. Those drops in value are often temporary. You make them permanent when you sell.