Risk and the Smart Investor / Edition 1

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Overview

Master the most important investing skill of all—DECISION MAKING

“De-risking your investments

requires knowing that there is

much you don’t know.”

–David X Martin

Risk exists because of one simple fact:

Decisions are always based on incomplete

information. Therefore, to meet your investment

goals over the long term, you must

learn to manage the risks associated with a

decision-making process that is by nature

flawed. Risk and the Smart Investor provides a

framework for making such decisions.

Avoiding unrealistic promises of completely

risk-free investing, world-renowned

risk management expert David X Martin

familiarizes you with the principles of risk

management. Based on Martin’s experience

in managing risk at several of the world’s

largest financial institutions, this principlebased

approach presents a unique perspective

that helps you manage the risk in every

investment you make.

Risk and the Smart Investor provides not

only a framework for managing risk in today’s

markets, it also prepares you to handle

the next financial crisis—which is coming,

sooner or later—by separating risk management

into four separate processes:

  • Assessment—know where you are,

    but accept the fact that you cannot

    know everything

  • The Rules of the Game—determine

    your appetite for risk, diversify

    accordingly, demand transparency,

    and institute checks and balances

  • Decision Making—consider all

    alternatives, fit your plans into specific

    time frames, and always have an

    exit strategy

  • Reevaluation—continually monitor the

    outcomes of your decisions and learn

    from your mistakes

Praise for Risk and the Smart Investor

“Interesting and instructive. A good book for those who want to learn about risk and build this knowledge into their financial decisions.”
—John Reed, former CEO, Citigroup

“David Martin has produced a popular yet serious post-financial crisis

reflection on the fundamentals of risk management as a living process. Rich in

experience and wisdom, Risk and the Smart Investor is both a useful handbook

brimming with insights, and a moral tale for our times. Simply a must-read for

every serious investor, risk manager, and just about everyone else.”

—Michael Power, professor,

London School of Economics and Political Science

“David Martin knows risk and the active investor and his book proves it.”

—Jerry Lieberman

“This book is like having your own mentor to guide you through

risk management decisions.”

—William Rhodes, Chairman, Citigroup and Citibank

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What People Are Saying

John Reed
“Interesting and instructive. A good book for those who want to learn about risk and build this knowledge into their financial decisions.”--(John Reed, former CEO, Citigroup)
William Rhodes
“This book is like having your own mentor to guide you through risk management decisions.”--(William Rhodes, Chairman, Citigroup and Citibank)
Jerry Lieberman
“David Martin knows risk and the active investor and his book proves it.”--(Jerry Lieberman)
Michael Power
“David Martin has produced a popular yet serious post-financial crisis reflection on the fundamentals of risk management as a living process. Rich in experience and wisdom, Risk and the Smart Investor is both a useful handbook brimming with insights, and a moral tale for our times. Simply a must-read for every serious investor, risk manager, and just about everyone else.”--(Michael Power, professor, London School of Economics and Political Science)
Read More Show Less

Product Details

  • ISBN-13: 9780071743495
  • Publisher: McGraw-Hill Professional Publishing
  • Publication date: 8/19/2010
  • Edition number: 1
  • Pages: 288
  • Product dimensions: 6.00 (w) x 9.10 (h) x 1.20 (d)

Meet the Author

David X Martin is senior vice president for AllianceBernstein, which has more than $450 billion in assets under management. Formerly chief risk officer at

AllianceBernstein, he also has held senior risk management positions at Citibank. Martin was founding chairman of the

Investment Company Institute's (ICI) Risk Committee and has lectured at the graduate schools of business at MIT, Columbia University, and NYU. He has written articles for

The Bankers Magazine, the journal Pension & Investments, and the AEI-Brookings Joint Center Web site. He and his family live in the greater New York metropolitan area.

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Table of Contents

Introduction

Part 1 Assessment

Risk Principle 1 Know Where You Are 3

Risk Principle 2 Know What You Don't Know 19

Part 2 The Rules Of The Game

Risk Principle 3 Determine Your Appetite for Risk 41

Risk Principle 4 Demand Transparency 57

Risk Principle 5 Diversify 75

Risk Principle 6 Checks and Balances 95

Risk Principle 7 Hard Work 115

Part 3 Decision Making

Risk Principle 8 Consider All the Alternatives 135

Risk Principle 9 Risk Is Everyone's Responsibility in the Decision-Making Process 157

Risk Principle 10 The Importance of Reputation 175

Risk Principle 11 Fit Your Decision Making into Specific Time Frames 189

Part 4 Reevaluation

Risk Principle 12 Monitor Outcomes Continuously 209

Risk Principle 13 Identify and Learn from Your Mistakes 223

Conclusion

Risk Principle 14 Enduring Principles and Perpetual Process 241

Index 253

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