The Naked Portfolio Manager: Why Rules Trump Reason on Wall Street

by Robert J. Fischer

Traditionally, investment portfolios are managed by people with years of experience who graduated from the best schools. We are told they have nearly mystical ways of forecasting stock prices that we... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0984089438
• ISBN13: 9780984089437
• Release Date: October 2009
• Publisher: Abalucci Press
• Length: 155 Pages
• Weight: 1.00 lbs.
• Dimensions: 0.7" x 6.3" x 9.2"

Customer Reviews

Great Read for the Novice Investor

I was interested in reading "The Naked Portfolio Manager" because I wanted to learn about investing and different methods that are used from a financial advisor's perspective. As someone who is looking at pursuing a career as a financial planner, I have had a few courses that dealt with the subject, but no extensive training or knowledge of the different models and methods that are used when managing portfolios. That being said, I thoroughly enjoyed every second of reading this book and felt that it presented a straightforward answer to a very "complex" subject. Fischer presented his viewpoint in a way that is easy to understand for even the most novice of investors as well as any person who has a financial professional handling their portfolio. As an Econ major, I was very intrigued by the premise that a statistical model can produce the best results in the investment world. As a potential financial advisor, I am thrilled that there are CFP's like Robert Fischer who can serve as mentors for graduates looking to get into the business. Knowing that there is a method that can be used consistently, be easily explained to the client, and has a record of achieving above market average results gives me confidence in pursuing this type of career. I would recommend "The Naked Portfolio Manager" not only to anybody interested in portfolio management, but to any college student taking a finance or economics course as well as any individual that plans on doing any investing in their lifetime. I plan on reading some of the books recommended by Fischer and am looking forward to reading the follow-up when it comes out!

Fascinating and well written

Bob Fischer has written a fascinating and well-written book. The Naked Portfolio Manager is a down-to-earth foray into statistical prediction methods used in picking stocks. Through countless real-life examples and humorous cartoons and anecdotes, Bob gives us an inside view into why facts -- and not hunches -- should be used in portfolio management. Thinking errors, now well known in behavioral economics, help explain why the decision process matters. This book is readily accessible to a wider audience outside of fund managers, and is highly recommended to the average investor. Disclosure: Lucky for me, I came to learn of this book because Bob is a member of an intellectual think group here in Richmond.

Great guide for investment decision-making

As a CPA, I have seen how many individual investors scramble from broker to broker, scheme to scheme, or tip to tip--as they try to achieve investment success. This book can help them to assemble a strategy that can be consistently applied, enabling long-term investment growth. The author encourages an investment approach based upon mathematical modeling, which he calls Statistical Prediction Methodology. He suggests that investments should not be "picked," but that the investor instead should select a winning investment strategy and methodology for implementing that strategy. He describes in detail how decisions based on an individual's judgment, knowledge or expertise can actually sabotage investment returns, even where this is no preconceived bias. He gives examples of how this happens due to critical thinking errors. This book will serve as a terrific guide for investors in today's economic climate, which demands wise investment decision-making.

Investing, Psychology, and Chess masterfully presented within an interwoven framework

[...] This is my first book review. The book's author will be familiar to many Virginia chess players: a local USCF Life member who has attained the distinguished Life Master title. Yet, Bob will agree that his more prestigious titles are Certified Financial Planner and Multi-Millionaire. The Naked Portfolio Manager is not a chess book, but an excellent book about investing. This groundbreaking work is truly exceptional in how it discusses the similarities between chess thinking and investment decision-making. Does a discussion of an investment book deserve to be found within the pages of a chess magazine? Yes! Bob presses home the point that the most successful investment technique is Statistical Prediction Methodology (SPM), versus a more traditional judgment method (TJM). Based on the statistical facts, a SPM will beat out a TJM every time. In other words, over a lifetime of investing, statistical prediction methods are clearly superior and will trounce judgment-based methods. The key to statistical prediction methods is to ascertain the handful of rules required to reach a successful investment decision. Like zero and double-zero on a casino roulette wheel, the book will "show you how to tilt the odds in your favor just slightly. And while the edge this truth will give you is small and difficult to measure in the short term; over a lifetime of investing, the advantage it will give you can have a very meaningful impact on your ability to accumulate wealth." Bob quickly comes right to the point, succinctly stating on page 5: "The first decision should be not to buy stocks or pick managers, but to select a winning strategy and a method of implementing that strategy." Unlike traditional portfolio managers (or other decision makers) who rely primarily on experience and personal judgment, SPMs always make good decisions. Once the sound investment rules have been ascertained, SPMs make better, more accurate, and less expensive decisions than any judgment-based manager does. The world's strongest chess playing program, Rybka, is essentially a SPM, albeit an incredibly more complicated one requiring hundreds of chess-specific heuristic rules. Give Rybka the same position with the same amount of time, and she will calculate the same results every time. Because of his qualified chess background, Bob uses dozens of chess analogies to highlight how grandmasters and portfolio managers make similar mistakes in their thinking, hammering home the superiority of SPMs. It is fascinating how investing, chess, and human psychology are all presented within an interwoven framework. Every page contains something new and interesting. The Naked Portfolio Manager is an easy and enjoyable read without any technical analysis convolution, and Bob uses truly original examples. I am impressed with the book and put it on par with another easy read, my favorite classic, How I Made $2,000,000 in the Stock Market by Nicolas Darvas. One striking similar

Excellent book on behavioral finance and mechanical investing

The Naked Portfolio Manager is simply the most understandable book on behavioral finance and investment decision making available. The goal of the book is to illustrate a superior approach to investment decisions. It is consistent with process improvement methods used in industry today since it relies on developing a consistent, repeatable, measurable approach. The book consists of four sections. 1. The Case for Statistical Decision Making This section makes the case for deciding how to decide. You can either: a) Analyze available information and reach a buy/sell conclusion based on experience, special knowledge, or intuition - in other words, judgment-based investing. One-of-a-kind decisions dependant on the expert characterize this approach. Or you can b) Pick an algorithm and let the algorithm identify buy/sell conditions based on the available information - in other words, rule-based investing. Consistent, repeatable decisions independent of who uses the algorithm characterize this approach. Bob Fischer makes an excellent case for the latter. He refers to rule-based, algorithmic decision making as Statistical Decision Making (SPM). NOTE: Don't worry about the math part - somehow Bob makes it all happen without resorting to lots of math and statistics. Examples from a variety of disciplines illustrate the difference between clinical (judgment-based) decision making by experts and decision making using algorithms. 2. Common Thinking Errors This section is worth the price of the book even if you decide not invest using SPM since the rule-based approach is applicable to any endeavor involving decision making. Other books on investing deal with behavioral finance but in my opinion, not as clearly as this book. In addition to describing various thinking errors in non-technical language, Bob explains how these errors sabotage investment returns. The book devotes chapters to each of the following categories of thinking errors: * Simple decision making errors (aka fuzzy thinking) - 8 distinct types of common errors identified by behavioral finance * Complex thinking errors - 2 types driven by the quality and quantity of data available to support the decision * Intractable thinking errors - 2 types of errors that occur because the problem is too large for the human mind * Confirmation bias errors - several examples of how our blindness to our own shortcomings cripples us 3. Putting Statistical Decision Methods into Practice The introduction is an interesting discussion of the difference between proprietary judgment-based decision making and rule-based decision making. It reminded me of my personal experience implementing algorithms to replace judgment-based decisions by experienced operators in a manufacturing operation. A few of the operators were superior to their peers but the algorithms out-performed the operators and provided a consistent, measurable outcome. In turn, this led to improvement. To illustrate the SPM approach, s