Deep Risk: How History Informs Portfolio Design - Paperback

by William J. Bernstein (Author)

Deep risk: How History informs Portfolio Design is the third installment in the investing for adults series. this series is not for novices. This booklet takes portfolio design beyond the familiar "black box" mean-variance framework. Most importantly, the short-term volatility of financial assets, commonly measured as standard deviation, is a highly imperfect measure of the actual long-horizon perils faced by real-world investors subject to the vagaries of financial and military history. These risks have names-inflation, deflation, confiscation, and devastation-and any useful discussion of portfolio design of necessity incorporates their probabilities, consequences, and costs of mitigation. You're an investment adult, so you know that the future efficient frontier lies well beyond our ken; presumably you already know all about the mechanics, long-term benefits, as well as the uncertainties, of wide diversification and factor tilt using low-cost, efficient vehicles and the risk/reward spectrum between all-fixed- income and all-equity portfolios. This booklet contains no magic formula for the "perfect portfolio," but rather, with luck, a framework within which to think more clearly about risk.

Author Biography

William J. Bernstein is the author of The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk (2000), The Four Pillars of Investing: Lessons for Building a Winning Portfolio (2002), The Birth of Plenty: How the Prosperity of the Modern World Was Created (2004), A Splendid Exchange: How Trade Shaped the World (2008), and The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between (2009). His latest book, Masters of the Word: How Media Shaped History, a narrative treatment of the relationship among communications technology, culture, and politics, was published in April, 2013 by Grove/Atlantic Press. He is also the author of the Investing for Adults booklet series. The frst two, The Ages of the Investor: A Critical Look at Life-cycle Investing, and Skating Where the Puck Was: The Correlation Game in a Flat World, were both published in 2012.