Digital Wealth

SIMON MOORE is Chief Investment Officer at FutureAdvisor, the award-winning digital asset manager. He has written about finance for Forbes, Huffington Post, and Yahoo! Finance, and is quoted regularly by such major media outlets as CNN and the Wall Street Journal.

• Preface xiiiAcknowledgments xviiChapter 1 America’s Savings Challenge 1We Don’t Save Enough 1The Key Change in America’s Retirement Planning Process 3How Financial Innovation Helps 4The Magic of a 15 Percent Savings Rate 5Notes 8Chapter 2 The Risk of Not Investing in Stocks 9The Short‐Term Risks 10The Historical Perspective 10The Logic 12Chapter 3 The Enemies of a Stock Portfolio 15Why Inflation Matters 16Treasury Inflation‐Protected Securities (TIPS) 17Asset Confiscation 18Recession 19Chapter 4 The Value of Time for Investors 21Why Long‐Term Stock Investing Is Less Risky than It May Seem 21The Long‐Term Picture 22How Bonds Can Help 24Note 27Chapter 5 Core Assets of a Robust Portfolio 29Asset Classes We Include 29Individual Asset Classes We Exclude 34Notes 39Chapter 6 Dynamic Asset Selection Determining the Lowest‐Cost Option for Each Portfolio 41Chapter 7 What Software Does Better than People 47How Software Helps Investors 49Example: All the Decisions an Algorithm Makes 50Chapter 8 How International Investing Can Smooth Returns 53Demographics Matter 54Diversification Improves Your Industry Mix 56Notes 58Chapter 9 The Advantages of Exchange‐Traded Funds 59The Benefits of ETFs 61In‐Kind Transfers 62The Risks of ETFs 63Securities Lending Policies 65Notes 67Chapter 10 The Triumph of Low‐Cost Investing How Paying Less Gets You More 69Fooled by Randomness 70A Triumph of Marketing over Results 72Notes 76Chapter 11 Learning from Nobel Prize Winners 79Milton Friedman, 1976 80James Tobin, 1981 81Harry Markowitz, 1990 81William Sharpe, 1990 82Daniel Kahnemann, 2002 83Eugene Fama and Robert Shiller, 2013 83Chapter 12 The Costs of Being Active 85The Cost of Closet Indexing 87The Other Costs of Active Management 88Notes 90Chapter 13 The Greatest Mistakes Made by Novice Investors 91Starting Saving Too Late 92Are You Using Tax Shelters Effectively? 93Are You Taking Advantage of 401(k) Matching If Available? 93Are You Diversified Internationally? 93Are You Chasing Returns? 94Are You Overpaying in Fees? 95Are You Tracking the Right Index? 95Do You Trade Too Much? 97Chapter 14 Tilts and Other Ways to Help Long‐Term Performance 99History of Market Thought 100Data Mining 102Debunking Strong‐Form Market Efficiency 103Rationality 103The January Effect 104Sell in May and Go Away 104Momentum 105Value 105Small Cap 106Quality 106Longer‐Term Mean Reversion 107Assessing Tilts in a Portfolio Context 107Notes 108Chapter 15 Establishing a Tax‐Efficient Portfolio 109Tax Shelters 111Tax Efficiency for Retirement 111Tax Efficiency for College 112Tax Efficiency for Giving 113Tax‐Efficient Asset Placement 114Tax Loss Harvesting 115Offsetting Gains with Losses 115The Principal of Tax Deferral 116How Tax Loss Harvesting Works 117Challenges of Implementing Tax Loss Harvesting 117Conclusion 119Chapter 16 The Value of Rebalancing and Glidepaths 121Rebalancing Keeps a Portfolio on Course 122Tiered Rebalancing 125Glidepaths 126Notes 129Chapter 17 How to Manage a Market Crash 131Keep Stock Market Investing for Longer‐Term Money 133Making Saving an Ongoing Activity 134Pay Attention to Extremes of Long‐Term Valuation Signals 134Don’t Consider Stocks in Isolation 135Remember that You May Underestimate Your Risk Tolerance in Good Markets 136Chapter 18 Your Own Worst Enemy Is in the Mirror 139The Biggest Threat to Your Returns Is in the Mirror 140Always a Reason to Avoid Staying Out 141The Returns You See Aren’t the Ones You Get after Tax 141The Media Isn’t Your Friend 142Overtrading 142Home Bias 143Failing to Take a Long‐Term Perspective 143Availability Bias 144Chasing Performance 144Ignoring Fees 144Holding Too Much Cash 145How Software Can Help 145Note 146Chapter 19 Saving for Goals beyond Retirement 147Tax Efficiency 148Portfolio Construction 149Emergency Funds 150Investment Flow Chart 150Chapter 20 A History of Diversified Portfolio Performance 153Stocks vs. Bonds 153The Impact of Recessions 154The Impact of Inflation 155The Danger of Averages 155The Benefits of Combination 155An Emerging Market that Has Emerged 156Chapter 21 The Future of Wealth Management 157Lower Costs 158Democratization of Services 159Increasing Customer Intimacy 160Improved Financial Awareness 160Note 161Chapter 22 Conclusion 163Author’s Disclaimer 167About the Author 169Index 171