This debut work presents a sophisticated, informed approach to investing.
To preserve wealth over time, writes Klosterman, a certified financial planner, the investor must fight off four evils: “Inflation,” “Volatility,” “Group Think,” and “Global Displacements and Transformations.” In a book that is both educational and actionable, he dissects each of these “four horsemen” and discusses how best to ameliorate their negative and potentially apocalyptic effects on an investment portfolio. Klosterman debunks common financial myths, explains how the investment environment has become more dynamic, and makes recommendations for developing what he calls a “high-probability portfolio,” with a concentration on valuations, diversification, and rebalancing. The author answers “six critical questions for every investor,” including the one he says is often the subject of great debate: “Do you want to focus on average, accepting the good with the bad (indexing), or do you want to focus on finding the best investments (active)?” He discusses the fine points of asset allocation, indicating the common belief that “90 percent of investment returns are based on asset allocation, not security selection.” He makes the key point that “investing is not just the stock market”; in fact, he includes a helpful chapter about such “alternative investments” as commodities, distressed debt, leveraged buyouts, and real estate. Klosterman also provides useful information about how to get the most out of financial data providers, offers sound advice about ways to continually monitor an investment portfolio, and conveys a number of tips for “finding and vetting advisors.” While the chapters are brief and the book is short (less than 170 pages, including the appendix), the content is robust. Klosterman writes well, speaks with an authoritative voice, includes investor anecdotes, and inserts numerous charts and graphs to augment the text. The book does assume a certain level of investment knowledge and, as such, is likely to be more appropriate for an intermediate or advanced investor rather than a novice.
Spirited and straightforward; provides experience-based guidance to the enlightened investor.