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Contact: Rachel Friedman, 727-443-7115, ext. [email protected]
Do Naked Investing Techniques Work?Expert Reveals Secrets to Statistical Prediction Methods
Conventional wisdom is neither conventional nor wise on Wall Street, anymore.
Traditional methods are obscure and based on a portfolio managers judgment,said Fischer, a senior portfolio manager at a national brokerage firm and authorofThe Naked Portfolio Managerby Abbalucci Press(www.thenakedportfoliomanager.com). An enormous body of evidence indicatesthat rule-based decision strategies (which are called statistical or mechanicalmethods by researchers) consistently result in better decisions than the typicalexpert judgment used in the portfolio management and brokerage profession.When financial managers employ these rules, emotion and gut feelings that oftenlead to poor choices are eliminated from the equation.
In his position as a portfolio manager, Fischer predominantly uses what he hasidentified as statistical prediction methods (SPMs) to oversee clients portfoliosfor high-net-worth individuals. He has employed SPMs for more than ten yearsand said he has observed, over time, how this methodology consistently putsclients earnings on par with those managed by the smartest minds on WallStreet.
For people in the industry to achieve similar success for their clients, all theyneed to do is to adopt a clear set of rules for choosing investments, and apply thecharacter necessary to stick to those rules, he said. Rules trump reason onWall Street. Financial planners are constantly reading about this experts advice
or that experts advice. They would do much better if they simply used a set ofclearly defined, empirically-based, transparent rules and followed those rules in adisciplined fashion.
Fischer said that SPMs are relatively simple, empirically-based rules for selectingsecurities. They are completely transparent, and the planner intrinsicallyunderstands exactly how the securities in the portfolio are selected, and caneasily explain it to the client.
The key is for planners and brokers to be able to change their way of thinkingabout how they approach their clients investments, according to Fischer.
My daughter Abigail taught me a lesson about how to do that when she wasseven years old, he said. She came to me and asked, Daddy, if God did notwant Adam and Eve to eat from the apple tree, why didnt he put a fence aroundit? Actually, Daddy, why did he put the tree there in the first place? Just as shewas thinking critically beyond the religious dogma of the story of Adam and Eve,planners need to divest themselves of the dogma of Wall Street. This relates tohow so many industry professionals have been brainwashed to use mutual fundsinstead of selecting securities by themselves.
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The key is for professionals to forget what they think they know about the marketand start from scratch, or be naked, Fischer added.
If you simply start with a blank sheet of paper, and assemble a set of rules thatare based on empirical data and stick to them youd be surprised at howmuch better you can do for your clients, Fischer added.
About Bob Fischer
Bob Fischer is a senior portfolio manager and advisor for affluent individuals at anational brokerage firm. His noteworthy success in the investment field is basedupon his in-depth knowledge of decision-making, which he applies in adisciplined rule-based approach: the application of Statistical Prediction Methods.Bob has written numerous articles on investment and financial planning forrespected industry publications. He lives with his family in Midlothian, Virginia.
To interview Bob Fischer or request a review copy of "The Naked PortfolioManager contact Rachel Friedman at (727) 443-7115 ext. 206 or email
[email protected] Please include your name, publication, andmailing address with your request.
mailto:[email protected]:[email protected]