Efficient Frontier 
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William J. Bernstein

Skating Where the Puck Was

Second e-Book in the Investing for Adults Series

Not to beat a dead horse, but the Investing for Adults series is not for beginners. This is even more true of the latest installment than it was for the first, The Ages of the Investor, which dissected the mechanics of life-cycle theory for the average investor.

In this second e-book, I examine the vicissitudes of diversification in the ever more global capital marketplace, in which correlations trend closer and closer to 1.0. The headlong rush of pension plans, endowments, and wealth management assets into hedge funds, private equity, commodities, and private real estate provides a lens to observe just what transpires when, as almost always occurs with initially good ideas, Wall Street runs it into the ground.

One of the grimmest realities of finance is that as an asset class becomes more popular, it suffers the twin plagues of falling expected returns and rising correlations.  While this booklet offers useful guidance to small investors, its real audience is in the institutional realm, which, without putting too fine a point on it, is headed en masse off a cliff called "The Yale Model." This booklet is available in Kindle and Amazon paperback formats.

As always, if this series isn't for you, don't be discouraged; I've put together a reading list for those who need to start with the basics. The list looks daunting, I know, but remember, you have all the time in the world to get this right. Read just one of the books on the list every month, and within a year you'll know more about finance than most professionals. You won't be sorry.

I anticipate more e-books in the series over the coming year or two. Several months hence I plan to release my third e-book with an investor-friendly discussion of the efficient market hypothesis.

One other book project to share: Following the publication of A Splendid Exchange four years ago, I began researching communications technology, from 100,000 B.C. to the present. The resulting book, Masters of the Word: How Media Shaped History, is now in the final stages of editing and will be published by Grove/Atlantic shortly after the new year. Stay tuned.


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