I finally finished The Only Three Questions that Count by Ken Fisher. It is one of my favorite investing books because it teaches the readers how to develop their own strategy. It shows people how to ask questions, to challenge common knowledge, and to think for themselves.
Here is the strategy that is discussed in the book.
1. Choose a benchmark based on your time horizon, income needs, liquidity, and unique needs.
2. Match the market weightings in the proper sectors and countries.
3. Only deviate from the benchmark (pursue benchmark risk) if you know something others don’t.
Use funds (index funds, ETFs) if the porfolio is small, otherwise, stocks are cheaper to hold. There was no discussion on stock selection because they only account for 10% of the returns in the market. The other 90% is mainly asset allocation and sub-asset allocation (country, sector, capilization (big vs small cap) and valuation (value vs growth).
This book really made me think about how I approached the market. I was more of a bottom up investor, but now that I’ve read this book, his strategy seems to make a lot of sense.
I will try to develop new capital market technologies ( anomolies ) to see if I can uncover something new.
