This book is organized into two parts. Part One sets out the rationale and evidence supporting simple, systematic processes. We begin by questioning society's reliance on “expert” opinion. Highlighting the evidence behind the performance of expert opinion, we explain why experts are self-interested and (surprise) are prone to the same behavioral biases that afflict all human beings. Finally, we highlight that experts often rely on stories, not facts.
Part Two outlines how individual investors, managing from $50 thousand to $5 billion, can beat the experts. We outline the reasons why a do-it-yourself (DIY) approach makes sense. Next, we outline various asset allocation frameworks and explain why a simple approach is probably most effective. Next, following this discussion, we explore simple evidence-based risk-management concepts, which help a DIY investor avoid large losses when investing his capital. Next, we outline ways in which a DIY investor can develop a systematic approach to add value to his equity portfolios by incorporating simple value-based and momentum-based security selection techniques. We then highlight techniques to implement approaches to momentum-based security selection processes. We move on to simple asset allocation frameworks, and we end with a discussion of simple, evidence-based risk-management concepts. Finally, we end Part Two by integrating the knowledge discussed on asset allocation, risk-management, and security selection into a full-fledged investment program with an overview of what we believe to be a reasonable DIY Financial Advisor solution.