In Beating the Indexes, leading trader and Minyanville columnist Bill Feingold shows you how to systematically exploit the biases and mediocrity of index investors, and continuously make winning investments. Writing for individual investors as well as professional advisors and money managers, Feingold introduces a more profitable set of investing strategies based on convertible bonds and related alternative investments. In this surprisingly readable (even fun to read) book, each chapter exposes one index investing myth – and presents a powerful strategy for beating investors who still buy into it. If you’re tired of minimal returns that disappear with the slightest market volatility, this is the book you’ve been searching for.
The book has two distinct but related parts. The first and shorter section, Part I, “Our Flawed Institutions,” addresses and expands upon the core of my first book, The Undoing of Cowardice. I lay out the argument that the professional investment world is largely designed for mediocrity and job preservation at the expense of the creative, forward-looking asset allocation it is supposed to provide. I think there are a lot of competent people out there who want to do a good job, but we are giving them all the wrong incentives. I explain why and how this actually creates more opportunities for you. I hope that as you come to understand the structure of markets, you will feel more confident about taking control of your investments, especially as an individual investor. If you do, you will find that the time invested in learning about convertible bonds—the second and larger part of the book—will repay you many times over.
Within Part II, “Convertibles, a Better Solution,” I begin by laying out the basic facts you need to understand convertibles. For investors focused largely on stocks—and this means most investors—you will find this part highly useful. You’ll come away with knowledge of traditional bonds and options that you knew you should have had, but probably never got around to. Then I’ll take you through the journey of my career so that you have immediate contexts for those facts. I hope that you’ll experience a bit of the thrills, pitfalls, and unintended humor that have all befallen me in my own convertible journey. After we finish the tour, we dig deeper into convertibles, learning how to compare them as investments with the stocks that underlie them. There’s a brief quiz midway through this section to make sure you’re learning to speak the language. By the end, although you might not quite be a convertible guru, you’ll have a pretty good comfort level with an investment a lot more people would use if they only knew about it.
I need you to keep a few things in mind. This book does not teach you how to pick stocks. I am not a stock picker. My skill, such as it is, involves starting with an idea about where a stock is heading, how long it might take to get there, and what might happen if the idea turns out to be wrong. For most people, the set of possible investments begins and ends with the stock itself. After you’ve finished this book, you’ll be way ahead of them. You’ll understand not only stocks, but also options, bonds, and, of course, convertibles. You’ll begin, as a matter of course, examining your own thought process and matching your investment to your opinion—because it’s not a one-size-fits-all world.
As such, this book is probably best for people—individual investors and professionals alike—who like to pick their own stocks but want help in finding the best way of structuring their investments. I know there are a lot of you out there. After we’ve learned how convertibles work—including the actual nuts and bolts of the trading process—and how to identify attractive ones, we’ll look at the securities from the perspectives of different constituencies. Individual investors, financial advisors, institutions, corporate treasurers, and students will all find a subsection dedicated to their area of interest. Before we finish, we’ll take a quick overview of the more advanced topics convertible professionals follow. Those of you eager to learn more about convertibles will find this last section a good starting point for further study.
- Indexing and Its Discontents
- The Individual’s Edge
- Delusions and Illusions: Chasing Performance in Our Lost Decade
- A Change Is Gonna Come
- The Very Basics
- Reminiscences of a Convertible Operator
- A Quick Review and Quiz
- Enough Already…How Do Convertibles Actually Work?
- What to Look for in a Convertible
- Convertibles For Individual Investors, Financial Advisors, Nontraditional Institutional Investors , Corporate Financial Advisors and Students
- Introduction to Advanced Topics