The Investor's Paradox: The Power of Simplicity in a World of Overwhelming Choice

Brian Portnoy

jan. 2014 · Macmillan + ORM

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Investors are in a jam. A troubled global economy, unpredictable markets, and a bewildering number of investment choices create a dangerous landscape for individual and institutional investors alike. To meet this challenge, most of us rely on a portfolio of fund managers to take risk on our behalves. Here, investment expert Brian Portnoy delivers a powerful framework for choosing the right ones – and avoiding the losers.

Portnoy reveals that the right answers are found by confronting our own subconscious biases and behavioral quirks. A paradox we all face is the natural desire for more choice in our lives, yet the more we have, the less satisfied we become – whether we're at the grocery store, choosing doctors, or flipping through hundreds of TV channels. So, too, with investing, where there are literally tens of thousands of funds from which to choose. Hence "the investor's paradox": We crave abundant investment choices to conquer volatile markets, yet with greater flexibility, the more overwhelmed and less empowered we become.

Leveraging the fresh insights of behavioral economics, Portnoy demystifies the opaque world of elite hedge funds, addresses the limits of mass market mutual funds, and discards the false dichotomy between "traditional" and "alternative" investments. He also explores why hedge funds have recently become such a controversial and disruptive force. Turns out it's not the splashy headlines – spectacular trades, newly minted billionaires, aggressive tactics – but something much more fundamental. The stratospheric rise to prominence and availability of alternative strategies represents a further explosion in the size and complexity of the choice set in a market already saturated with products. It constitutes something we all both crave and detest.

The Investor's Paradox lights a path toward simplicity in a world of dangerous markets and overwhelming choice. Written in accessible, jargon-free language, with a healthy skepticism of today's money management industry, it offers not only practical tools for investment success but also a message of empowerment for investors drowning in possibility.

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Brian Portnoy, Ph.D., CFA, is a veteran of the hedge fund and mutual fund industries. He is currently the Director of Investment Education at Virtus Investment Partners, a multi-asset platform of boutique investment managers who deliver a broad array of investment solutions. In that role, Brian leads the firm's educational initiatives for clients and financial advisors related to sound investing and effective decision-making. Over the previous 15 years, he held senior strategy, investment, and research roles at Chicago Equity Partners, Mesirow Financial, and Morningstar. Brian is a regular contributor at Forbes.com and Yahoo! Finance, speaks about investing and decision-making to audiences all over the world, and has lectured on the history and future of hedge funds at the U.S. Securities and Exchange Commission as part of their Leading Authors series. Brian pursued his research and teaching interests in political economy at the University of Chicago, where he earned his doctorate. He earned his B.A. from the University of Michigan. Brian holds the Chartered Financial Analyst (CFA) designation, is a member of the Economic Club of Chicago, and is active in various charitable activities on Chicago's north side, where he lives with his wife and children.