Description
Book SynopsisTrade Review"The most important investment decision is not 'what' but 'how much.' If you ever hear a professional investor talk about a trade that taught them a lot, prick up your ears. Usually, this is code for 'a time I lost an absolutely colossal amount of money,' and you are in for one of the better stories about how finance works at the coalface. On this front, Victor Haghani is a man to whom it is worth listening. Now, along with his present-day colleague James White, he has written a book that aims to spare other investors his mistakes . . . The Missing Billionaires . . . examines what its authors argue is a much more important—and neglected—question than picking the right investments to buy or sell: not 'what' but 'how much.'"
—The Economist's Buttonwood column "Size Matters," September 21, 2023
"A compelling book dealing with an important and neglected question in finance: not what to buy or sell, but how much. Even sophisticated professionals tend to answer this question badly, leading to lost fortunes. But financial theory provides the answer. Mathematical but not excessively so, this will appeal to anyone with an interest in markets."
—The Economist Best Books of 2023, December 9-15, 2023
Table of ContentsForeword xiii
Preface xvii
About the Authors xxi
Acknowledgments xxiii
Chapter 1: Introduction: The Puzzle of the Missing Billionaires 1
Section I: Investment Sizing 13
Chapter 2: Befuddled Betting on a Biased Coin 15
Chapter 3: Size Matters When It’s for Real 27
Chapter 4: A Taste of the Merton Share 41
Chapter 5: How Much to Invest in the Stock Market? 49
Chapter 6: The Mechanics of Choice 67
Chapter 7: Criticisms of Expected Utility Decision- making 103
Chapter 8: Reminiscences of a Hedge Fund Operator 117
Section II: Lifetime Spending and Investing 127
Chapter 9: Spending and Investing in Retirement 129
Chapter 10: Spending Like You’ll Live Forever 149
Chapter 11: Spending Like You Won’t Live Forever 165
Section III: Where the Rubber Meets the Road 173
Chapter 12: Measuring the Fabric of Felicity 175
Chapter 13: Human Capital 193
Chapter 14: Into the Weeds: Characteristics of Major Asset Classes 201
Chapter 15: No Place to Hide: Investing in a World with No Safe Asset 235
Chapter 16: What About Options? 245
Chapter 17: Tax Matters 265
Chapter 18: Risk Versus Uncertainty 275
Section IV: Puzzles 285
Chapter 19: How Can a Great Lottery Be a Bad Bet? 287
Chapter 20: The Equity Risk Premium Puzzle 291
Chapter 21: The Perpetuity Paradox and Negative Interest Rates 297
Chapter 22: When Less Is More 303
Chapter 23: The Costanza Trade 309
Chapter 24: Conclusion: U and Your Wealth 319
Bonus Chapter: Liar’s Poker and Learning to Bet Smart 327
Cheat Sheet 335
A Few Rules of Thumb 340
Endnotes 343
Suggested Reading 357
References 359
Index 373
