New Book Relased: DIY Financial Advisor @ $14.99

/New Book Relased: DIY Financial Advisor @ $14.99

New Book Relased: DIY Financial Advisor @ $14.99

By | 2017-08-18T16:59:53+00:00 September 1st, 2015|Book Reviews|21 Comments

Hi Readers/Fans:

We are happy to announce that our second book, DIY Financial Advisor, is finally available.

For a limited time (and while supplies last) we are selling the book direct for $14.99!

To get this deal you need to buy from the link below the main Amazon link.

The first part of the book is dedicated to making better investment decisions and the second half is dedicated to a practical application of the principles we outline in the first part.

For DIY types, we have a tool available on our tools site:

If DIY is too much to handle, we’re also launching a robo-advisor based on the philosophy outlined in the book:

DIY Financial Advisor at Amazon

Click to purchase.

 

Editorial Reviews

From the Inside Flap

DIY Financial Advisor gives individual investors the information and tools they need to take control of their hard-earned money and manage their own wealth—no matter how much or how little they have. The key advantage any individual investor has over so-called “institutional” investors is the ability to make long-term investment decisions that maximize after-tax, after-fee, and risk-adjusted performance, without fear of a misalignment of incentives. Those who own the money are the best stewards of the money.

In this essential resource, Wesley R. Gray, Jack R. Vogel, and David P. Foulke show what it takes to stop relying on so-called experts and become a savvy investor. The authors outline an investment strategy that reduces fees, banishes psychological fears and traps, and shows how to minimize taxes by limiting trading activity, engaging in smart planning, and by following some simple rules.

DIY Financial Advisor empowers investors to maintain direct control of their portfolios and shows how to implement simple quantitative models that can beat the experts. In easy-to-understand terms, they explain the vital importance of sticking to the FACTS (fees, access, complexity, taxes, and search). This proven framework outlines straightforward concepts that apply to everyone, from the middle-class to the mega-rich.

DIY Financial Advisor is as timely as it is informative. The investment industry is undergoing a significant shift due in part to the use of automated investment strategies that do not require a financial advisor’s involvement. Let DIY Financial Advisor be your hands-on guide for making your money work for you—not for someone else!

From the Back Cover

Praise for DIY Financial Advisor

“Surprisingly simple advice: Avoid these common mistakes, make these small improvements, and voilà! Better investing performance!”
Barry Ritholtz, Chief Investment Officer, Ritholtz Wealth Management

“Sophisticated yet sensible advice is typically afforded to only the wealthiest individuals and institutions. Now it is accessible to all in DIY Financial Advisor. A must read.”
Eric Balchunas, Senior ETF Analyst, Bloomberg Intelligence and author of The Institutional ETF Toolbox

DIY Financial Advisor is a great read for investors who want to take their retirement into their own hands. Wes Gray & co. bring a ton of enthusiasm to the topic while arming their readers to the teeth with useful information.”
Joshua M. Brown, author of the bestselling book Backstage Wall Street, founder of The Reformed Broker blog, and star of CNBC’s The Halftime Report

“Wall Street’s so-called experts are overconfident, biased, and out to sell you a story. That is why DIY Financial Advisor is such a valuable resource.”
Tadas Viskanta, Founder and Editor of Abnormal Returns, author of Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere

“Investors are told their success relies on complex strategies and expert forecasts about the future. Using an evidence-based approach, Gray, Vogel, and Foulke prove why this isn’t the case. A great read!”
Ben Carlson, author of A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan

Again, for a limited time we are selling the book direct for $14.99

To get this deal you need to buy from the link below the main Amazon link.


  • The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).
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About the Author:

Wes Gray
After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes, ETF.com, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.
  • Steve

    I’m excited that you three guys have written a book together! Can’t wait to read…congrats!

  • Jim

    Read the book,liked it.don’t agree with the Graham beats Buffett part because Buffet wouldn’t rebalance annually..you. can’t compare those two that way and be truthful

  • Jim

    If the analogy was quality stocks picked by cheapness and quality held for only a one year period against a Graham portfolio you would be correct ,but looking back at the See’s Candy deal that is the example for the quote. ,you would have to include its appreciation and its excess cash investments against a Graham portfolio (as.well other. Such investments).you. would. Have to include taxes and trading costs as well.if compared to. The magic formula and left out Buffett,it would be better.

  • Ciaran Youd

    $37 shipping to aus 🙁

  • Jack Vogel, PhD

    Sorry — we just use Amazon’s rates.

  • Jack Vogel, PhD

    Thanks!

  • Jack Vogel, PhD

    Different rebalance frequency will affect results — Buffett also has to manage more money now since he was successful.

  • Sam

    I just finished reading to book and enjoyed it. Do you have suggestions for which ETFs/ETNs to use for the alpha commodities portion as well as for domestic and international momentum, given that your IMOM and QMOM ETFs are not out yet, that are reasonable proxies for the strategies you talk about (not closet indexers, reasonable rebalance time periods etc)?

  • Here is some background on a reasonable solution:

    https://www.summerhavenindex.com/guest/sdci.html

    USCI is based on that index.

    CS also has some backwardation focused ETNs.

    I’m sure there are few more. The key is to look for ‘term structure’ and momentum, if possible.

    https://alphaarchitect.com/2013/02/05/improving-commodity-strategies-with-momentum-and-term-structure/

    Claude Erb and Campbell Harvey have some great insights on commodities as well:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2645444

    The issue with commodity ETFs that actually run reasonable strategies is they are usually in the 80bps-120bps range.

  • Sam

    Thanks for the quick response, I’ll look into those

  • Raffi

    Hi guys,

    I recently purchased and read DIY Financial Advisor, and I’m a big fan of the Ultimate DIY portfolio. I have two questions that relate to how the strategy is carried out.

    First, it says that the risk-management strategy (ROBUST) should be applied on a monthly basis. Does this mean that we should only review the Moving Average tests once a month? If that was the case, it seems like there could be a big risk of not going to cash if there was a major downturn at the beginning of that month. Or, does it mean the Moving Average tests should use monthly data and not daily data?

    Second, should the ROBUST be used on all asset classes when utilizing the Ultimate DIY portfolio? I.e., should the ROBUST strategy be used only for equities, or should be used for all assets (equities, bonds, real assets) and their sub assets (domestic, international, REITs, and commodities)?

    Thanks for writing the book, the hard work, and the response/insight ahead of time!

  • Hi Raffi,

    Yes, 1x a month. One can review at higher frequency intervals, but it doesn’t improve performance and increases frictional costs. The rules aren’t so fine-tuned that missing the signal by a month would even matter, at the margin.

    As far as caclutions are concerned, daily and monthly achieve similar results.

    All asset classes and you want to stick with the broad index as your benchmark and calculate the rules off of that. In other words, if you have a domestic value allocation, you would calc the rule based on sp 500, not a deep value index. If you had intl mom, you would calce the rule off of eafe. …

    hope that helps.

  • Raffi

    Hi Dr. Gray,

    Thank you very much for the response and examples. I have few follow ups if that’s okay.

    First, and by no means am I questioning your research and findings; I’m merely clarifying my question as I respect your opinion very much. What my concern is with only imploring the risk management 1x a month is in the instance when say, for example, bonds have a massive downside reversion to the mean during the first week of the monthly cycle, and doesn’t recover for the entire month. Won’t you incur a massive draw down, which should be avoided? Or, do your finds show that, given the monthly time period, there is a baked in recovery time for the asset price to rise?

    Second, should both ROBUST risk management rules be based on a 12 month basis? Additionally, if one rule says stay in assets (e.g. equity domestic value), and the other says go T-Bills/Cash, should you have half the target allocation in the asset class and the other half of the target allocation in T-Bills/Cash for month X, and then re-asses in month X+1?

    I cannot say enough how much I appreciate your guidance and knowledge. I apologize in advance for the length of these questions. Thank you again Dr. Gray!

  • Raffi,
    Great questions.

    1) We’ve looked at daily triggers to avoid the issue you’ve mentioned. This adds a lot of complexity and the results are essentially the same as using monthly. You sometimes win a little by being faster, but you also do a lot more whipsawing in and out. And unless we are talking about flash crashes like 1987, long-term trend following rules–daily or monthly assessed–have historically worked about the same. I’d say go with whatever makes you most comfortable, but we go with simple and effective.

    2) Yep, you can either go 100%, 50%, or 0%. 50% is the case when one rule says yes, and the other says no.

    No problem. Slow and steady wins the race so keep grinding and keep learning. That’s what we do everyday!

  • FYI, on page 164 the moderate tilt should have 60% for equity, not 40%. We notified the publisher of this issue beforehand but the changes were never incorporated. Sorry.

  • Edward Chao

    Alpha team:

    Thanks for penning a highly original contribution to personal finance. As a buy-and-hold investor, I’ve looked warily at tactical asset allocation but am appreciating the substantial quantitative evidence presented in the book.

    Wondering if you have practical tips on implementing DIY_MOD_RM across my family’s multiple accounts (401(k), Traditional IRAs, Roth IRAs, taxable accounts). p. 164 suggests locating REITs and bonds in tax-advantaged accounts, but does the back-test show we are better off locating equities or other asset classes there to minimize capital gains taxes? Is there an algorithm / process to re-balance across accounts while minimizing trades?

    Also, I’m trying to understand the Risk Management process. If during the year, say, an asset declines from its target weighting of 10% to 7%, and then ROBUST tells me to cash out, when ROBUST flashes the buy signal, do I revert to the same dollar value holding as before and wait for the annual rebalance?

    Thanks,

    Ed

  • Hey Ed,

    You want to try and “tax-optimize” across your different accounts. With ETFs you can make equity very tax-efficient so you don’t want to burn your tax-efficient accounts on equity. At the margin, you’d rather deploy income-producing (e.g., bonds, reits) or MTM assets (e.g., futures) in those accounts.

    The annual rebalance is to make sure you aren’t getting substantial “drift” in your asset exposures. For example, bonds go up 100% and stocks go down 50%, you’d want to get the exposures back in line at the 366 day mark (so any taxable liability is at least long-term). If you want to explore the downside protection elements, you assess the timing rules monthly–so you could end up buying and selling from one month to the next. This obviously creates a tax-management issue, which a DIY investor would need to consider. Managing the tax issues associated with monthly trading rules is tricky. We use futures to manage these problems, but this may be outside the scope of a DIY investor–not impossible, but non-trivial.

    In the end, you will never get things “perfect” since the real world creates a lot of wrinkles where you may need to make sub-optimal decisions in theory, but in practice they are the best solution. But that isn’t a reason to stress. As long as you are following the FACTS principles and thinking critically about each aspect of your portfolio, you’ll have a great shot at success over the long-haul.

    Good luck

  • Doug01

    I learned a lot from your book. There was one sentence that I didn’t understand though: “Tax managing hedging events by shorting exposures that are highly correlated” Could you go into more detail about this?

    I wish you all the best at alpha architect. In some ways, it looks like you’re trying to do what DFA does, but with decreased advisory costs. You’re targeting a more knowledgeable group of investors than DFA does.

    https://www.youtube.com/watch?v=tcuVSPDHo48

    FWIW, the above video is about the origins of DFA. It mentions that DFA had significant problems during the initial period. The video implies what really made a difference for DFA was applying Fama and French’s 1992 publication.

    To make money (break even?) in a taxable account, one must invest in a tax sensitive manner. For American domiciled investors, your products are highly tax sensitive. But for those outside the USA, it’s different. If you’re an investor outside the USA in a country that DFA operates in, it offers funds that are domiciled in that country. That improves tax efficiency for foreign investors.

  • Hi Doug,

    Thanks for sharing the video. Great stuff.

    Yep, our idea relative to DFA is to deliver more active, more tax-efficient, and more direct-to-consumer portfolios. The upside is we can potentially create more long-term value, but the downside is our business model isn’t scalable to $500B AUM. Pick your poison I guess.

    re Taxes:
    “Tax managing hedging events by shorting exposures that are highly correlated”

    Let’s say you own REIT at $1 and it’s now at $10, but a timing rule says you need to hedge to 0% exposure. Instead of selling the REIT and incure a taxable liability, you can short something that is 99% correlated to bring the effective exposure down to ~0%. We use futures to do this, but you can also use ETFs (e.g., VNQ vs IWR). This can get complicated, but the tax benefits of continued tax-deferral can be worth it.

    re Ex-US focus:
    We are currently focused on US taxpayer issues and haven’t branched into exploring how to make our systems more tax-efficient for foreign investors. We’d love to do this at some point, but our resources are more limited than DFA’s 🙂

  • Raffi

    Hi Dr. Gray,

    First off, I think I speak for everyone in the comments section by saying your responsiveness and interactiveness is very much appreciated.

    Second, despite your research focusing on more of an active management style in terms of managing a position through ROBUST, which I have been incorporating into my Roth IRA, I wanted to know whether you would be so kind to share your thoughts( and research results) on a Dollar Cost Averaging strategy for someone who just turned 30 and has been investing for 7-8 years.

    From a psychological standpoint, I can appreciate that the “fear” that can creep up on market participants and investors, as I saw first hand during the financial crisis, can make it difficult to DCA. However, does it out perform active management in the long-run for someone like me, who has the ability to contribute a constant dollar amount to his Roth IRA?

    Thank you very much in advance for all of your help and knowledge!

    Raffi

  • Raffi,

    Here is an in-depth post on ROBUST: https://alphaarchitect.com/2015/08/13/avoiding-the-big-drawdown-is-downside-protection-helpful-or-heresy/. If you have the ability to stick to the program, the evidence is fairly compelling that trend-following helps curb massive drawdowns. That said, it is NOT for everyone and you have the horizon to compound out of a big drawdown.

    Buy and hold with a dollar-cost-average concept is also a reasonable approach and also can be easier to follow for an investor. Honestly, as long as you are following a process and stick to a reasoned program, you’re gonna be a-okay in the long-haul. I say go for it.

    If you aren’t comfortable implementing ROBUST on your own, we also have an active robo solution that is currently in beta: http://www.alphaarchitect.com/robo.