As I read Investments: Principles of Portfolio and Equity Analysis, I was struck by how much the investment profession has evolved over the past 40 years. Although the changes have been mostly for the better, the market events of the past decade suggest that we still have more to learn in order to avoid repeating some of our recent mistakes. We witnessed the bursting of two bubbles—technology and housing/credit—which resulted in a lost decade for equities: The S&P 500 generated negative returns for the 10 years ended December 2009.
I remember learning modern portfolio theory as a student when it was indeed relatively modern. Although analytical techniques for managing portfolios have improved since the 1970s, the investment landscape has become much more complex. The number of markets, institutions, and securities has exploded alongside improvements in security selection/analysis, portfolio construction, and risk management. Aided by ever-increasing information and computing power, institutional investors have become bigger, more numerous, more global, and seemingly more sophisticated. They have attracted the best and brightest from the world’s leading universities. These growing armies of professional investors all compete to be the next Warren Buffett or top hedge fund manager.
New investment texts that keep up with the changing markets and analytical techniques are needed. Investments: Principles of Portfolio and Equity Analysis is a valuable addition to the bookshelves ...