The Empowered Investor: 7 Principles for Strategic Wealth Creation in a New Financial World

by C. Puempin, H. von Liechtenstein, F. Hashemi, Kenneth A. Loparo

Overview

Take control of your investment decisions

The investment industry is in a state of inertia. Recent events highlight an overreliance on mathematical foundations and flawed investment models. Investors need to find new paths to effective wealth creation.

The Empowered Investor provides a proven framework for wealth creation. Built around 7 key principles and practical real-world examples, the book provides insight into the limitations of traditional investment concepts, and illustrates how investors can take control of their investments. Instead of relying on often flawed financial advice, investors need to develop their own investment approach, drawing on their unique skill sets and experiences.

This book:

-Presents a practical strategy for wealth creation, based on practical experience and sound theoretical foundation;

-Provides real world cases and excerpts from interviews with highly successful investors;

-Demonstrates how investors can build on their core strengths, exploit opportunities and differentiate their investments;

-Illustrates how to protect a portfolio from threats and risks

This book will help you:

-Build on your core strengths;

-Identify and make the most of new opportunities;

-Cultivate quality networks;

-Differentiate your investments;

-Protect yourself against threats and risks;

-Understand and manage the time dimension;

-Execute with efficiency.

Written in a practical and straightforward manner, The Empowered Investor provides a robust strategic toolkit for investors, bringing the individual to the core of the investment strategy and creating new opportunities for wealth creation.

Product Details

ISBN-13:	9781137366863
Publisher:	Palgrave Macmillan UK
Publication date:	06/13/2014
Edition description:	2014
Pages:	157
Product dimensions:	5.51(w) x 8.50(h) x 0.03(d)

About the Author

Cuno Puempin is a Swiss entrepreneur, economist and private investor. He has served on many boards of directors and was a member of the international advisory board of the Blackstone Group in New York. In the past 20 years Dr. Puempin has successfully applied the seven principles of wealth creation presented in this book to his own private investments. He is a Professor Emeritus of Management and Strategy, and was Chairman of the Institute of Management at the St. Gallen University in Switzerland. Dr. Puempin is a regular speaker at leading global venues such as the World Economic Forum in Davos.

Heinrich Liechtenstein is the founder of a network of leading Angel investors in Germany, serves on the investment committee of a Family Office, and is advisory board member of a Private Equity firm. Dr. Liechtenstein is Professor of Finance in IESE Business School and specializes in entrepreneurial finance and management of wealth.

Fariba Hashemi is an Economist with extensive experience in investment strategy and decision making. She has designed, and instructed in Executive Education, Masters and Doctoral programs at International Institute for Management Development in Lausanne, Swiss Federal Institute of Technology in Lausanne, and Karolinska Institute in Skholm. Dr. Hashemi holds a Ph.D. in Economics from the University of California in Los Angeles. She currently serves on the editorial boards of two academic journals in Economics and Finance, and is an advisor to a Family Office on wealth planning and management.

Brian Hashemi is a Managing Partner at Salus Partners leading the healthcare investment practice of the firm. In this capacity he has successfully applied the strategic principles presented in this book for investments in proven medical innovations. Prior to establishing Salus Partners Dr. Hashemi was a Partner at a multi-family office leading the Direct Investment team. He holds a Ph.D. in Applied Physics from Cornell University in New York, and an MBA in Entrepreneurship and Investment Management from The Wharton School in Philadelphia. For 13 years Dr. Hashemi was responsible for the development of advanced technologies in the biomedical division of NASA, a number of which were flown in the Space Shuttle program on STS-81 and STS-84.

Table of Contents

List of Figures ix

List of Tables xi

Introduction xiii

Who should read this book? xiii

Why should you read this book? xiii

Overview of the book xiv

About the authors xvi

Acknowledgments xvii

Disclaimer xvii

Part I From Broken Investment Models to Sustainable Strategic Investing

1 Perils of the Misguided Investor: Lessons from a CFO - Part 1 3

2 Why Traditional Investment Models Don't Work 5

The truth about returns on stocks and bonds 5

Taxes, fees, and other costs 9

The temptation to follow simple graphs and the catastrophic effects of power laws 10

So is investing a bell curve game? 12

The tremendous impact of power law events 13

Why is the financial services industry (still) promoting stocks and bonds? - 5

Challenges facing near-term performance 16

Conclusion: what to expect from traditional investment concepts 17

3 The Investor Back at the Core of Investing: Lessons from a CFO - Part 2 19

4 The Essence of Strategy 25

The battle of Salamis 25

The core elements of strategy 27

Strategic principles: universal laws of life 30

5 The Empowered Investor: A New Paradigm of Investing 33

A framework for strategic wealth creation 33

Strengths: the investor at the core of investment strategy 36

The importance of strengths 36

Why are strengths neglected in finance literature? 39

How to build strengths 40

Where can strengths be built? 41

Concentrate! 43

Assign resources 44

Focus on allocation of resources 45

Be aware of risks 45

Opportunities: sources of wealth creation 46

Opportunities in the finance industry 46

Pitfalls of the finance industry 48

Types of opportunities 48

Finding opportunities: chance or methodology? 49

Start with your strengths 50

Do your homework: scan the environment 50

Apply a long-term view 50

Pitfalls of opportunities 51

Networks: support of wealth creation 53

Networks in finance 53

Why are networks so important? 55

Guidelines for building networks 56

The heart of the network: core competences 56

Networks are a two-way street 57

Strong and weak ties 58

Building your network strategy 59

Differentiation: the path to uniqueness and competitive advantage 60

Successful differentiation: Williams story 60

Prerequisites for successful differentiation 63

Building core competences for differentiation 63

Apply an indirect approach 63

Be innovative 64

Threats and risks: preventing losses 65

Continuous wealth creation without setbacks is not possible 66

How to deal with threats and risks 67

Rigorous analysis 67

Careful selection of the core competences to be built 69

Risk management by concentration of forces 69

Avoiding threats and risks 70

Use of opt ions and derivatives 71

Build networks 71

Don't over leverage 72

Diversification 73

Timing: limited strategic choices 74

Guidelines for successful timing: cycles 74

Apply the big picture 76

Clarify your investment horizon 76

Assure your strategic flexibility 77

Be creative and courageous 77

Be patient 78

Efficiency: a prerequisite for value creation 78

Fees can hamper wealth creation 78

Using networks effectively 80

Opportunity costs 80

Be selective 83

Three dimensions of efficiency 83

Making use of the framework of strategic investing 84

Strategic asset allocation 85

Part II How to Be a Successful Strategic Investor

6 Two Paths to Your Investment Strategy 91

How Paul became a successful investor by crafting his strategy 91

How Ralph designed his investment strategy with a formal process 93

Crafting vs. designing strategy 94

7 What Should an Effective Investment Strategy Contain? 97

The vision of the investor 97

The core competences the investor intends to build 99

The structure of the investment portfolio 99

Examples 104

Handling threats and risks 107

The networks the investor intends to build and use 107

Guidelines for cash and liquidity 109

Priorities for allocation of investor resources 109

The legal and tax structure 110

Example 110

3 Putting the Process of Strategic Investing into Practice 113

Essential considerations 113

Key questions to ask - information analysis 115

Questions on strengths 115

Questions on opportunities 116

Questions on networks 117

Questions on differentiation 118

Questions on threats and risks 118

Questions on timing 118

Questions on efficiency 119

Practical considerations 119

Developing options as a step to success 120

Creating alternative options 120

The moment of truth - evaluating options and making decisions 122

The hard work - implementing the strategy 123

Ensuring success - strategic control 125

9 Putting Everything Together 127

A final story: Henrys success 127

Applying the framework to all aspects of wealth creation 131

Final remarks on this new approach 131

Appendices 133

Notes 139

References 149

What People are Saying About This

From the Publisher

"After having lost trust in the financial industry the empowered investor mandates us to regain control of our investments.

A really revolutionary book that must be read by all investors open to a fundamental redesign of their investment strategy."

- Thorsten Hens, Chairman Department of Banking and Finance, Professor of Financial Economics, University of Zurich

Editorial Reviews

"After having lost trust in the financial industry the empowered investor mandates us to regain control of our investments.

A really revolutionary book that must be read by all investors open to a fundamental redesign of their investment strategy."
- Thorsten Hens, Chairman Department of Banking and Finance, Professor of Financial Economics, University of Zurich

From the Publisher