Competitive Advantage in Investing: Building Winning Professional Portfolios by Steven Abrahams

Competitive Advantage in Investing: Building Winning Professional Portfolios by Steven Abrahams

Part I
Theory

1

Welcome, Harry Markowitz
In the Beginning
Imagine a simple beginning. You have some spare cash. You have covered
your daily cost of living and other bills, and it's rattling around in your
pocket. You start thinking about what you might do with it. Other than
spend it, that is. That is the beginning. With that thought, you have become
an investor.
Or imagine that you are sitting at a bank or insurance company or mutual
fund. Or a hedge fund or some other place that invests professionally. In
front of you is a number with the cash you have to invest. You have work to
do.
You start penciling out a list. It's short at first. Maybe you think about
putting the money in a drawer just because it's convenient. Perhaps you
think about putting the money in a bank. Or you think about making a loan
to someone or some company somewhere in the world. You think about
investing as an owner of a business or several businesses. You imagine a
budding international empire of businesses. The list has only started.
You could buy a bond from a government or from a company somewhere in
the world. You could buy stock. You could buy an option, where someone
takes a payment today and agrees to either buy or sell something at a certain
price in the future. You could buy insurance or a contract that works like
insurance, where someone takes a payment today and agrees to cover losses
or damage in the future. You could buy gold or silver, wheat or orange
juice, oil or other commodities. You could buy an apartment or an
apartment building, an office building, or other commercial property. That's
a lot to consider, but the list goes on.
You could buy shares in funds managed by professional investors—even if
you are a professional investor yourself. The fund would invest on your
behalf in any or all of the available markets. You could buy shares in funds

Competitive Advantage in Investing: Building Winning Professional Portfolios by Steven Abrahams