Managing Portfolios and Investor Behavior in a Complex Economy

By Phillip Toews

The investment advisory industry is beset by two largely unacknowledged problems. First, the history and risks of both stock and bond portfolios far exceed what most investors and advisory practices can endure. Second, the approach that most advisors take to communicate about portfolios does virtually nothing to prevent investors from known biases and bad decision making.

In The Behavioral Portfolio, Felipe Toews guides advisors build all season’s portfolios designed to both invest optimistically and address the real-world contingencies of investing in a high debt world. He begins by re-defining foundational portfolio objectives such such as gains with the market, low risk of extreme losses, and protection against high inflation. He then walks us through the process of quantifying and building these portfolios, illustrating that in so doing, advisors can improve probabilities of success.

Then, he shares specific, pro-active strategies that aim to train investors to both understand portfolio components and embrace the sometimes contrarian decision making that not only helps avoid known biases, but poises investors to take advantage of the corrosive behavior of the crowds.

The result of executing behavioral portfolios and communications is that advisors can provide investors with return profile that matches their needs, and the communications tools necessary to keep investors on the right path regardless of market turbulence.

Phillip Toews is the lead portfolio manager of the Toews Funds and the AgilityShares ETFs and the co-founder of the Behavioral Investing Institute. Over the past 30 years, he has managed portfolios with the aim of participating in financial markets but addressing the possibility of extreme loss. Along the way, he discovered that advisors were powerless to help investors avoid common pitfalls at selling low and buying high. Over the past decades, he and his team have coached thousands of advisors to adopt behavioral investing and change their approach to investor communications. He appears regularly on Bloomberg news, CNBC, Reuters, and is a guest columnist at Barrons. He lives in New York.