in the The other wayRobert J. Klosterman’s successor The Four Horsemen of the Apocalypsethe author once again offers his clever financial and investment advice. The subtitle of the book “Illuminate the path to volatility while delivering equity-like returns‘ is apt, as Klosterman advocates exactly what investors should do to achieve optimal monetary returns from their investment portfolios. Klosterman took his title from Robert Frost’s famous poem “The path not taken‘ which he quotes at the beginning of The Other Path, a fascinating book that offers investors insight into a different type of investment approach than they may be used to, although it is a very effective approach designed to help investors build equity earn. To generate returns while reducing the volatility experienced by many other investors who only try more traditional approaches when planning their portfolios.
Klosterman’s book, The other way, is relatively short at only 60 pages, not counting the appendices at the end, but his approach to investing, which he details in it, is very informative. The book is certainly interesting and useful for anyone who wants to reduce their investment risks while maximizing their potential returns.
The very title of Klosterman’s book, The other way, alludes to an investment strategy or path that most people have traditionally followed, which is to invest their money entirely in stocks, bonds, and cash. Such an approach is a tried and tested approach that has proven beneficial for many investors, but has also proven to be a sometimes fickle path for others. Investing in stocks, bonds, and cash is an important part of an overall investment strategy, Klosterman says, although there are other ways to diversify one’s investments and reduce the volatility that unfortunately affects many portfolios, volatility that affects the monetary value of one’s portfolio may experience a catastrophic dive.
Still, the main leg of the milk stool, investing in stocks, bonds, and cash, is an essential part of a smart investment strategy, according to Klosterman The other way. He calls it the core leg of a metaphorical three-legged milk stool, with each leg in the metaphor referring to a different but complementary strategy in investing. If an investor diversifies his portfolio and focuses not only on the core business of stocks, bonds and cash, but also invests his money in non-traditional ways, Klosterman argues, using a number of useful and informative charts and graphs, that one’s portfolio is much less vulnerable to a catastrophic financial loss and the volatility of one’s portfolio is reduced.
The second of the three legs of the milk stool is “Diversifiers” and the third leg is “Absolute Returns”. Klosterman argues that “diversifiers,” or alternative or non-traditional investments, help reduce the volatility of an overall investment portfolio. Some examples given by the author of non-traditional investments are real estate, private equity, “developed and emerging international equities”, distressed debt and managed futures. These types of non-traditional investments can reduce volatility either by exhibiting “very low correlation to traditional markets,” as Klosterman writes, or by delivering “consistent returns year-over-year with little or no volatility.”
The third leg of the milk chair, “Absolute Returns”, is also the name of Chapter Four of The Other Path. Absolute returns, according to Klosterman, are investments that “have the same qualities of a bond with the assurance of a principal return and a steady payment of interest.” The author writes that they are similar to 10-year government bonds, but “they are not backed by the full confidence and credit of the United States.” Nonetheless, Klosterman notes that the absolute return vehicle aspect can be seen as an advantage. That’s because, as the author writes, strategies with absolute return vehicles “can invest in sound ideas and don’t have to conform to the constraints of other institutions.”
An example is investing in companies that lend money to small businesses and house fins. These companies can work fast and complete loans faster than banks. Compared to banks, these companies are able to give people like real estate developers or home fixers quick access to loans in exchange for money.
in the The other way, author Robert J. Klosterman writes about a no-nonsense approach to non-traditional investing and how it can benefit one’s investment portfolio and help reduce volatility. In addition to volatility, the book examines and identifies “trouble signs” in portfolio planning, such as groupthink, market disruptions and inflation. While Klosterman recommends investors take the advice of professionals who are experts at planning investment portfolios and have a proven track record of at least a decade, The Other Path is an interesting and insightful look at adding non-traditional investments to an individual’s portfolio. Whether investors plan and plan their investment strategies themselves or with professional advice, The other way is eye-opening essential reading designed to educate investors about types of alternative investments that can balance their portfolios and reduce the negative effects of market volatility. It’s a book I would highly recommend to anyone who has ever thought about expanding their investment portfolio and adding non-traditional investments to it.