COURSE SYLLABUS & OUTLINE

Transcription

1 Department of Business & Management COURSE SYLLABUS & OUTLINE Course Title: Quarter: Instructor: Meeting Times: Location: Office Hours: X The Science and Art of Investing Spring 2010 Darius G. Gagne, PhD, MBA, CFP, CFA Quantum Wealth Management darius@quantumwm.com Phone: Thursday, April 1, 2010, to June 17, 2010 (12 Meetings) 6:00pm 9:00pm 2242 School of Public Affairs Bldg., UCLA Campus By Appointment Course Description: The field of investing has evolved into a rigorous discipline based on the process of collecting and analyzing data by researchers and practitioners, hypothesis testing, and then formulating models that explain the performance of portfolios. At the same time, the field of behavioral finance has evolved to demonstrate and explain why investors do not always make financial decisions that are rational. This course explores, on the one hand, the rational, analytical approach to investing, including the efficiency of markets, the factors of risk in markets and the leading models used in the design of portfolios. On the other hand, the course also explores in detail many of the most important behavioral biases that stand in the way of investors making smart decision with their money. Intended for individual investors and financial professionals, the course borrows from numerous real client cases and will address the ultimate question of designing portfolios.

2 Course Objective and Format: The main objective of the course is to provide the students with the knowledge and intuition to begin designing investment portfolios based on rational principles reconciled with behavioral biases. We will discuss a wide range of the topics that are important in the science and art of investing. It is impossible to discuss these topics in a one-by-one, or linear fashion because many of them are so closely interrelated. Therefore, most lectures will consist of 1) a presentation with a theme that ties together several topics, and 2) a case based on a real client situation, where each case serves the purpose of demonstrating several of the important topics of the course. Although we will cast a wide net over the range of topics, we will also dig deeply into a good number of the topics. Students are encouraged to let me know if there are topics for which they have a particular interest or for which they would like to understand more thoroughly. In addition, we will have several guest speakers who are experts on certain topics, providing clarity to topics and balance on perspectives. The following is a list of the topics: Behavioral finance Brinson, Hood & Beebower study Efficient markets Market timing (active mgt) vs. buy-hold (passive mgt) Security picking (active mgt) vs. indexing (passive mgt) vs. risk-factor mgt Diversification Asset allocation Total market approach Goals, setting goals What is risk, what is risk tolerance Risk and return go hand in hand Investment philosophy Investment taxes and tax efficient investing Account types Asset location Dividends & home-made dividends After-tax wealth vs. minimizing taxes Wealth mgt vs. investment mgt Investment expenses Capital markets Public vs. private investments Mutual funds, ETFs Equities International and emerging markets Bond market, MBS/CDOs/CDS, trust deeds Real estate, LLC, LPs, TICs, REITs, funds Commodities, timber, water, other real assets Hedge funds Business venture, passive and active Options, futures and derivatives Rebalancing Technical analysis Fundamental analysis Bottom-up portfolio design Macro-economic analysis Top-down portfolio design CAPM Fama-French model Suitability (broker) vs. fiduciary (RIA) Financial planning, budgeting & saving Your mortgage and leverage Estate planning Please note that behavior finance and the associated behavior biases will appear throughout most of the lectures and topics.

3 COURSE OUTLINE Week Week One, April 1 Week Two, April 8 Week Three, April 15 Week Four, April 22 Week Five, April 29 Week Six, May 6 Week Seven, May 13 Week Eight, May 20 Week Nine, May 27 Week Ten, June 3 Week Eleven, June 10 Week Twelve, June 17 Topic What is investing? Capital markets The basics of diversification Intro to behavioral finance Case: intro to portfolio design Equities, total market approach Bond market basics Mutual funds, ETFs Case: long time horizon, high net-worth vs. cost-constrained portfolio Active management and security selection Brinson Hood study and efficient markets Fama-French model Case: couple within 10 years of retirement Guest speaker: Joe Chrisman, CFA, Dimensional Fund Advisors (DFA) Case: risk-factor based portfolio design Guest Speaker: Cam Davis, Bernstein Global Wealth Management Case: actively managed portfolio design Guest Speaker: Cynthia Harrington, CFA, Cynthia Harrington Coaching What is risk and risk tolerance Behavioral biases, Goals, financial planning Case: financial planning driven portfolio design After tax wealth vs. minimizing taxes Homemade dividends Tax efficient investing Case: tax efficient portfolio design Guest speaker: Amita Sheth, Pacific Investment Mgmt Co. (PIMCO) More on bonds Macro economic analysis Case study: the all-bond portfolio Guest speaker: Ken Chong, Commercial Investment Brokerage Corp. Commodities Real estate Business ventures, derivatives Mortgage and leverage Case: diversification Broker vs. fiduciary Passive vs. active management debate Market timing and stock picking Case: retired couple Guest speaker: Jonathan Forster, Weinstock, Manion & Co. Estate planning considerations Case: A-B trust portfolio design Putting it all together The full wealth management plan

4 Course Readings: 1. The Psychology of Investing, Fourth Edition, by John R. Nofsinger. Published by Prentice Hall. 2. There will be occasional articles provide from various sources. Course Materials: Financial calculator such as the Hewlett Packard 12C or the Texas Instruments BA II. s: On the first day of class, each student should provide me with their address. Class communication outside of class will primarily be conducted by and Blackboard. Grading: Course grades will be based on class participation and completion of projects as shown below. % 50% 50% Item Class Participation Home Work Projects A B C D F Please note that ALL COURSE GRADES ARE FINAL. Reading Assignments: There will be occasional reading assignments from the Course Readings to prepare for upcoming lectures and to reinforce topics. Homework Projects: There will be regular homework projects which will give you the opportunity to solidify your understanding of the course material. Assignments will range from Excel spreadsheet modeling to internet research. These projects will play a core role in your learning experience; they will replace traditional exams; lastly, they are intended to be enjoyable and useful. Class Participation: Class participation is defined as actively raising or answering questions during weekly class discussions. Students must substantially contribute and share their personal opinion, experience, and knowledge to these discussions. Class participation will be evaluated based on the following: The quality of your contributions. The ability of your comments to motivate and engage others in a collaborative effort.

5 Incompletes: The interim grade Incomplete may be assigned when a student's work is of passing quality, but a small portion of the course requirements is incomplete for good cause (e.g. illness or other serious problem). It is the student s responsibility to discuss with the instructor the possibility of receiving an I grade as opposed to a non-passing grade. The student is entitled to replace this grade by a passing grade and to receive unit credit provided they complete the remaining coursework satisfactorily, under the supervision of and in a time frame determined by the instructor in charge, but in no case later than the end of the next academic quarter. At that time, the Registrar will cause all remaining Incompletes to lapse to the grade "F". Note: Receiving an I does not entitle a student to retake all or any part of the course at a later date.