Investors, no matter what strategy they are using, can be placed into two categories. Single-minded, inflexible hedgehogs lock into one strategy and stick with it through thick and thin. Dynamic, adaptable foxes, on the other hand, are alert for changes, learn from experience, embrace new ideas, and make the most of new trends and technologies. The key lies in being flexible and realizing that markets are dynamic.Invest Like a Fox . . . Not Like a Hedgehog shows investors how being a hedgehog can reduce returns while increasing the risk of a portfolio, and how acquiring the cunning and adaptability of the fox will improve returns while reducing risk. It reveals the shortcomings of popular but hedgehog-like investment strategies and shows how a fox-like investor adjusts to new market realities. Readers learn how to use the renowned Bayesian Theory of Probability and other guideposts from outside the world of finance to adjust their strategies and react to new information.

ROBERT C. CARLSON is Editor of the monthly newsletterRetirement Watch. He is also the managing member of Carlson Wealth Advisors, LLC. Carlson is Chairman of the Board of Trustees of the Fairfax County Employees Retirement System, which has over $2.4 billion in assets, and was a member of the Board of Trustees of the Virginia Retirement System, which oversees $42 billion in assets. He has been interviewed by or quoted in numerous financial publications and has appeared on many national television and radio programs.

Foreword ix

Preface xiii

Acknowledgments xxi

About the Author xxiii

Chapter 1 Foxes vs. Hedgehogs 1

Chapter 2 Classic Hedgehog Investment Strategies 25

Chapter 3 The Modern Hedgehog Theory 45

Chapter 4 How Foxes Look at Markets 85

Chapter 5 The Valuation Cycle in Action 111

Chapter 6 Foxes and Reverend Bayes: Rational Investing in Irrational Markets 133

Chapter 7 Advice for Foxes and Hedgehogs: Key Investment Mistakes to Avoid 177

Chapter 8 Portfolios of the Future 195

Index 227