Wednesday, August 1, 2012

Wilson, Visual Guide to Financial Markets

The third volume in Bloomberg’s new “visual guide” series, David Wilson’s Visual Guide to Financial Markets (Bloomberg/Wiley, 2012) targets the beginning investor. It is a well written, ingeniously organized primer.

In a shift from the ordinary, Wilson looks at the basic financial instruments in the context of their issuers. Instead, for instance, of devoting a chapter to bonds, he discusses bonds in two chapters: government and companies.

After his description of each security (currencies, bills, and notes and bonds in the government chapter and money markets, corporate notes and bonds, and stocks in the companies chapter) Wilson turns to the so-called three Rs: returns, risks, and relative value. He packs a lot of useful information into these three R sections.

Hard assets don’t lend themselves to an issuer lens, so Wilson approaches gold, commodities, and real estate head on, once again with a three Rs section after each.

Wilson rounds out his first take on direct investing with a chapter on indexes. He then begins anew, revisiting government, companies, and hard assets—this time describing more complex securities. The government chapter deals with municipal bonds and mortgage-backed securities, the companies chapter with preferred stock, convertible securities, and bank loans, and the hard assets chapter with master limited partnerships and real estate investment trusts. The three Rs structure remains intact.

The second part of the book is devoted to indirect investing—derivatives (futures and forwards, options and warrants, and various kinds of swaps), mutual funds and ETFs, and indexes based on futures, options, swaps, and funds.

Throughout the book are color charts that illustrate key points and the sidebars that I still find annoying in this series.

If, as Bill Gross recently said, “the cult of equity is dying,” investors may want to look around for alternatives. Wilson’s Visual Guide to Financial Markets introduces the reader to a wide range of investing opportunities in an engaging and informative way.

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