Foreword

I’m pleased to introduce the eleventh in a series of investing guides from Fisher Investments Press. This imprint—the first ever from a money manager—was launched in partnership with John Wiley & Sons to bring whatever my firm can in the way of educational materials to you, whether you’re an investing enthusiast, student or aspiring professional.

With this book on Financials, we’ve completed the 10 standard investing sectors (Energy, Materials, Consumer Staples, Health Care, Utilities, etc.) and 1 book on a region (Emerging Markets). Each book is intended to stand alone—read one or just a few on topics that interest you. However, if you like this one, you now have access to a full complement of sector investing guides—a comprehensive, do-it-yourself training program for capital markets analysis—from the comfort of your couch.

Financials may conjure bad feelings in some readers. After all, the big 2008 bear market was Financials-led and the accompanying recession particularly deep. But this book isn’t merely a retread of the primary causes and outcome of that episode—such a focus would be too narrow and wouldn’t help you shape forward-looking expectations for the sector.

Nor are Financials inherently bad. In fact, Financials firms are critical to the very functioning of healthy capital markets. All sectors, including Financials, have periods they lead and others they lag—sometimes badly. Individual sectors do occasionally fall big—but not forever. Over long periods, finance theory says all well-constructed equity categories (like sectors) should yield relatively similar returns, though traveling different paths.

And the “different paths” is where this book comes in. Your aim, as an investor, is to understand what drives a sector and its industries, and what makes it more likely for investors to bid stock prices up or down over the next 12 to 24 months.

For example, Financials firms can be particularly sensitive to new regulation. But how? They are also sensitive to interest rate moves—some industries more so than others. Which? And how do interest rates affect them? The book shows you. Financials, as I write, is the biggest standard sector (at 19% of the MSCI World Index) and is fully global—so any analysis must also include an understanding of global regulatory issues, interest rates, liquidity, securities demand and other key issues. A US-only focus can mean missing major factors that can drive the sector up or down. The book will walk you through how to understand global drivers and how to shape forward-looking expectations, no matter the market environment.

Don’t expect to get tips on hot stocks or a “formula” or secret code for finding them. In my third of a century-plus investing money for private clients and big institutions, I’ve never run across such a thing. Rather, this book provides a workable, repeatable framework for increasing the likelihood of finding profitable opportunities in the Financials sector as well as managing risk. And the good news is the investing methodology presented here works for all investing sectors and the broader market. This methodology should serve you not only this year or next, but the whole of your investing career. So good luck, and enjoy the journey.

Ken Fisher

CEO of Fisher Investments