A Handbook of Mutual Fund Investing: A New Perspective, A New Paradigm: Fund Screen Investigation (F.S.I.) -- An Introduction

Fund Screen Investigation (F.S.I.) is a proprietary, risk-managed mutual fund portfolio construction process, generating portfolios characterized by varying levels of historical risk and return and based, in part, on the principles and statistics of Modern Portfolio Theory (MPT), developed by long-time financial advisor and author of A Handbook of Mutual Fund Investing: A New Perspective, A New Paradigm", Barry G. Dolgin.

Its essentially quantitative character is complemented and supported by a set of assumptions regarding financial markets and investor psychology and, as a result, a very specific model of investing emerges.

Underlying the entire F.S.I. process, quantitatively and philosophically, is the foundational assumption that the only thing you can control as an investor is your exposure to risk. A corollary to this assumption is that no one can consistently "outguess" or successfully time any market, consistently choose which sectors to overweight or underweight, or consistently outperform any index or benchmark. And, by the way, you can't even control your risk exposure unless you have some idea of where the risk has, at least historically, arisen.

FSI uses standard deviation as its risk measure. This replaces the traditional conservative, moderate and aggressive nomenclature, or the simplistic "on a scale of 1 to 10, where 1 is extremely conservative and 10 extremely aggressive, where do you fall?" Well, your 5 might be my 8 and my 5 might be your 3, etc. etc.

What does it all really mean? Let's say you and your advisor determine that your risk tolerance is 5, let's call it moderate (whatever that means). He or she suggests the traditional allocation: 60% stocks and 40% bonds. But think about it. 60% stocks. Large companies, medium, small? And in what proportions? Growth stocks and value stocks? In what proportions? International stocks? And how about emerging market stocks as part of the international allocation? And in what proportions? 40% bonds. OK. What kinds of bonds? Treasuries, agencies, investment-grade corporates, junk bonds, international bonds? And with regard to the latter, will they include sovereign bonds of developed and emerging markets? Corporates? And, of course, in what proportions? And by the way, let's not forget another variable that applies to bonds: maturity. How will they be weighted by maturity? Bottom line: we can create a huge number of different portfolios that contain 60% stocks and 40% bonds, and each portfolio will have a different historical risk profile! By using a specific number such as standard deviation as a measure of historical risk level, we are all on the same page. And let me tell you, when you're investing your hard-earned dollars, you really want to be on the same page with your financial advisor.

Thus, the overwhelming importance of the acknowledgement and measurement of risk is a recurring theme in the book, now available at amazon.com , barnesandnoble.com, books.google.com, including on Kindle and Nook.