Review: “Where does the money go?” Written by Christian Henke and Salah Eddine Bouhamidi

It's rare to find a book about trading and investing discussed so convincingly and clearly that it instantly inspires you. It was very exciting to see the authors in person at their book launch in Zurich at IG Bank at the end of August 2024.

As a former finance lecturer and forex trader, I was impressed by how the authors turn their years of experience and analysis at the cutting edge of trading into an engaging guide to building and managing an active trading and investing portfolio.

Where does the money go?

The first reason for this title is surprisingly simple and lies in the name of the book. Investors should always monitor where money is going in the wholesale markets. This principle is reminiscent of the well-known investigative journalism slogan “follow the money,” which became popular during the Watergate scandal in the United States. Example: What asset has attracted the most capital since the beginning of the year? Interestingly, it was cocoa for which futures prices rose from just over $4,000 at the beginning of the year to over $7,000 at the end of August.

• Simple portfolio management: The authors, both executives of IG Group, present a simple model for consistent asset allocation within a portfolio. These visual aids and accompanying recommendations show investors how to effectively diversify and adjust their portfolios over time.
• It proved successful: The authors have a proven track record of identifying trends and exploiting them profitably. They explain the thinking behind their strategies and share their resources to empower readers to achieve similar success.

Active and diversified asset allocation

Trading, investing and asset allocation are no secret science, although they can come with high costs. Private bankers often talk about portfolio allocation, but for those who are not high-net-worth individuals, there are usually only standardized recommendations based on expensive ETFs. Cheaper alternatives like apps offer similar services, but the underlying algorithms are often arcane. As a result, many investors invest too heavily in one asset class, typically ETFs, and miss the benefits of true diversification.

Good time to get in and out

Many books explain the importance of a balanced trading and investment portfolio. However, this work goes further and describes not only the optimal allocation, but also when changes are necessary.

The authors' top-down approach is presented in a clear diagram. The following is one of the clearest guides to choosing asset classes by region, sector and value. Additionally, it explains how metrics are used to determine which assets to acquire and how information is quickly compiled to evaluate potential investments. One approach is to compare relative performance over different time periods (for example, one week versus three months).

Detailed analyzes and practical examples

All of this is covered in the first 50 of 150 pages. In Part Two, the authors delve deeper into technical analysis methods and different asset classes. If you have ever been interested in chart formations such as the shoulders and the head and shoulders, this section explains their practical application in trading. The third part reinforces the main points with concrete examples. Developing the right habits is crucial to success, and the authors support this with regular blogs and podcasts to help keep you on track.

Establish trading and investments routinely

Education, research and risk management tools such as stop loss orders are essential in any trading book. However, this book stands out for its practical advice and proven strategies. If you've only read one book about trading and investing, it should be this one – and put the lessons it contains into practice!