Apr 22, 2019
Derek Moore and Jay Pestrichelli are back with part 2 of their discussion around the myths prevalent in the 60/40 portfolio. This week they highlight how bonds with low yields may have even more potential interest rate risk than investors think. Plus, they elaborate on why some diversification strategies fail touching on increased risk of the All-Weather Portfolios and Risk Parity Strategies. Finally, they expand on the “Hedgers Opportunity” where a good hedged equity strategy may allow investors to miss much of a selloff and have a chance at buying more shares when prices are depressed.
- • How is sensitivity to interest rates determined for bonds?
- • How is Modified Duration or Macaulay Duration altered by time to a bonds maturity and coupon percentage rates?
- • What would happen to bonds prices should interest rates rise?
- • How interest rates rising would affect the real return for bond investors
- • What is the All-Weather Portfolio concept?
- • What are the assets in an All-Weather Portfolio?
- • Why the All-Weather Portfolio concept may have more risk than before?
- • Why using historical back testing for All Weather Portfolio Strategies may not pick up future expected returns and risks
- • What is the Risk Parity Strategy?
- • How a Risk Parity Strategy leveraging up the fixed income or bond component may have more risk than people think
- • How changing correlations between equities and bonds could break the Risk Parity Strategy
- • What is the Hedgers Opportunity and how a good hedged equity strategy can allow potential investments and lower prices?
- • How alternative strategies like Hedged Equity have more defined outcomes including downside floors than normal diversification.
- • Discussion of real versus nominal returns
Mentioned in this Episode:
Part I Podcast Myths of the 60/40 Portfolio with Jay Pestrichelli and Derek Moore http://brokenpiechart.libsyn.com/discussing-myths-around-the-classic-6040-portfolio-part-i
Contact Derek Moore www.razorwealth.com
The Hedgers Opportunity by Jay Pestrichelli https://www.investmentnews.com/article/20190401/BLOG09/190409991/the-hedgers-opportunity
Historical Gold Prices https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM#0
How do Treasury Inflation Protected Securities TIPS work? https://www.thebalance.com/how-do-tips-work-417128