Index
Derek Moore
(Razor Wealth Management LLC, Scottsdale, AZ, USA)
ISBN: 978-1-78743-554-4, eISBN: 978-1-78743-553-7
Publication date: 9 February 2018
This content is currently only available as a PDF
Citation
Moore, D. (2018), "Index", Broken Pie Chart, Emerald Publishing Limited, Leeds, pp. 201-206. https://doi.org/10.1108/978-1-78743-553-720181004
Publisher
:Emerald Publishing Limited
Copyright © 2018 Emerald Publishing Limited
INDEX
Accumulation, investor’s lifecycle
, 3
Aggregate Bond Index ETF
, 59
“Am I Diversified?” (Jim Cramern)
, 52
Annual investment returns
compared with equity balance curve
, 115
Apple
, 54
Balance sheets, Central Bank
, 90–93
Bank of England
historical interest rates
, 23, 94
Bank rate
, 23
Barclays High Yield 1–3 Year Index
, 165
Basis points (BPS)
, 20, 21
Bear market
, 65, 66, 75
Big Short, The (2015)
, 162
Black Swan risk
, 172, 196
Bond(s)
open market
, 20
past performance versus future results
, 19–34
returns
, 1–2
total turn
, 19–20
yields, inflation impact on
, 30–34
Breakeven balance
, 116
Buffered equity
, 155
benefits to risk-adjusted returns
strategies
, 163–165
Buffered Indexed Strategies
, 164, 168, 170, 172
equity risk
, 167–170
Buffet, Warren
, 77, 79
Buffet Indicator
, 77
Bureau of Labor Statistics
, 95
Buy 30-Year Treasury Bonds and Check Back in 30 Years
, 32
Central Bank balance sheets
, 90–93
Chicago Board of Options Exchange (CBOE)
, 126, 139
Citigroup
, 89
Classic asset allocation models
, 55
CNBC
, 113, 119, 128
Mad Money
, 52
Committee on Aging (U.S. Senate)
, 38, 40
Concentrated assets, in exchange-traded funds
, 53–55
Consumer markets, low interest rates effect on
, 97–100
Cost of Living Adjustment (COLA)
, 47, 113
Coupon problem
, 22, 24, 27, 28
Covered call strategies
, 171
Cramern, Jim
, 52
Credit default swaps
, 162
Currencies, and interest rates
, 95–97
Debt
to GDP
, 83, 84–85, 87, 88
municipal
, 88–90
outstanding, interest expense on
, 85, 86
state
, 88–90
Distribution, investor’s lifecycle
, 4
Diversification
, 124–126
See also Diversification, failure of
Diversification, failure of
, 51–64
classic asset allocation models
, 55
concentrated assets in exchange-traded funds
, 53–55
dividend stocks, as hedge
, 61–64
fixed income, as hedge
, 58–61
sectors and regions
, 55–58
short-term market corrections
, 60–61
Dividends collection, synthetic options to
, 160–161
Dividend stocks, as hedge
, 61–64
Dotcom
, 83
Dow Jones Index
, 5, 6, 10, 14, 61–63, 125, 194
Effective duration
, 20
Equity
balance curve. See Equity balance curve
buffered equity
, 155, 163–165, 168–171
hedged
, 133–137, 155
risk
, 167–168
See also Equity positions, synthetics of
Equity balance curve
, 108–110
compared with annual investment returns
, 115
Equity positions, synthetics of
, 157–173
buffered equity benefits to risk-adjusted returns
, 168–171
buffered equity strategies
, 163–165
covered call strategies
, 171
dividends collection
, 160–161
equity risk
, 167–168
profit-and-loss graphs
, 158–160
risk shifting
, 165–166
structured notes
, 162–163
using options example
, 160
White Swan risk
, 172–173
European Central Bank
, 92
European Union (EU)
, 91
Eurozone
, 87–88
Exchange-traded funds (ETF)
, 20, 52, 53, 124–126
concentrated assets in
, 53–55
Federal Drug Administration (FDA)
, 51
Federal Reserve Bank
, 24, 33, 59, 83, 84, 89, 96, 99
Fixed income, as hedge
, 58–61
401k plan
, 36, 41, 43, 44, 48, 105, 109
FOX Business
, 119
Goldilocks economy
, 100
Government debt expansion
, 84–88
Great Recession
, 35–36, 69, 84, 85, 89, 91, 99, 104, 110, 120, 162
Greenspan, Alan
, 72
Gross domestic product (GDP)
, 83, 86, 100
debt to
, 83, 84–85, 87, 88
growth rate
, 69, 70
Gross national product (GNP)
historical ratio total stock market cap to
, 77, 78
Hedged equity
, 155
down side of
, 136–137
strategies
, 133–136
Hedges
, 109–138
diversification
, 124–126
dividend stocks as
, 61–64
exchange-traded funds
, 124–126
factors to consider
, 137
fixed income as
, 58–61
hedged-equity, down side of
, 136–137
hedged-equity strategies
, 133–136
options
, 130–133
problems with classic portfolio asset allocation
, 130
stop-loss limit
, 122–124
stop-loss market
, 121
stop-loss orders
, 121
VIX Index
, 126–129
Historical returns
averages
, 3
probabilities of
, 11–17
shorter time periods, average of
, 4–10
Implied volatility
, 141, 143–148
Individual Retirement Account (IRA)
, 43
Inflation
, 24, 111–114
impact on bond yields
, 30–34
rise of
, 93–95
Inflation adjusted annual income distribution
, 112
Interest rates
, 141
Intrinsic volatility
, 141
Investors
, 1
average of shorter time periods, realization of
, 4–10
lifecycle for
, 3–4
IShares
7- to 10-Year Treasury Bond ETFs
, 29
20 + Year Treasury Bond ETFs
, 29
Kaiser Foundation
, 113
Lehman Brothers
, 162
Lifecycle, for investors
, 3–4
Life expectancy
, 107
Lyft
, 95
Market value
, 19–22, 24–28
Medicare
, 86
Minimum Acceptable Return (MAR)
, 182–187
Minimum band 1 dealing rate
, 23
Minimum lending rate
, 23
Mortgage-backed securities
, 45
Municipal debt
, 88–90
Mutual funds
, 20, 22
Nasdaq 100 Index ETF
, 7, 53, 124, 125
National Business of Economic Research (NBER)
, 70, 72
historical recessions and recoveries, determination of
, 72–74
Negative interest rate policies (NIRP)
, 33
Netflix
, 149
Net present value (NPV)
, 80
Nikkei 224 Index
, 6
Nikkei 225 Index
, 6–7
Nominal return
, 24
Office of Management and Budgets (OMB)
, 86–87
Official bank rate
, 23
Open market
, 20
Option Greeks
, 141–143, 172
Option premium selling
, 148–150
probability-based
, 150–154
benefits and risks in
, 154–155
Options
, 130–133, 157
example, synthetic positions using
, 160
premium selling. See Option premium selling
price, components of
, 140–141
volatility in relation to
, 140
Pension income
, 113
Personal Consumption Expenditures (PCE)
, 31, 32
Pie chart
, 1–17
Point-to-point flat cumulative return
, 75
Portfolio asset allocation, problems with
, 130
Portfolios
, 1, 19, 31, 33, 34
Preservation, investor’s lifecycle
, 3–4
Price-to-earnings ratios
, 75, 76
Probability-based option premium selling
, 150–154
Profit-and-loss graphs
, 158–160
Rate of interest
, 19, 20, 22–24, 26–33
basis points
, 20, 21
currencies and
, 95–97
low, effect on consumer markets
, 97–100
spike in
, 23, 31, 33
Real estate investment trusts (REITs)
, 44
Real return
, 24
Recessions
, 69–70, 72–77, 194
defined
, 69
Rental income
, 113
Repo rate
, 23
Required Minimum Distribution (RMD) period
, 104
Retirement calculator, assumptions for
, 108
Return on investments (ROI)
, 114–117
Risk-adjusted returns
, 175–180, 196
buffered equity benefits to
, 168–171
Risk shifting
, 165–166
Rolling
, 172
S&P 500 Index
, 7–9, 11, 13, 38, 139
buffered equity strategies
, 163–165
Composite Index
, 65–68
equity risk
, 167, 168
exchange-traded funds
, 53, 56, 75, 124, 134, 135, 158
option premium selling
, 150, 153
options price
, 141
risk-adjusted returns
, 175
Total Return Index
, 68–69
White Swan risk
, 172
Savings
, 109–111
Securities and Exchange Commission (SEC)
, 35, 38–40
Sequence of returns
, 103–117
inflation
, 111–114
return on investments
, 114–117
savings
, 109–111
Shark Tank
, 51
Sharpe Ratio
, 180–182, 188, 196
equities, historical
, 189–190
Shorter time periods
average of, realization of
, 4–10
traditional asset allocation issues in
, 10–11
Short-term market corrections, diversification during
, 60–61
Short volatility
, 155, 196
Sideways
, 65–82
60 Minutes
, 89
Social Security
, 86, 113
Sortino Ratio
, 182–188
Spain’s 10-Year Government Bond
, 28
Spike in interest rate
, 23, 31, 33
State debt
, 88–90
Stop-loss limit
, 122–124
Stop-loss market
, 121
Stop-loss orders
, 121
Structured notes
, 162–163
Switzerland’s 10-Year-Government bond
, 93
Target date funds
, 35–49
composition of
, 37–38
hearings point to issues with
, 38–41
individual situations, addressing
, 42–48
near-term target-dated funds, 2008 great recession and
, 35–36
10-Year Treasury Bond
, 20, 22–33
Traditional asset allocation
, 24
Treasury inflation protected securities (TIPS)
, 86
Trimmed mean inflation rate
, 114
20-Year Treasury Bond
, 29, 30
exchange-traded funds
, 60
Uber
, 94
U.S. Dollar Index
, 96
U.S. Large Cap
, 56, 176
U.S. Senate
Committee on Aging
, 38, 40
U.S. Treasury
, 70, 85, 91, 94
historical Sharpe Ratios equities
, 189–190
maturities within Federal Reserve balance sheet
, 92
securities, interest rate on
, 86, 87
10-Year Bond
, 20, 22–33, 176
20-Year Bond
, 29, 30
VIX Index
, 126–129
Volatility
, 1, 3, 10, 14, 33, 40, 45, 46, 52, 56, 69, 121, 126, 127, 132, 139–155
implied volatility
, 143–148
Option Greeks
, 141–143
option premium selling. See Option premium selling
options price, components of
, 140–141
in relation to options
, 140
short
, 155, 196
Walmart
, 95
White Swan risk
, 172–173
Whitney, Meredith
, 89
Yield curve
, 70, 72, 76
Zero-interest rate policy (ZIRP)
, 33
- Prelims
- 1 What’s in Your Pie Chart?
- 2 Why Bonds’ Past Performance Can’t Equal Future Results
- 3 Target Date Surprise
- 4 Why Diversification Fails
- 5 What If We Go Sideways or Down?
- 6 This Time Is Different?
- 7 Why Sequence of Returns Matter
- 8 Hard Floors and Hedges
- 9 Volatility Is an Emerging Asset Class
- 10 Synthetics to Build Positions with a Seat Belt
- 11 Risk-Adjusted Returns Matter
- 12 Final Thoughts
- Bibliography
- Index