Index

Derek Moore (Razor Wealth Management LLC, Scottsdale, AZ, USA)

Broken Pie Chart

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