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Rebalancing
In finance and investing, rebalancing of investments (or constant mix) is a strategy of bringing a portfolio that has deviated away from one's target asset allocation back into line. This can be implemented by transferring assets, that is, selling investments of an asset class that is overweight and using the money to buy investments in a class that is underweight, but it also applies to adding or removing money from a portfolio, that is, putting new money into an underweight class, or making withdrawals from an overweight class. History Now a commonplace strategy, rebalancing can be traced back to the 1940s and was pioneered by Sir John Templeton, among others. Templeton used an early version of the cyclically adjusted price-to-earnings ratio to estimate valuations for the overall U.S. stock market. Based on the theory that high stock valuations led to lower expected return on investment over the next few years, Templeton allocated a greater percentage of a portfolio to stocks w ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Sir John Templeton
Sir John Marks Templeton (29 November 1912 – 8 July 2008) was an American-born British investor, banker, fund manager, and philanthropist. In 1954, he entered the mutual fund market and created the Templeton Growth Fund, which averaged growth over 15% per year for 38 years.William Greene (1999)The Secrets Of Sir John Templeton(January 1, 1999). CNN Money, accessed 29 August 2020 A pioneer of emerging market investing in the 1960s, ''Money'' magazine named him "arguably the greatest global stock picker of the century" in 1999. Early life and education John Marks Templeton was born in the town of Winchester, Tennessee, and attended Yale University, where he was an assistant business manager for campus humor magazine '' Yale Record'' and was selected for membership in the Elihu society. He financed his tuition with a scholarship, odd jobs and winnings from playing poker, a game at which he excelled. He graduated in 1934 near the top of his class. He attended Balliol College, ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Constant Proportion Portfolio Insurance
Constant proportion portfolio investment (CPPI) is a trading strategy that allows an investor to maintain an exposure to the upside potential of a risky asset while providing a capital guarantee against downside risk. The outcome of the CPPI strategy is somewhat similar to that of buying a call option, but does not use option contracts. Thus CPPI is sometimes referred to as a convex strategy, as opposed to a "concave strategy" like Constant mix (investment), constant mix. CPPI products on a variety of risky assets have been sold by financial institutions, including equity indices and credit default swap indices. Constant proportion portfolio insurance (CPPI) was first studied by Perold (1986)André F. Perold (August 1986). "Constant Proportion Portfolio Insurance", Harvard Business School. for fixed-income instruments and by Black and Jones (1987), Black and Rouhani (1989),Fischer Black and Ramine Rouhani (1989). "Constant Proportion Portfolio Insurance and the Synthetic Put Option ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Asset Allocation
Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. The focus is on the characteristics of the overall portfolio. Such a strategy contrasts with an approach that focuses on individual assets. Description Many financial experts argue that asset allocation is an important factor in determining returns for an investment portfolio. Asset allocation is based on the principle that different assets perform differently in different market and economic conditions. A fundamental justification for asset allocation is the notion that different asset classes offer returns that are not perfectly correlated, hence diversification reduces the overall risk in terms of the variability of returns for a given level of expected return. Asset diversification has been described as "the only f ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Finance
Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Administration wich study the planning, organizing, leading, and controlling of an organization's resources to achieve its goals. Based on the scope of financial activities in financial systems, the discipline can be divided into Personal finance, personal, Corporate finance, corporate, and public finance. In these financial systems, assets are bought, sold, or traded as financial instruments, such as Currency, currencies, loans, Bond (finance), bonds, Share (finance), shares, stocks, Option (finance), options, Futures contract, futures, etc. Assets can also be banked, Investment, invested, and Insurance, insured to maximize value and minimize loss. In practice, Financial risk, risks are always present in any financial action and entities. Due ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Great Moderation
The Great Moderation is a period of macroeconomic stability in the United States of America coinciding with the rise of central bank independence beginning with the Volcker shock in 1980 and continuing to the present day. It is characterized by generally milder business cycle fluctuations in developed nations, compared with decades before. Throughout this period, major economic variables such as real GDP growth, industrial production, unemployment, and price levels have become less volatile, while average inflation has fallen and recessions have become less common. The Great Moderation is typically attributed to the adoption of standards for macroeconomic targeting such as the Taylor rule and inflation targeting. However, some economists argue technological shifts also played a role.Ćorić, Bruno. "The Sources Of The Great Moderation: A Survey." Challenges Of Europe: Growth & Competitiveness – Reversing Trends: Ninth International Conference Proceedings: 2011 (2011): ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Contrarian Investing
Contrarian investing is an investment strategy that is characterized by purchasing and selling in contrast to the prevailing sentiment of the time. A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company's risks, and understates its prospects for returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above-average gains. Conversely, widespread optimism can result in unjustifiably high valuations that will eventually lead to drops, when those high expectations do not pan out. Avoiding investments in over-hyped investments reduces the risk of such drops. These general principles can apply whether the investment in question is an individual stock, an industry sector, or an entire market or any other asset class. Some contrarians h ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Rob Arnott
Robert D. Arnott (born June 29, 1954) is an American businessman, investor, and writer who focuses on articles about quantitative investing. He is the founder and chairman of the board of Research Affiliates, an asset management firm. Research Affiliates develops investment strategies for other firms, and there are over US$166 billion assets under the management of firms using their strategies as of September 2021. He edited CFA Institute's ''Financial Analysts Journal'' from 2002 to 2006, and has edited three books on equity management and tactical asset allocation. Arnott is a co-author of the book ''The Fundamental Index: A Better Way to Invest'', and co-editor of three other books relating to asset allocation and equity market investing. Arnott has also served as a Visiting Professor of Finance at the UCLA Anderson School of Management, on the editorial board of the ''Journal of Portfolio Management'', the product advisory board of the Chicago Mercantile Exchange, and the C ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Gain
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares. A capital gain is only possible when the selling price of the asset is greater than the original purchase price. In the event that the purchase price exceeds the sale price, a capital loss occurs. Capital gains are often subject to taxation, of which rates and exemptions may differ between countries. The history of capital gain originates at the birth of the modern economic system and its evolution has been described as complex and multidimensional by a variety of economic thinkers. The concept of capital gain may be considered comparable with other key economic concepts such as profit and rate of return; however, its distinguishing feature is that individuals, not just businesses, can accrue capital gains through everyday acquisition a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Sharpe Ratio
In finance, the Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) measures the performance of an investment such as a security or portfolio compared to a risk-free asset, after adjusting for its risk. It is defined as the difference between the returns of the investment and the risk-free return, divided by the standard deviation of the investment returns. It represents the additional amount of return that an investor receives per unit of increase in risk. It was named after William F. Sharpe, who developed it in 1966. Definition Since its revision by the original author, William Sharpe, in 1994, the '' ex-ante'' Sharpe ratio is defined as: : S_a = \frac = \frac, where R_a is the asset return, R_b is the risk-free return (such as a U.S. Treasury security). E _a-R_b/math> is the expected value of the excess of the asset return over the benchmark return, and is the standard deviation of the asset excess return. The t-sta ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Buy And Hold
Buy and hold, also called position trading, is an investment strategy whereby an investor buys financial assets or non-financial assets such as real estate, to hold them long term, with the goal of realizing price appreciation, despite volatility. This approach implies confidence that the value of the investments will be higher in the future. Investors must not be affected by recency bias, emotions, and must understand their propensity to risk aversion. Investors must buy financial instruments that they expect to appreciate in the long term. Buy and hold investors do not sell after a decline in value. They do not engage in market timing (i.e. selling a security with the goal of buying it again at a lower price) and do not believe in calendar effects such as Sell in May. Buy and hold is an example of passive management. It has been recommended by Warren Buffett, Jack Bogle, Burton Malkiel, John Templeton, Peter Lynch, and Benjamin Graham since, in the long run, there is a hi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Portfolio Insurance
Portfolio insurance is a hedging strategy developed to limit the losses an investor might face from a declining index of stocks without having to sell the stocks themselves. The technique was pioneered by Hayne Leland and Mark Rubinstein in 1976. Since its inception, the portfolio insurance strategy has been dubiously marketed as a ''product'' (similar to an insurance policy). However, this is a misnomer as it is not a policy and there is no insurer of last resort. This strategy involves selling futures of a stock index during periods of price declines. The proceeds from the sale of the futures help to offset paper losses of the owned portfolio. This is similar to buying a put option in that it allows an investor to preserve upside gains but limits downside risk. Portfolio insurance is most commonly used by institutional investors when the market direction is uncertain or volatile. In practice, a portfolio insurance strategy uses computer-based models to analyze an opti ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
