Asset Rotation E-Book

Matthew P. Erickson

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 322

Veröffentlichungsjahr: 2014

Beschreibung

An all-weather, tactical approach to asset management utilizing Exchange Traded Funds (ETFs)

In Asset Rotation, portfolio management pioneer Matthew P. Erickson demonstrates a time-tested approach to asset management that has worked throughout the history of capital markets, in good times and bad. Providing investors with strong participation in rising markets, but more importantly with a discipline to reduce participation in prolonged declines. Over time this revolutionary approach has yielded superior returns, with significantly reduced levels of risk; providing the engine for true, long-term sustainable growth.

The investment world as we know it has changed, and the paradigm has shifted. What has worked in the past may no longer work in the future. No longer may bonds be regarded as a safe haven asset class, as for the first time in generations, investors in fixed income face losses as interest rates rise from historical all-time lows. For those adhering to a conventional Modern Portfolio Theory based investment approach to asset management, what was once regarded as safe and stable, may very well soon become our greatest impediment.

Asset Rotation provides investors with a practical solution for today's real world problems. This tactical approach to asset management provides us with concrete proof that there is indeed a better way.

We are standing on the precipice of an Investment Renaissance. What was previously impossible, is now possible. Find out how.

• Presents an easy-to-understand price momentum-based approach to investing
• Illustrates the benefits of asset rotation
• Offers a systematic approach for securing a sound financial future
• Provides further insights as to how to customize your own asset rotation portfolio

Matthew Erickson gives investors a hands-on resource for how to navigate an increasingly difficult investment landscape, by providing them with keen insights into the most rapidly growing segment of the investment markets.

Leseprobe

Contents

Acknowledgments

Prologue: David & Goliath

Preface: We Stand on the Precipice of an Investment Renaissance

Chapter 1: Taking the 30,000-Foot View

The Individual Investor

The Individual Investor

Ockham’s Razor

Our Current Economic Landscape

The Bottom Line

Chapter 2: When the Paradigm Shifts

A Primer on Modern Portfolio Theory

The Treasury Run

Losing Money in Bonds

The Bottom Line

Chapter 3: Shooting Stars

The Persistence of Manager Performance

The Bottom Line

Chapter 4: Beyond the Stars

The Cost of Investing

Identifying Risk

Assessing the Investment Environment

The Bottom Line

Chapter 5: The Landscape Has Changed

The ETF: What Is It?

A Brief History

The Use of ETFs in a Portfolio

The Bottom Line

Chapter 6: Challenging Convention

A Time-Tested Approach

The 2000s

The 1990s

The 1980s

The 1970s

The 1960s

The 1950s

The 1940s

The Great Depression

From the Great Depression to Today

The Bottom Line

Chapter 7: Building a Better Mousetrap

Building a Better Mousetrap

The 1990s

The 2000s

From 2010 to

23 Years: 1999–2012

Going Toe to Toe with the Best

The Bottom Line

Chapter 8: Choose Your Own Adventure

Choose Your Own Adventure

Additional Factors to Consider: Eligible Risk Assets

Additional Factors to Consider: Eligible Flight to Safety/Fixed-Income Assets

Additional Factors to Consider: Criteria for Investment Selection

Creating a Scoring System

Required Due Diligence

The Bottom Line

Chapter 9: The Anatomy of Change

Benchmarking Success

The Four Seasons

When Equity Markets Rise

When Equity Markets Fall

When Equity Markets Move Sideways

When Equity Markets Move Sideways with Volatility

The Bottom Line

Chapter 10: Letting Go of Your Crutch

Citius, Altius, Fortius

Asset Rotation as a Core Approach

Baby Steps

Supplementing Either Equities or Fixed Income

Adopting a Core/Satellite Approach

The Bottom Line

Chapter 11: The Road Ahead

The Bottom Line

About the Author

Index

End User License Agreement

List of Illustrations

FIGURE 1.1 Historical Performance of the S&P 500, 1990–1999

FIGURE 1.2 Historical Performance of the S&P 500, 2000–2009

FIGURE 2.1 The Efficient Frontier

FIGURE 2.2 Portfolio Allocations along the Efficient Frontier

FIGURE 2.3 The Bull Market in Bonds (1982–2012)

FIGURE 2.4 The Bursting of the Tech Bubble (2000–2002)

FIGURE 2.5 The Great Recession (2008)

FIGURE 2.6 The Tech Bubble and Beyond (2000–2012)

FIGURE 2.7 The Great Depression (October 1, 1929–December 31, 1941)

FIGURE 2.8 The Bear Market in Bonds (1942–1981)

FIGURE 2.9 The Beginning of the Great Unwind? (August 1, 2012–July 31, 2013)

FIGURE 2.10 Who Needs Bonds? (1990–1999)

FIGURE 3.1 Morningstar Ratings by Percentile

FIGURE 3.2 Morningstar Rating Persistence—Percentage of Time that a Stock Fund Maintained Its Rating for at Least 12 Months

FIGURE 3.3 15 Years of Record-Breaking Returns, Statistical Analysis

FIGURE 3.4 15 Years of Record-Breaking Returns, Growth $100,000

FIGURE 3.5 When Giants Fall, Statistical Analysis

FIGURE 3.6 When Giants Fall, Growth of $100,000

FIGURE 3.7 Eight Years of Legendary Returns, Statistical Analysis

FIGURE 3.8 Eight Years of Legendary Returns, Growth of $100,000

FIGURE 3.9 Legends of the Fall, Statistical Analysis

FIGURE 3.10 Legends of the Fall, Growth of $100,000

FIGURE 3.11 Morningstar Fund Manager of the Decade, Statistical Analysis

FIGURE 3.12 Morningstar Fund Manager of the Decade, Growth of $100,000

FIGURE 3.13 Beyond the Accolades, Statistical Analysis

FIGURE 3.14 Beyond the Accolades, Growth of $100,000

FIGURE 4.1 Active vs. Passive, Growth of $100,000

FIGURE 4.2 Active vs. Passive, Calendar-Year Returns

FIGURE 4.3 The Performance of Low Beta vs. Market Beta, Statistics (2008–2012)

FIGURE 4.4 The Performance of Low Beta vs. Market Beta, Annual Returns (2008–2012)

FIGURE 4.5 Low Beta vs. Market Beta—The Great Recession (2008)

FIGURE 4.6 Low Beta vs. Market Beta—The S&P Downgrade (2011)

FIGURE 4.7 Long-Term U.S. Treasury Performance (October 1 2007–July 31, 2012)

FIGURE 5.1 ETF Industry Growth

FIGURE 5.2 Five-Year Growth of $100,000, Leading Tactical Managers vs. the S&P 500

FIGURE 5.3 Calendar-Year Returns, Leading Tactical Managers vs. the S&P 500

FIGURE 6.1 The Lost Decade (2000–2009)

FIGURE 6.2 Historical Equity vs. U.S. Treasury Bond Returns (1929–2012)

FIGURE 6.3 A Simple Two-Asset-Class Rotation (2000–2012)

FIGURE 6.4 A Simple Two-Asset-Class Rotation (1990–1999)

FIGURE 6.5 A Simple Two-Asset-Class Rotation (1980–1989)

FIGURE 6.6 A Simple Two-Asset-Class Rotation Portfolio (1970–1979)

FIGURE 6.7 A Simple Two-Asset-Class Rotation Portfolio (1960–1969)

FIGURE 6.8 A Simple Two-Asset-Class Rotation Portfolio (1950–1959)

FIGURE 6.9 A Simple Two-Asset-Class Rotation Portfolio (1940–1949)

FIGURE 6.10 A Simple Two-Asset-Class Rotation Portfolio (October 1, 1929–December 31, 1939)

FIGURE 6.11 A Simple Two-Asset-Class Rotation Portfolio (October 1, 1929–December 31, 2012)

FIGURE 7.1 14 Years of Sector Returns (1999–2012)

FIGURE 7.2 Two-Asset-Class Sector Rotation Portfolio Returns (1990–1999)

FIGURE 7.3 Two-Asset-Class Sector Rotation Portfolio Returns (2000–2009)

FIGURE 7.4 Two-Asset-Class Sector Rotation Portfolio Returns (2010–2012)

FIGURE 7.5 Two-Asset-Class Sector Rotation Portfolio Returns (1990–2012)

FIGURE 7.6 Two-Asset-Class Sector Rotation Portfolio vs. Good Harbor (2004–2012)

FIGURE 9.1 Two-Asset-Class Sector Rotation and the Credit Suisse Hedge Fund Index (1994–2012)

FIGURE 9.2 Two-Asset-Class Sector Rotation vs. the S&P 500 (2008)

FIGURE 9.3 Two-Asset-Class Sector Rotation vs. the S&P 500 (2011)

FIGURE 10.1 Supplementing Asset Rotation for Either Stocks or Bonds (1990–2012)

FIGURE 10.2 Integrating Asset Rotation in a Core/Satellite Approach

List of Tables

TABLE 1.1 It Pays to Lose Less

TABLE 1.2 Historical Cost Comparison (U.S. City Average)

TABLE 2.1 Inflation Rates during the Bear Market in Bonds (1942–1981)

TABLE 3.1 SPIVA® Scorecard, Year-End 2012

TABLE 3.2 S&P Persistence Scorecard, July 2013

TABLE 3.3 Average Fund Statistics for 36 Months Following Morningstar Rating (June 30, 1992–August 31, 2009)

TABLE 4.1 Evaluating Mutual Fund Expenses

TABLE 5.1 Summary: Notable Differences between ETFs and Mutual Funds

TABLE 6.1 Average Annual Returns by the Decade

TABLE 7.1 Correlation and Performance Attributes, Sectors, and Treasury Bonds (1999–2012)

TABLE 7.2 Asset Class Sector Rotation Portfolio Eligibility

TABLE 7.3 Sample Monthly Ranking (April–May 2010)

TABLE 8.1 The Various Types of Sector ETFs Available

TABLE 8.2 Correlation and Performance Attributes, Countries, and Treasury Bonds (2003–2012)

TABLE 8.3 Correlation and Performance Attributes, Global Equities, and Treasury Bonds (2008–2012)

TABLE 8.4 Correlation and Performance Attributes, Fixed Income (2008–2012)

TABLE 8.5 A Three-Factor Tactical Asset Rotation Scoring System

TABLE 9.1 Two-Asset-Class Sector Rotation Monthly Returns and Underlying Holdings (2008)

TABLE 9.2 Two-Asset-Class Sector Rotation Monthly Returns and Underlying Holdings (2011)

TABLE 9.3 Simple Two-Asset-Class Rotation (2005)

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Guide

Cover

Table of Contents

Begin Reading

ASSET ROTATION

The Demise of Modern Portfolio Theory and the Birth of an Investment Renaissance

Matthew P. Erickson

Cover image: © Linda Huber

Cover design: Wiley

Copyright © 2014 by Matthew P. Erickson. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

© 2014 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; (3) does not constitute investment advice offered by Morningstar; and (4) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Use of information from Morningstar does not necessarily constitute agreement by Morningstar, Inc. of any investment philosophy or strategy presented in this publication.

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Library of Congress Cataloging-in-Publication Data:

ISBN 9781118779194 (Hardcover)

ISBN 9781118779040 (ePDF)

ISBN 9781118779200 (ePub)