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|Subject: Re: May want to re-think traditional allocations||Date: 9/26/2012 4:04 PM|
|Author: Hawkwin||Number: 70964 of 76594|
2-leg re-set indexing does it. This company calls it 'Integrated Options Portfolio.' http://desertrosecapital.com/
I saw you post this on another board and was interested, since I had never heard of the 2-leg re-set term before.
From the above link, there are quite a few assumptions that are questionable, to say the least:
By not owning the shares of “ABC” Fund, we will not have any shareholder rights (no dividends, voting, etc.), unless we decide to actually purchase the shares . In this case, the dividends are 1%/year.
That is quite a lowball div to help their performance. SPY yields twice as much. Failure #1.
We will not have to pay the “ABC” Fund expense fees which will save us 1.25%/year, but Desert Rose will charge a 1% fee to implement and manage the IOP.
Why would you pay fund expenses of 1.25%??? Most institutional shares are well below that and of course index funds are a fraction of that. Additionally, why use funds at all if they are going to compare it to buying calls, why not simply compare to the underlying stock or index? Failure #2.
We will also assume that the fixed income money ($43,500) was put into a short-term, high quality bond fund (“RST” Fund) that is yielding 5%/year. There is much more that we do in this area to yield more than this, but let’s keep it simple for now with what we believe is a conservative assumption of 5%. Also for simplicity, we will also assume for now that the “RST” bond fund price will remain constant.
Failure #3 and #4. One need not even comment on how bad both those assumptions are.
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