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Investing/Strategies / Retirement Investing
|Subject: Re: Strategy comparison S&P500 vs. IUL||Date: 4/3/2013 7:34 PM|
|Author: Dwdonhoff||Number: 71686 of 81569|
If you are "long" your home, and you buy homeowners insurance, you are placing a hedge.
Whaaat???? This makes no sense.
A Beginner's Guide To Hedging
The best way to understand hedging is to think of it as insurance. When people decide to hedge, they are insuring themselves against a negative event.
Yep... Investopedia... that's a pretty obscure & oddball reference source ;~)
How did a house and homeowners insurance get dragged into this thread, anyway. We are talking about investments, not homes.
A retirement account is a 'financial home' equivalent. It is relied upon by most folks, usually without alternative options, for their survival.
Dave, you keep using loaded words & phraseology. You keep calling a long position "naked". No normal investors term it that way.
I guess it depends on your idea of "normal." I learned market finance from professional traders where risk management is everything, and undercapitalized drawdowns kill more accounts than anything else. Not saying that's superior, or normal... but that's the world I know.
A long is a long. The only customary use of "naked" in investment parlance is a "naked short" position. And a naked short is pretty well known to be a high-risk position.
A naked long is equally high risk to a naked short (at least down to zero.)
When you use "naked" to refer to a long position, you are trying to smuggle in the idea that it is a high-risk situation.
'Smuggle' is a loaded word & phraseology... it implies I am saying something with a meaning other than what I am actually saying. I am not. I am overtly stating that a naked position (long *OR* short) is unhedged, and at full risk of loss without time constraint.
Ditto when you try to claim that homeowners insurance is a hedge. It may (or may not) be the way insurance agents think of fire insurance, but it is definitely not the way that "hedge" is used in investment terminology.
Perhaps you can educate Investopedia... they're apparently not as wise as you in this aspect.
When you misuse words this way, you lower your credibility in eyes of people who know the field.
HAH!! That is rich!
In other news, my 3 year old toddler scolded me this morning for shaking hands with his teddy bear "the wrong direction" ;~)
Allow me to help you;
Definition of 'Naked Position'
A securities position that is not hedged from market risk. Both the potential gain and the potential risk are greater when a position is naked instead of covered (a covered position is hedged from market risk).
Maybe you could benefit by hanging out with real financial professionals... at least in vernacular (if not returns, which I trust you are doing fine in ;~)
Color me sceptical.
Me too... except I dig deeper.
I have the historical "total S&P500" data (with the shifting dividends,) back to inception now.
Great! Is it posted somewhere for download? If not, can you put put it up somewhere?
Of course, I'll get it up as soon as I can put some focus time into that project.
Although, at some point -- which is rapidly approaching -- all that needs to be done is upload the spreadhseet somewhere it's publicly accessible. Then people can d/l it and plug in parameters on their own.
Yep, will do... that's why I shared a link for a free Dropbox account. (If anyone particularly prefers I not get credit for the free account, just get it straight from the Dropbox website.)
Thanks for catching my error on the m-m vs. y-y for the way IUL caps work. I hope that's the only error
I've only eyeballed the equity curves, not dug deeper into the data & calculations, but it doesn't appear at first blush that the spend-downs were addressed. The IUL is going to have a more gradual glidepath, potentially with more distribution even if/when the S&P account grew more on the accumulation (it definitely will in certain market periods.)
We'll get that all sorted along the way... the data is out there, & not going anywhere ;~)
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