Invest Without Emotions
Investing insight to make you a better investor.
MoneyControl combined the calls of different brokers who recommended them for 100% returns in a slideshow.
We have created a Theme containing an equally weighted portfolio of stocks contained in this report: Lucky 13: Brokerages betting on these stocks for 100% returns
You can now follow the Theme, keep track of its performance, risk metrics etc. and answer the question yourself: Dood, ya Paani?
Microsec Capital identified 10 agricultural companies which, they believe, will outperform in the medium-to-long term. (ET)
We have created a Theme containing an equally weighted portfolio of stocks contained in this report: Microsec’s Top 10 Agri Stocks
You can now follow the Theme, keep track of its performance, risk metrics etc. and answer the question yourself: Dood, ya Paani?
Paper from the brain-trust at AQR Capital Management: Covered Calls and Their Unintended Reversal Bet is a must read for anybody trading options.
Simply put, a covered call is when you own the underlying stock and you sell a call on it. If the stock doesn’t go beyond the strike at which you sold the call, then you pocket the premium. Otherwise, your upside on owning the stock is capped at the strike.
The payoff diagram of a covered call looks like this:
The authors claim that over a quarter of a covered call’s risk may be attributed to market timing and investors are ignoring its effect on returns.
Because a covered call option strategy reflects an underlying position in equity (delta = 1) and being short a call with changing delta, we get the following situation:
The insight: a covered call strategy embeds elements of a reversal strategy, not a trend-following strategy.
From Research Affiliates’ Slugging It Out in the Equity Arena:
There is a huge gap between reported mutual fund performance and the returns actually earned by the average investor. The gap — the difference between the fund’s total time-weighted return and the average investor’s money-weighted return — reflects the value added (or subtracted) by investors’ decisions to move cash into and out of funds. In other words, the gap is the return impact of investors’ market timing decisions.
Over the past 10 years, the average investor earned a return that was 2.5% worse than the return of the average fund they invested in!
Smart beta strategies – Themes – are countercyclical, periodically rebalancing out of winning stocks and into losers. They may underperform for extended periods but they ultimately tend to prevail.
Investors’ procyclical behavior, selling recent losers and buying recent winners, pays for the long-term value added by Themes.
Source: Slugging It Out in the Equity Arena
To see how Themes have performed, follow the trail: http://stockviz.biz/tag/theme/
From Why Inexperienced Investors Do Not Learn: They Do Not Know Their Past Portfolio Performance (Glaser, Weber)
Here’s a telling chart on what investors “thought” they made vs what they actually made:
I loved the academic euphemism for “most investors are clueless”: The correlation coe±cient between return estimates and realized returns is not distinguishable from zero. And this gem: The correlation between self ratings and actual performance is also not distinguishable from zero.
Read the whole thing here (pdf) and open a StockViz account and start tracking your portfolio now!