query: who accepts all of the risk associated with a mutual fund 's portfolio of stocks and / or bonds

pos: Mutual fund Mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature. Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The primary advantages of mutual funds are that they provide economies of scale, a higher level of diversification, they provide liquidity, and they are managed by professional investors. On the negative side, investors in a mutual fund must pay various fees and expenses. Primary structures of mutual funds include open-end funds, unit investment trusts, and closed-end funds. Exchange-traded

pos: Portfolio (finance) Portfolio (finance) In finance, a portfolio is a collection of investments held by an investment company, hedge fund, financial institution or individual. The term “portfolio” refers to any combination of financial assets such as stocks, bonds and cash. Portfolios may be held by individual investors and/or managed by financial professionals, hedge funds, banks and other financial institutions. It is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance, time frame and investment objectives. The monetary value of each asset may influence the risk/reward ratio of the portfolio. When determining a proper asset allocation one

pos: Stock selection criterion can be associated with greater price volatility. When yields on long-term government bonds exceed the dividend yield (annual percentage of return earned by an investor on a common or preferred stock) on the S&P 500 Index by 6 percent or more, Lynch recommends selling stocks and purchasing bonds. He recommends this as a type of value-contrarian-safety strategy, claiming that when this situation occurs investors should enjoy the "risk-free" investment of bonds, they are either yielding exceptionally well or the stock market is over-valued. Either way bonds make more sense than stocks at that time. This is the only exception to

pos: S&P 500 Index the first of which was The Vanguard Group's Vanguard 500 in 1976. In addition to investing in a mutual fund indexed to the S&P 500, investors may also purchase shares of an exchange-traded fund (ETF) which represents ownership in a portfolio of the equity securities that comprise the Standard & Poor's 500 Index. These exchange-traded funds track the S&P 500 index and may be used to trade the index. Investors may also invest in all the stocks of the S&P 500 directly, which is usually called "index replication". In the derivatives market, the Chicago Mercantile Exchange (CME) offers futures contracts

pos: Market portfolio it is the only fund in which investors need to invest, to be supplemented only by a risk-free asset, depending upon each investor's attitude towards risk. Sharpe notes that many investors are at least targeted to a fixed ratio (e.g. 60% stocks, 40% bonds). He points out that this is sort of contrarian. The holdings of all investors combined must, by equation, be in the cap-weighted proportions. So many investors following this strategy implies some other investors must follow a buy-high, sell-low (trend following) strategy. He then says that he doesn't like it and people should use adjustments to the

pos: Portfolio investment investment vehicles. A diversified portfolio helps spread the risk of possible loss because of below-expectations performance of one or a few of them. Portfolio investment Portfolio investments are investments in the form of a group (portfolio) of assets, including transactions in equity securities, such as common stock, and debt securities, such as banknotes, bonds, and debentures. Portfolio investments are passive investments, as they do not entail active management or control of the issuing company. The foreign investors have a relatively short-term interest in the ownership of these passive investments such as bonds and stocks. Rather, the purpose of the investment

pos: Managed futures account actual amount invested. As a result, notional funding can add significant risk to managed futures accounts and investors who wish to use such funding are required to sign disclosures to state that they understand the risk involved. Managed futures have historically displayed very low correlations to traditional investments, such as stocks and bonds. Following modern portfolio theory, this lack of correlation builds the robustness of the portfolio, reducing portfolio volatility and risk, without significant negative impacts on return. This lack of correlation stems from the fact that markets tend to "trend" the best during more volatile periods, and periods in

pos: Risk-free bond States Treasury notes and United States Treasury bonds are often assumed to be risk-free bonds. Even though investors in United States Treasury securities do in fact face a small amount of credit risk, this risk is often considered to be negligible. An example of this credit risk was shown by Russia, which defaulted on its domestic debt during the 1998 Russian financial crisis. In financial literature, it is not uncommon to derive the Black-Scholes formula by introducing a continuously rebalanced "risk-free portfolio" containing an option and underlying stocks. In the absence of arbitrage, the return from such a portfolio needs

pos: Mutual fund separation theorem 1970 that two-fund monetary separation applies if all investors have HARA utility with the same exponent as each other. More recently, in the dynamic portfolio optimization model of Çanakoğlu and Özekici, the investor's level of initial wealth (the distinguishing feature of investors) does not affect the optimal composition of the risky part of the portfolio. A similar result is given by Schmedders. Mutual fund separation theorem In portfolio theory, a mutual fund separation theorem, mutual fund theorem, or separation theorem is a theorem stating that, under certain conditions, any investor's optimal portfolio can be constructed by holding each of certain

pos: Bond (finance) affect certain classes of investors. Price changes in a bond will immediately affect mutual funds that hold these bonds. If the value of the bonds in their trading portfolio falls, the value of the portfolio also falls. This can be damaging for professional investors such as banks, insurance companies, pension funds and asset managers (irrespective of whether the value is immediately "marked to market" or not). If there is any chance a holder of individual bonds may need to sell their bonds and "cash out", interest rate risk could become a real problem (conversely, bonds' market prices would increase if

pos: Stocks for the Long Run -4.1% and -5.4%; and for a holding period of 20 years, stocks have always been profitable. Figure 2.6 shows that the optimally lowest risk portfolio even for a one-year holding, will include some stocks. In Chapter 5, he shows that after-tax returns for bonds can be negative for a significant period of time. Some critics argue that the book uses a perspective that is too long to be applicable to today's long-term investors who, in many cases, are not investing for a 20–30 year period. Furthermore, picking different start and end dates, or different starting valuations, can yield significantly different

pos: Kotak Mutual Fund portfolio action and on-going review. The fund manager is the decision maker for their portfolios. Kotak Mutual Fund believes that funds are like kids and do not have more than what you can manage. It aims is to equate fund return and the client return. It offers mutual fund products for investors seeking long term investment goals with moderately high risk, investors who are seeking income from the opportunities in the equity market, investors who are seeking income over long term investment horizon, investors who want regular income over short term, investors who are seeking income over medium term and

pos: Portfolio (finance) however, the true time-weighted method is a method preferred by many investors in financial markets. There are also several models for measuring the performance attribution of a portfolio's returns when compared to an index or benchmark, partly viewed as investment strategy. Portfolio (finance) In finance, a portfolio is a collection of investments held by an investment company, hedge fund, financial institution or individual. The term “portfolio” refers to any combination of financial assets such as stocks, bonds and cash. Portfolios may be held by individual investors and/or managed by financial professionals, hedge funds, banks and other financial institutions. It is

pos: Hedge fund In addition to those strategies within the four main categories, there are several strategies that do not fit into these categorizations or can apply across several of them. For an investor who already holds large quantities of equities and bonds, investment in hedge funds may provide diversification and reduce the overall portfolio risk. Managers of hedge funds use particular trading strategies and instruments with the specific aim of reducing market risks to produce risk-adjusted returns that are consistent with investors' desired level of risk. Hedge funds ideally produce returns relatively uncorrelated with market indices. While "hedging" can be a way

pos: Portfolio insurance securities periodically in order to maintain limit of the portfolio value. The working of portfolio insurance is akin to buying an index put option, and can also be done by using listed index options. The technique, invented by Hayne Leland and Mark Rubinstein in 1976, is often associated with the October 19, 1987, stock market crash. Portfolio insurance Portfolio insurance is a method of hedging a portfolio of stocks against the market risk by short selling stock index futures. This hedging technique is frequently used by institutional investors when the market direction is uncertain or volatile. Short selling index futures

pos: United States policy responses to the Great Recession accounts. Due to the speculation and uncertainty in the market, discussion forums filled with questions about whether or not to liquidate assets and financial gurus were swamped with questions about the right steps to take to protect what remained of their retirement accounts. During the third quarter of 2008, over $72 billion left mutual fund investments that invested in stocks or bonds and rushed into Stable Value investments in the month of October. Against the advice of financial experts, and ignoring historical data illustrating that long-term balanced investing has produced positive returns in all types of markets, investors with decades

pos: Mutual fund the financial crisis of 2007–2008. At the end of 2016, mutual fund assets worldwide were $40.4 trillion, according to the Investment Company Institute. The countries with the largest mutual fund industries are: In the United States, mutual funds play an important role in U.S. household finances. At the end of 2016, 22% of household financial assets were held in mutual funds. Their role in retirement savings was even more significant, since mutual funds accounted for roughly half of the assets in individual retirement accounts, 401(k)s and other similar retirement plans. In total, mutual funds are large investors in stocks and

pos: Hedge fund Hedge fund A hedge fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets, often with complex portfolio-construction and risk-management techniques. It is administered by a professional investment management firm, and often structured as a limited partnership, limited liability company, or similar vehicle. Hedge funds are generally distinct from mutual funds, as their use of leverage is not capped by regulators, and distinct from private equity funds, as the majority of hedge funds invest in relatively liquid assets. The term "hedge fund" originated from the paired long and short

pos: Alternative beta stocks, bonds or cash), alternative beta relates to the use of hedge funds. At its most basic, a hedge fund is an investment vehicle that pools capital from a number of investors and invests in securities and other instruments. It is administered by a professional management firm, and often structured as a limited partnership, limited liability company, or similar vehicle. For an investment that involves risk to be worthwhile, its returns must be higher than a risk-free investment. The risk is related to volatility. A measure of the factors influencing an investment's volatility is the beta. The beta is a

pos: Fidelity Magellan Fund Morris Smith's tenure, AUM grew from $14 billion to $20 billion. During Jeffrey Vinik's it grew to $50 billion. Bob Stansky certainly experienced the most volatility with respect to AUM during his time with Magellan. In July 1996, his first month as manager, more than $3.5 billion was taken out of the fund as investors redeemed their shares and the portfolio experienced setbacks. Stansky quickly moved out of bonds and into stocks to stop the assets from flowing out. On September 30, 1997 Fidelity decided to close the Magellan Fund to new investors. They believed that the size of the

pos: The Superinvestors of Graham-and-Doddsville the "lower" is investors' risk. On the opposite, as margin gets thinner, risks increase. Second, potential returns diminish with increasing size of the fund, as the number of available undervalued stocks decreases. Finally, analyzing the backgrounds of seven successful managers, he makes a conclusion that an individual either accepts value investing strategy at first sight, or never accepts it, regardless of training and other people's examples. "There seems to be a perverse human characteristic that likes to make easy things difficult... it's likely to continue this way. Ships will sail around the world, but the Flat Earth Society will flourish...

pos: Hedge fund words, even though low average correlations may appear to make hedge funds attractive this may not work in turbulent period, for example around the collapse of Lehman Brothers in September 2008. Hedge fund A hedge fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets, often with complex portfolio-construction and risk-management techniques. It is administered by a professional investment management firm, and often structured as a limited partnership, limited liability company, or similar vehicle. Hedge funds are generally distinct from mutual funds, as their use of leverage is not

pos: Market portfolio alpha close to zero, while with another measurement most of them have significantly negative alpha. Most index providers give indices for different components such as stocks only, bonds only, et cetera. As a result, proxies for the market (such as the FTSE 100 in the UK, DAX in Germany or the S&P 500 in the US) are used in practice by investors. Roll's critique states that these proxies cannot provide an accurate representation of the entire market. The concept of a market portfolio plays an important role in many financial theories and models, including the capital asset pricing model where

neg: Permanent Portfolio Family of Funds investing in precious metals, Swiss bonds, U.S. Treasury bills and natural resource stocks. This was similar to Browne's strategy of 25% of a portfolio in bonds, stocks, cash and gold with annual re-balancing. Browne's strategy was portrayed as a "fail-safe" investment strategy and was outlined in his 1999 book Fail-Safe Investing. The "Permanent Portfolio" mutual fund, however, is more complex than Browne's original concept and has six asset categories. The fund aims to invest in a fixed percentage of uncorrelated, asset categories to minimize risk in changing economic climates. These include 35% in government bonds, 25% in gold and silver

neg: Active management investment portfolio, hedge fund or mutual fund, active management may also serve to create less volatility (or risk) than the benchmark index. The reduction of risk may be instead of, or in addition to, the goal of creating an investment return greater than the benchmark. Active portfolio managers may use a variety of factors and strategies to construct their portfolio(s). These include quantitative measures such as price–earnings ratios and PEG ratios, sector investments that attempt to anticipate long-term macroeconomic trends (such as a focus on energy or housing stocks), and purchasing stocks of companies that are temporarily out-of-favor or selling

neg: Mutual fund assets in Stock funds were $10.6 trillion, representing 56% of the industry. Hybrid funds invest in both bonds and stocks or in convertible securities. Balanced funds, asset allocation funds, target date or target risk funds, and lifecycle or lifestyle funds are all types of hybrid funds. Hybrid funds may be structured as funds of funds, meaning that they invest by buying shares in other mutual funds that invest in securities. Many funds of funds invest in affiliated funds (meaning mutual funds managed by the same fund sponsor), although some invest in unaffiliated funds (i.e., managed by other fund sponsors) or

neg: Fund of funds Fees can reduce an investor's profits and potentially reduce the total return below what could be achieved through a less expensive mutual fund or exchange-traded fund (ETF). A fund of venture capital funds is a fund of funds that invests in a portfolio of different venture capital funds for access to private capital markets. Clients are usually university endowments and pension funds. Fund of funds A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. This type of investing is often referred to

neg: Capital asset pricing model the market as a whole, by definition, has a beta of one. Stock market indices are frequently used as local proxies for the market—and in that case (by definition) have a beta of one. An investor in a large, diversified portfolio (such as a mutual fund), therefore, expects performance in line with the market. The risk of a portfolio comprises systematic risk, also known as undiversifiable risk, and unsystematic risk which is also known as idiosyncratic risk or diversifiable risk. Systematic risk refers to the risk common to all securities—i.e. market risk. Unsystematic risk is the risk associated with individual

neg: Risk parity bonds, stocks, real estate, etc.) contributes equally to the portfolio overall volatility. Risk parity can also be a generalized term that denotes a variety of investment systems and techniques that utilize its principles. The principles of risk parity are applied differently according to the investment style and goals of various financial managers and yield different results. Some of its theoretical components were developed in the 1950s and 1960s but the first risk parity fund, called the "All Weather" fund, was pioneered in 1996. In recent years many investment companies have begun offering risk parity funds to their clients. The term,

neg: Goal-based investing goal of security. A person's goals may be short term security (the savings account), intermediate term portfolio for a child's education expenses and a longer term fund for eventual retirement. The emergency fund should be invested in very short term low risk investments. The intermediate term fund should be longer and take more risk but only moderately. While the long term fund would likely own long dated bonds, stocks and other equity investments. Circumstances of the individual can satisfy the needs of the various goals or make those needs more aggravated. For instance, a pension benefit or annuity can greatly

neg: Beta (finance) question; e.g., beta for gold bars compared to the S&P 500 may be low or negative carrying the information that gold does not track stocks and may provide a mechanism for reducing risk. The restriction to stocks as a benchmark is somewhat arbitrary. A model portfolio may be stocks plus bonds. Sometimes the market is defined as "all investable assets" (see Roll's critique); unfortunately, this includes lots of things for which returns may be hard to measure. By definition, the market itself has a beta of 1, and individual stocks are ranked according to how much they deviate from the

neg: Modigliani risk-adjusted performance adjusted for comparison to another portfolio's returns. Virtually any benchmark return (e.g., an index or a particular portfolio) could be used for risk adjustment, though usually it is the market return. For example, if you were comparing performance of endowments, it might make sense to compare all such endowments to a benchmark portfolio of 60% stocks and 40% bonds. Modigliani risk-adjusted performance Modigliani risk-adjusted performance (also known as M, M2, Modigliani–Modigliani measure or RAP) is a measure of the risk-adjusted returns of some investment portfolio. It measures the returns of the portfolio, adjusted for the risk of the portfolio relative

neg: Fund of funds Fund of funds A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. This type of investing is often referred to as multi-manager investment. A fund of funds may be "fettered", meaning that it invests only in funds managed by the same investment company, or "unfettered", meaning that it can invest in external funds run by other managers. There are different types of FOF, each investing in a different type of collective investment scheme (typically one type per FOF), for example a mutual

neg: Permanent Portfolio Family of Funds said to invest 80% or more of its net assets in bonds. Fail-Safe Investing Permanent Portfolio Family of Funds Permanent Portfolio Family is an American mutual fund investment company founded in 1982. The company's products consist of four mutual funds. Its flagship fund, the "Permanent Portfolio", is based on the investment strategies of Harry Browne. The company was established in 1982 and its first offering was a mutual fund called the "Permanent Portfolio" (PRPFX). The "Short-Term Treasury Portfolio" (PRTBX) was founded in 1987. A stock fund called "Aggressive Growth Portfolio" (PAGRX) was opened in 1990 and Michael Cuggino was hired

neg: Fidelity Magellan Fund cumulative S&P500 return by 5.91%. Vinik is most often remembered as the manager who moved a high percentage of the portfolio out of technology stocks and into bonds at the wrong time, causing Magellan to underperform its peers for the first time in the fund’s history. However, others argue that Vinik merely moved into bonds early. Vinik moved Magellan into bonds in the fall of 1995. In the seven years ending in March 2003, on a total return basis, 10-year Treasuries returned 78 percent, AAA corporate bonds returned 46 percent, and, with dividends reinvested, the S&P 500 returned 31 percent.

neg: Risk parity success. Risk parity is a conceptual approach to investing which attempts to provide a lower risk and lower fee alternative to the traditional portfolio allocation of 60% stocks and 40% bonds which carries 90% of its risk in the stock portion of the portfolio (see illustration). The risk parity approach attempts to equalize risk by allocating funds to a wider range of categories such as stocks, government bonds, credit-related securities and inflation hedges (including real assets, commodities, real estate and inflation-protected bonds), while maximizing gains through financial leveraging. According to Bob Prince, CIO at Bridgewater Associates, the defining parameters of

neg: Index fund than between companies operating in the same market. Asset allocation is the process of determining the mix of stocks, bonds and other classes of investable assets to match the investor's risk capacity, which includes attitude towards risk, net income, net worth, knowledge about investing concepts, and time horizon. Index funds capture asset classes in a low cost and tax efficient manner and are used to design balanced portfolios. A combination of various index mutual funds or ETFs could be used to implement a full range of investment policies from low risk to high risk. Research conducted by the World Pensions

neg: Risk parity say that the leveraged investment line is less steep and that the levered risk parity portfolio has slight or no advantage over 60% stocks / 40% bonds, and carries the disadvantage of greater explicit leverage. Risk parity Risk parity (or risk premia parity) is an approach to investment portfolio management which focuses on allocation of risk, usually defined as volatility, rather than allocation of capital. The risk parity approach asserts that when asset allocations are adjusted (leveraged or deleveraged) to the same risk level, the risk parity portfolio can achieve a higher Sharpe ratio and can be more resistant to

neg: Stock fund of stock funds". See fund of funds. "Hedge fund" is a legal structure. Hedge funds often trade stocks, but may trade or invest in anything else depending on the fund. This is done to reduce the risk of investments in stocks. Stock fund A stock fund, or equity fund, is a fund that invests in stocks, also called equity securities. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities. This may be a

neg: Book value the bonds. In the United Kingdom, the term net asset value may refer to book value. A mutual fund is an entity which primarily owns "financial assets" or capital assets such as bonds, stocks and commercial paper. The net asset value of a mutual fund is the market value of assets owned by the fund minus the fund's liabilities. This is similar to shareholders' equity, except the asset valuation is market-based rather than based on acquisition cost. In financial news reporting, the reported net asset value of a mutual fund is the net asset value of a single share in

neg: Market portfolio whether what is used for the market portfolio really matters. Some authors say that it does not make a big difference; you can use any old index and get similar results. Roll gave an example where different indexes produce much different results, and that by choosing the index you can get any ranking you want. Brown and Brown examine this, using different indexes such as stocks only, stocks and bonds, and stocks plus bonds plus real estate. They find that using a market that includes real estate produces much different results. For example, with one measurement most mutual funds have

neg: Standard deviation than for cities inland. Thus, while these two cities may each have the same average maximum temperature, the standard deviation of the daily maximum temperature for the coastal city will be less than that of the inland city as, on any particular day, the actual maximum temperature is more likely to be farther from the average maximum temperature for the inland city than for the coastal one. In finance, standard deviation is often used as a measure of the risk associated with price-fluctuations of a given asset (stocks, bonds, property, etc.), or the risk of a portfolio of assets (actively

neg: Risk–return spectrum returns on the highest rated corporations are notably risky. Small-cap stocks are generally riskier than large-cap; companies that primarily service governments, or provide basic consumer goods such as food or utilities, tend to be less volatile than those in other industries. Note that since stocks tend to rise when corporate bonds fall and vice versa, a portfolio containing a small percentage of stocks can be less risky than one containing only debts. Option and futures contracts often provide leverage on underlying stocks, bonds or commodities; this increases the returns but also the risks. Note that in some cases, derivatives can

neg: Brandywine Asset Management lower event risk than conventional portfolios. Leverage can even be added to a diversified portfolio, and the diversified portfolio would still have less event risk and volatility than a conventional portfolio allocated to stocks (60%) and bonds (40%). Brandywine's philosophy is to incorporate as many diversified return drivers as possible in the portfolio so that they are not all subject to the same external events. But there is always the risk of loss, regardless of the amount of diversification. Dever believes that drawdowns are the largest impediment to strong, positive returns over time. Brandywine Asset Management Brandywine Asset Management, Inc.

neg: Beta (finance) The term is used in many related ways in finance. For example, the betas commonly quoted in mutual fund analyses generally measure the risk of the fund arising from exposure to a benchmark for the fund, rather than from exposure to the entire market portfolio. Thus they measure the amount of risk the fund adds to a diversified portfolio of funds of the same type, rather than to a portfolio diversified among all fund types. Beta decay refers to the tendency for a company with a high beta coefficient (β > 1) to have its beta coefficient decline to the

neg: Modern portfolio theory return than the hyperbola does at every possible risk level. The fact that all points on the linear efficient locus can be achieved by a combination of holdings of the risk-free asset and the tangency portfolio is known as the one mutual fund theorem, where the mutual fund referred to is the tangency portfolio. The above analysis describes optimal behavior of an individual investor. Asset pricing theory builds on this analysis in the following way. Since everyone holds the risky assets in identical proportions to each other—namely in the proportions given by the tangency portfolio—in market equilibrium the risky assets'

neg: Mutual savings bank Mutual savings bank A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans, etc., are paid. Profits after deductions are shared among the members. The institution is intended to provide a safe place for individual members to save and to invest those savings in mortgages, loans, stocks, bonds and other securities and to share in any profits or losses that result. The members own the business. The institution most frequently identified as the first modern

neg: Separate account to a mutual fund in the sense that the investments of the separate account are actively managed (such as stocks, bonds or other debt instruments, loans, derivative instruments, etc.). A non-managed separate account is one that invests more "passively" in that it typically owns shares of other managed pools of investments such as mutual fund shares. This is similar to a "fund of funds" whereby the separate account ("fund") simply invests in shares of one or more mutual funds. This arrangement is sometimes more efficient and cost-effective rather than the insurance company maintaining many separate accounts with similar baskets of

neg: Segregated fund policy. Segregated funds are often referred to as "mutual funds with an insurance policy wrapper". Like mutual funds, segregated funds consist of a pool of investments in securities such as bonds, debentures, and stocks. The value of the segregated fund fluctuates according to the market value of the underlying securities. Segregated funds do not issue units or shares; therefore, a segregated fund investor is not referred to as a unitholder. Instead, the investor is the holder of a segregated fund contract. Contracts can be registered (held inside an RRSP or TFSA) or non-registered (not held inside an RRSP or TFSA).

neg: Beta (finance) a risk-free rate of 2%, for example, if the market (with a beta of 1) has an expected return of 8%, a stock with a beta of 1.5 should return 11% (= 2% + 1.5(8% − 2%)) in accordance with the financial CAPM model. Suppose an investor has all his money in an asset class X and wishes to move a small amount to an asset class Y. For example, X could be U.S. stocks, while Y could be stocks of a different country, or bonds. Then the new portfolio, Z, can be expressed symbolically The variance can be computed

neg: Alfred Winslow Jones the phrase ""hedged" fund" and is credited with creating the first hedge fund structure in 1949. Jones referred to his fund as being "hedged", a term then commonly used on Wall Street to describe the management of investment risk due to changes in the financial markets. Jones combined two speculative tools to create what he considered a conservative investment scheme. He used leverage to buy more shares, and used short selling to avoid market risk. He bought as many stocks as he sold, so market-wide moves up or down would be neutralized in the portfolio. The value of the portfolio,

neg: Gross dealer concession Gross dealer concession Gross Dealer Concession or GDC is the revenue to a brokerage firm when commissioned securities and insurance salespeople sell a product, whether it is an investment like stocks, bonds, or mutual funds, or insurance like life insurance or long term care insurance. The commission that the agent receives is usually a percentage of this figure, although some firms like Merrill Lynch use figures called Production Credits, usually smaller than GDC, to determine payouts and retain more revenue. For example, a mutual fund with a 5.75% sales charge is sold to someone who invests $10,000. $575 GDC is

neg: Stock fund payments, such as utility stocks, blue-chip stocks, and preferred stocks. Option income funds invest in securities on which options may be written and earn premium income from writing options. They may also earn capital gains from trading options at a profit. These funds seek to increase total return by adding income generated by the options to appreciation on the securities held in the portfolio. Balanced Funds invest in stocks for appreciation and bonds for income. The goal is to provide a regular income payment to the fund holder, while increasing its principal... A fund that owns stocks and a substantial

neg: Modern portfolio theory key result of the above analysis is the two mutual fund theorem. This theorem states that any portfolio on the efficient frontier can be generated by holding a combination of any two given portfolios on the frontier; the latter two given portfolios are the "mutual funds" in the theorem's name. So in the absence of a risk-free asset, an investor can achieve any desired efficient portfolio even if all that is accessible is a pair of efficient mutual funds. If the location of the desired portfolio on the frontier is between the locations of the two mutual funds, both mutual

neg: Risk-neutral measure formula_40 is a martingale under formula_9. Notice the drift of the SDE is r, the risk-free interest rate, implying risk neutrality. Since formula_42 and formula_43 are formula_9-martingales we can invoke the martingale representation theorem to find a replicating strategy – a portfolio of stocks and bonds that pays off formula_45 at all times formula_46. Risk-neutral measure In mathematical finance, a risk-neutral measure (also called an equilibrium measure, or "equivalent martingale measure") is a probability measure such that each share price is exactly equal to the discounted expectation of the share price under this measure. This is heavily used in the

neg: Closed-end fund shares corresponding to their initial investment. The fund managers pool the money and purchase securities or other assets. What exactly the fund manager can invest in depends on the fund's charter, prospectus and the applicable government regulations. Some funds invest in stocks, others in bonds, and some in very specific things (for instance, tax-exempt bonds issued by the state of Florida in the USA). A closed-end fund differs from an open-end mutual fund in that: Another distinguishing feature of a closed-end fund is the common use of leverage (gearing). In doing so, the fund manager hopes to earn a higher

neg: Stock fund Stock fund A stock fund, or equity fund, is a fund that invests in stocks, also called equity securities. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities. This may be a mutual fund or exchange-traded fund. The objective of an equity fund is long-term growth through capital gains, although historically dividends have also been an important source of total return. Specific equity funds may focus on a certain sector of the market

neg: Carhart four-factor model risk factors. The right hand side risk factors are: the monthly return of the CRSP value-weighted index less the risk free rate (EXMKT), monthly premium of the book-to-market factor (HML) the monthly premium of the size factor (SMB), and the monthly premium on winners minus losers (UMD) from Fama-French (1993) and Carhart (1997). A fund manager shows forecasting ability when his fund has a positive and statistically significant alpha. SMB is a zero-investment portfolio that is long on small capitalization (cap) stocks and short on big cap stocks. Similarly, HML is a zero-investment portfolio that is long on high book-to-market

neg: MSCI EAFE EFA but its portfolio represents nearly all of each country's investable market capitalization, while EFA only covers the top 85%, which excludes most small-cap stocks. The TIAA International Equity Index Fund is also based on the EAFE index. Vanguard has the mutual fund Vanguard Developed Markets Index Inv () and the Vanguard FTSE Developed Markets ETF (); these funds previously used the MSCI EAFE, but now use the FTSE Developed All Cap ex US Index, which is very similar but includes South Korea and Canada, and includes exposure to small-cap stocks. MSCI EAFE The MSCI EAFE Index is a stock

neg: Active management at a discount to their intrinsic value. Some actively managed funds also pursue strategies such as risk arbitrage, short positions, option writing, and asset allocation. Using the concept of asset allocation, researchers divide active management into two parts; one part is selecting securities within an asset class, while the other part is selecting between asset classes. For example, a large-cap U.S. stock fund might decide which large-cap U.S. stocks to include in the fund. Then those stocks will do better or worse than the class in general. Another fund may choose to move money between bonds and stocks, or some

neg: Foreign portfolio investment than 10% of a company's shares are classified as portfolio investment. These transactions are also referred to as "portfolio flows" and are recorded in the financial account of a country's balance of payments. Portfolio flows arise through the transfer of ownership of securities from one country to another. Foreign portfolio investment is positively influenced by high rates of return and reduction of risk through geographic diversification. The return on foreign portfolio investment is normally in the form of interest payments or non-voting dividends. Foreign portfolio investment A foreign portfolio investment is a grouping of assets such as stocks, bonds, and

neg: Modern portfolio theory funds will be held in positive quantities. If the desired portfolio is outside the range spanned by the two mutual funds, then one of the mutual funds must be sold short (held in negative quantity) while the size of the investment in the other mutual fund must be greater than the amount available for investment (the excess being funded by the borrowing from the other fund). The risk-free asset is the (hypothetical) asset that pays a risk-free rate. In practice, short-term government securities (such as US treasury bills) are used as a risk-free asset, because they pay a fixed rate

neg: Risk neutral preferences In the context of the theory of the firm, a risk neutral firm facing risk about the market price of its product, and caring only about profit, would maximize the expected value of its profit (with respect to its choices of labor input usage, output produced, etc.). But a risk averse firm in the same environment would typically take a more cautious approach. In portfolio choice, a risk neutral investor who is able to choose any combination of an array of risky assets (various companies' stocks, various companies' bonds, etc.) would invest exclusively in the asset with the highest expected

neg: Franklin Templeton Investments by Franklin. Prominent funds in the fund family include the Templeton Growth Fund, Inc. (opened 1954, $29.5bn assets), the Mutual Shares fund (opened 1949, $7.9bn assets), and the Mutual Discovery Fund (opened 1992, $7.6bn assets) and the Templeton Growth (Euro) Fund A (acc) ($6.1bn assets). The Franklin Income Fund (FKINX, assets $77.94bn is a mutual fund in Morningstar's "conservative allocation" category and "large/value" style box. The fund was created in 1948 and has paid uninterrupted dividends for 60 years. The Franklin Income Fund is constructed primarily of dividend-paying stocks and bonds (2%). In 2004, Franklin Templeton paid fines to the

neg: Mutual fund separation theorem Mutual fund separation theorem In portfolio theory, a mutual fund separation theorem, mutual fund theorem, or separation theorem is a theorem stating that, under certain conditions, any investor's optimal portfolio can be constructed by holding each of certain mutual funds in appropriate ratios, where the number of mutual funds is smaller than the number of individual assets in the portfolio. Here a mutual fund refers to any specified benchmark portfolio of the available assets. There are two advantages of having a mutual fund theorem. First, if the relevant conditions are met, it may be easier (or lower in transactions costs)

neg: Active management all the securities in that index i.e. both growth and value stocks. The use of managed funds in certain emerging markets has been recommended by Burton Malkiel, a proponent of the efficient market theory who normally considers index funds to be superior to active management in developed markets. The most obvious disadvantage of active management is that the fund manager may make bad investment choices or follow an unsound theory in managing the portfolio. The fees associated with active management are generally also higher than those associated with passive management, even if frequent trading is not present, reflecting in part

neg: Active management country versus a different one, et cetera. Then one class will do worse or better than the other class. The case where a fund changes its class of assets is called style drift. An example would be where a fund that normally invests in government bonds switches into stocks of small companies in emerging markets. Although this gives the most discretion to the manager, it also makes it difficult for the investor (portfolio manager) if he also has a target of asset allocation. The effectiveness of an actively managed investment portfolio depends on the skill of the manager and research

neg: Michael Dever most cases, are random. A trading strategy has two components: a system that exploits a return driver and a market that is best suited to capture the returns promised by the return driver. Dever's investment process is based on the scientific method and includes the following primary elements: Dever emphasizes the need to minimize event risk. Diversified portfolios are subject to far lower event risk than conventional portfolios. Leverage can even be added to a diversified portfolio, and the diversified portfolio would still have less event risk and volatility than a conventional portfolio allocated to stocks (60%) and bonds (40%).

neg: Portfolio optimization would be choosing the proportions placed in equities versus bonds, while an example of the latter would be choosing the proportions of the stock sub-portfolio placed in stocks X, Y, and Z. Equities and bonds have fundamentally different financial characteristics and have different systematic risk and hence can be viewed as separate asset classes; holding some of the portfolio in each class provides some diversification, and holding various specific assets within each class affords further diversification. By using such a two-step procedure one eliminates non-systematic risks both on the individual asset and the asset class level. One approach to portfolio

neg: Permanent Portfolio Family of Funds appreciation. In 2002 it had $24 million in assets under management and consisted of large and mid-sized companies. In the ten years prior to March 2002 it ranked #34 amongst 797 other diversified mutual funds and had a stock management turnover rate of 6%. During that period it never had a negative year and its average annual gain was 2% better than the S&P 500 Index. In 2002 its annual management fee was 1.29%. The company also offers a "Short-Term Treasury Portfolio" (PRTBX) which it describes as a short-term U.S. Treasury bonds fund. The firm's "Versatile Bond Portfolio" (PRVBX) is

neg: Exchange-traded fund performance of a specific index. Indexes may be based on stocks, bonds, commodities, or currencies. An index fund seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. As of June 2012, in the United States, about 1200 index ETFs exist, with about 50 actively managed ETFs. Index ETF assets are about $1.2 trillion, compared with about $7 billion for actively managed ETFs. Some index ETFs, known as leveraged ETFs or inverse ETFs, use investments in derivatives to seek a return

neg: Jensen's alpha financial markets are too efficient to allow for repeatedly earning positive Alpha, unless by chance. Nevertheless, Alpha is still widely used to evaluate mutual fund and portfolio manager performance, often in conjunction with the Sharpe ratio and the Treynor ratio. In the context of CAPM, calculating alpha requires the following inputs: Jensen's alpha = Portfolio Return − [Risk Free Rate + Portfolio Beta * (Market Return − Risk Free Rate)] An additional way of understanding the definition can be obtained by rewriting it as: If we define the excess return of the fund (market) over the risk free return as

neg: Laddering approach for all retirement investments. The idea is to separate CDs, cash, bonds, annuities, and others into different "ladders" or "buckets" or "baskets" depending on when the asset is expected to be liquidated to fund the retirement revenue stream. Low-risk assets are used at the start of retirement (and usually have an expected lower rate of return, due to lacking a risk premium). Higher-risk assets would be placed in a basket used at the end of retirement. This strategy is useful for a diversified portfolio, with other assets in the stock market etc. Generally an initial investment of $10,000-$20,000 is

neg: Tangible investment of land. Other assets’ values fluctuate with supply and demand, such as commodities, which are liquid investments unlike most other tangible investments. These various properties, together with the lack of correlation to traditional asset class values, make tangible investments a means of reducing overall investment risk through diversification. All of the following are tangible investments: Tangible investment A tangible investment is something physical that you can touch. It is an investment in a tangible, hard or real asset or personal property. This contrasts with financial investments such as stocks, bonds, mutual funds and other financial instruments. Some assets are held

neg: Bond duration (finance) #Interest rate derivatives. Sensitivity of a bond's market price to a change in Option Adjusted Spread (OAS). Thus the index, or underlying yield curve, remains unchanged. Floating rate assets that are benchmarked to an index (such as 1-month or 3-month LIBOR) and reset periodically will have an effective duration near zero but a spread duration comparable to an otherwise identical fixed rate bond. The sensitivity of a portfolio of bonds such as a bond mutual fund to changes in interest rates can also be important. The average duration of the bonds in the portfolio is often reported. The duration

neg: Portable alpha to as "Alpha Transport" As an example, consider a manager who invests only in small-cap US stocks, and the stocks in his portfolio have an average beta of 0.85. In a bear-market year, his portfolio returned 5% less than a risk-free asset, while the small-cap US stock market (the Russell 2000) declined 10% below the risk-free rate. Based on his beta (market risk), his portfolio should have returned 8.5% less than the risk free asset, but his skill in picking small-cap stocks resulted in his portfolio only declining 5% below the risk-free rate. The difference between 8.5% and 5% is

neg: Dedicated portfolio theory passive management believe that better returns are achieved by buying broad based mutual funds, such as index funds, and holding them. Most academic research suggests that passive management has, in fact, historically produced higher returns over the long run. Dedicated portfolios fall into the category of passive management because once bonds are purchased, they are held to maturity. If all remaining funds are invested in an index fund, then the entire portfolio could be regarded as 100 percent passive. (Index fund providers, such as Dimensional Fund Advisors and Vanguard can supply voluminous research results on the active/passive management debate.) Dedicated

neg: Permanent Portfolio Family of Funds Strategy" discusses the funds benefits and limitations. The authors say that the fund manager's investment decisions and the costs associated with an actively managed mutual fund are a downside when compared to an index fund, but points out that the fund's management fee of 0.78% per year is below the mutual fund average. According to a 2006 article in Kiplinger's personal finance magazine the fund has delivered on its goal of "long term stability with occasional market beating returns." The "Aggressive Growth Portfolio" (PAGRX) is described as a "diversified, multi-cap core, U.S. equity fund" with the goal of long term

neg: Virtual Brokers Virtual Brokers Virtual Brokers (a division of BBS Securities Inc.) is an online brokerage provider. The company is headquartered in Toronto, Canada and provides trade execution services for stocks, bonds, options, exchange-traded fund (ETF) and mutual funds associated with major banks and online brokers. The company was awarded the "Best Online Investment Broker" in Canada in 2012 by the "Canadian Business Journal". The company also won "Best Online Broker" in 2012, 2013, 2015, 2016 and ranked #2 in 2011 and 2014, as ranked by "The Globe and Mail". BBS Securities Inc. is a wholly owned subsidiary of CI Financial Corp.

neg: Index fund mutual fund. That is a 40% gain from the reduction of silent partners. Style drift occurs when actively managed mutual funds go outside of their described style (i.e., mid-cap value, large cap income, etc.) to increase returns. Such drift hurts portfolios that are built with diversification as a high priority. Drifting into other styles could reduce the overall portfolio's diversity and subsequently increase risk. With an index fund, this drift is not possible and accurate diversification of a portfolio is increased. Index funds must periodically "rebalance" or adjust their portfolios to match the new prices and market capitalization of the

neg: Exchange-traded fund costs and daily performance rates as the potential combined compound loss can sometimes go unrecognized and offset potential gains over a longer period of time. ETFs are structured for tax efficiency and can be more attractive than mutual funds. In the U.S., whenever a mutual fund realizes a capital gain that is not balanced by a realized loss, the mutual fund must distribute the capital gains to its shareholders. This can happen whenever the mutual fund sells portfolio securities, whether to reallocate its investments or to fund shareholder redemptions. These gains are taxable to all shareholders, even those who reinvest

neg: Uncompensated risk Uncompensated risk In investments, uncompensated risk is the level of additional risk for which no additional returns are generated and when taking systematic withdrawals make the probability of failure unacceptably high. Thus, looking solely at the US Market, investing in the Total Stock Market would present you with compensated risk since you own a representative weighted average of the entire market. You are "compensated" for taking on risk in your portfolio by higher expected returns. When you invest in stocks, you have higher risk than with bonds. But you expect a higher return. Conversely, if you owned only an individual

neg: Efficient-market hypothesis market timing, and that the only way an investor can possibly obtain higher returns is by chance or by purchasing riskier investments. His 2012 study with Kenneth French supported this view, showing that the distribution of abnormal returns of US mutual funds is very similar to what would be expected if no fund managers had any skill—a necessary condition for the EMH to hold. There are three variants of the hypothesis: "weak", "semi-strong", and "strong" form. The weak form of the EMH claims that prices on traded assets ("e.g.," stocks, bonds, or property) already reflect all past publicly available information.

neg: Holy grail distribution At the same time vehicles following the Holy Grail distribution such as US dollar (as a DXY index), treasury bonds and certain hedge fund strategies that bought credit default swaps (CDS) and other derivative instruments had strong positive returns. Market forces that pushed the first category of assets down pulled the latter category up. Protection of a diversified investment portfolio from market crashes (extreme events) can be achieved by using a tail risk parity approach, allocating a piece of the portfolio to a tail risk protection strategy, or to a strategy with Holy grail distribution of returns. A financial instrument

neg: Korea Investment Corporation traditional asset portfolio pursues stable risk-adjusted returns by investing in publicly traded securities, mostly stocks and bonds. The global financial crisis of 2008, the U.S. credit rating downgrade in 2011, and the fiscal crisis in Europe temporarily dampened returns on traditional assets. Nevertheless, the traditional asset portfolio delivered a return of 11.83% in 2012, outperforming the benchmark by 66bp, amid global policy collaboration to revive the world economy. The cumulative return over the past five years is 3.72%(annualized ), which is 3bp higher than the benchmark. Alternative Investments Alternative investments have a different risk/return profile compared with traditional asset classes.

neg: CalSTRS is a special trust fund established by law that holds the assets of the following programs: The assets come from contributions by members, employing school districts, investment earnings and appropriations from the State of California's General Fund. The fund's investments create a stream of income to add to those assets. The CalSTRS investment portfolio includes stocks, bonds, real estate and short-term investments. As of October 31, 2018, CalSTRS managed a portfolio worth $219.2 billion at market value. As of June 30, 2012, CalSTRS' assets were $143.1 billion at market value ($152.5 billion actuarial value), giving CalSTRS an unfunded liability of

neg: Stock market all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) "bank deposits to more risky securities of one sort or another". A second transformation is the move to electronic trading to replace human trading of listed securities. Compared to Other Asset Classes Over the long term, investing in a well diversified portfolio of stocks such as an S&P 500 Index outperforms other investment vehicles such as Treasury Bills and Bonds, with the S&P 500 having a geometric annual average

neg: Bridgewater Associates Kodak and Loews Corporation and began formally offering its currency overlay products to its clients. Bridgewater Associates developed several "innovative investment strategies" during the 1990s such as inflation-indexed bonds, currency overlay, emerging market debt, global bonds and "super-long duration bonds". The firm also "pioneered the separation of alpha and beta" investments and developed a strategy called "alpha overlay" which involved a portfolio of "20 uncorrelated" investments, leveraged for risk or return and combined with cash or an investment market benchmark. The firm launched its "Pure Alpha" fund and began to market portable alpha investment strategies in 1991. The "Pure Alpha"

neg: Manager of managers fund capital. This means that the role of the manager of managers is to assemble a group of investment experts, closely monitor their performance, and alter the composition of the team to adapt to market conditions or fund performance. For example, the manager of a large pension fund would appoint different investment managers for different asset classes such as equities (stocks), bonds, and commodities. The performance of those managers will then be measured against their respective benchmarks, replacing as necessary to maintain the fund’s overall performance and risk control measures. Manager of managers fund A "manager of managers fund" (MoM fund)

neg: Investment management is because equities are riskier (more volatile) than bonds which are themselves more risky than cash. Against the background of the asset allocation, fund managers consider the degree of diversification that makes sense for a given client (given its risk preferences) and construct a list of planned holdings accordingly. The list will indicate what percentage of the fund should be invested in each particular stock or bond. The theory of portfolio diversification was originated by Markowitz (and many others). Effective diversification requires management of the correlation between the asset returns and the liability returns, issues internal to the portfolio (individual

neg: Bermuda Stock Exchange the BSX are: Bermuda Stock Exchange The Bermuda Stock Exchange (BSX), established in 1971, is located in Hamilton, Bermuda. The stock exchange's 2010 'Year End Review' report stated that its aggregate market capitalization (excluding mutual funds) stood at US$319 billion. The exchange specializes in listing and trading of capital market instruments such as stocks, bonds, mutual fund (including hedge fund structures) and depository receipt programs. The BSX has been granted approved stock exchange status under Australia's Foreign Investment Fund taxation rules, and, effective 1 September 2005 was granted designated investment exchange status by the United Kingdom's Financial Services Authority. The

neg: Bermuda Stock Exchange Bermuda Stock Exchange The Bermuda Stock Exchange (BSX), established in 1971, is located in Hamilton, Bermuda. The stock exchange's 2010 'Year End Review' report stated that its aggregate market capitalization (excluding mutual funds) stood at US$319 billion. The exchange specializes in listing and trading of capital market instruments such as stocks, bonds, mutual fund (including hedge fund structures) and depository receipt programs. The BSX has been granted approved stock exchange status under Australia's Foreign Investment Fund taxation rules, and, effective 1 September 2005 was granted designated investment exchange status by the United Kingdom's Financial Services Authority. The securities listed on

neg: Separately managed account provide significant advantages in terms of risk/return over more typical portfolios. There is no clear answer, and without comprehensive data, any evidence is largely anecdotal. The ownership structure of an SMA provides an investor some tax advantages over a similarly-invested mutual fund. After purchasing mutual fund shares, an investor will have a tax liability for any net capital gains in the mutual fund portfolio, even if the investments the fund sold for a gain were purchased before the investor owned the shares of the fund. This is known as an "unearned capital gain," and has a negative effect on the

neg: Asset allocation recommended allocations that are grossly skewed from investment mandates and/or impractical—often even violating an investment manager's "common sense" understanding of a tenable portfolio-allocation strategy. An asset class is a group of economic resources sharing similar characteristics, such as riskiness and return. There are many types of assets that may or may not be included in an asset allocation strategy. The "traditional" asset classes are "stocks", "bonds", and "cash": Allocation among these three provides a starting point. Usually included are hybrid instruments such as convertible bonds and preferred stocks, counting as a mixture of bonds and stocks. Other alternative assets that

neg: Tom Price (American politician) several health care investments, including Innate, upon his confirmation as HHS Secretary. On January 16, 2017, CNN reported that Price had purchased shares in Zimmer Biomet, a medical devices company. Zimmer Biomet is an S&P 500 component, in that every S&P 500 ETF and numerous mutual funds often trade Zimmer Biomet. Price had a diversified, broker-directed portfolio of hundreds of stocks in which investment decisions were made by a Morgan Stanley financial advisor, and that advisor had purchased these shares, in addition to approximately 70 other stocks, as a part of a periodic portfolio re-balancing. Less than a week after

neg: Risk parity and derivatives and basis risks associated with derivatives. Other critics warn that the use of leverage and relying heavily on fixed income assets may create its own risk. Portfolio manager Ben Inker has criticized risk parity for being a benchmarking approach that gives too much relative weight to bonds when compared to other alternative portfolio approaches. However, proponents of risk parity say that its purpose is to avoid predicting future returns. Inker also says that risk parity requires too much leverage to produce the same expected returns as conventional alternatives. Proponents answer that the reduced risk from additional diversification more

neg: Equity-indexed annuity than fixed instruments such as CDs, money market accounts, and bonds but not as high as market returns. Equity Index Annuities are insured by each State's Guarantee Fund; coverage is not as strong as the insurance provided by the FDIC. For example, in California the fund will cover "80% not to exceed $250,000." The guarantees in the contract are backed by the relative strength of the insurer. The contracts may be suitable for a portion of the asset portfolio for those who want to avoid risk and are in retirement or nearing retirement age. The objective of purchasing an equity

neg: Target date fund were fully aware of a target-date fund glidepath, which may differ from manager to manager. The rules on disclosures for target-date funds were published by the SEC in 2010. Target date fund A target date fund (TDF) – also known as a lifecycle, dynamic-risk or age-based fund – is a collective investment scheme, often a mutual fund or a collective trust fund, designed to provide a simple investment solution through a portfolio whose asset allocation mix becomes more conservative as the target date (usually retirement) approaches. Target-date funds were invented by Donald Luskin and Larry Tint of Wells Fargo Investment

neg: Trade-off risk, as when one buys a mutual fund composed of many stocks rather than only one or a few stocks that may have a higher expected value of return. Similarly, trash cans that are used inside and then taken out to the street and emptied into a Dumpster can be small or large. A large trash can does not need to be taken out to the Dumpster so often, but it may become so heavy when full that the user risks strain or back injury when moving it. The choice of waste receptacle is a trade-off between the frequency of

neg: Mexican Stock Exchange its IPO in June 2008, and its shares are traded on the BMV equities market. It operates by concession of the Secretariat of Finance and Public Credit. Until its IPO BMV was owned by its members, which were a group of banks and brokerage firms. The exchange trades debt instruments including Federal Treasury certificates (CETES), Federal Government Development bonds (BONDES), Investment Unit bonds (UDIBONOS), Bankers acceptances, promissory notes with yield payable at maturity, commercial paper and development bank bonds. In addition, it also trades stocks, debentures, mutual fund shares, and warrants. Trading is conducted electronically through the BMV-SENTRA Equities System.

neg: Rex Sinquefield an “optimal portfolio” consisting of various funds that “emulate different style and size attributes of various securities markets worldwide,” so that one fund might behave “like the S&P 500,” another might correlate with “just the value stocks in the S&P 500,” while a third “might emulate the performance of all small-cap stocks.” Sinquefield is a proponent of “passive investment,” meaning that he believes “you simply cannot beat the market.” “Passive investing,” Sinquefield has said, “generally refers to the idea that you are going to get market rates of return from whatever category you're investing in. If you are invested in