Portfolio Management Strategies: Rapid Fire

What this video covers

• Why asset allocation drives returns more than security selection, and which allocation style responds to client circumstance changes versus market timing opportunities
• How strategic asset allocation is the long-term policy portfolio target, changed only when fundamentals shift, while tactical asset allocation is a short-term deviation that returns to target
• What separates active management (benchmark-beating, higher cost, higher turnover) from passive management (benchmark-matching, lower cost, tax efficient, resting on the Efficient Market Hypothesis or EMH)
• When growth investing outperforms (expansions, high price-to-earnings ratio, low dividends) versus when value investing wins (recoveries, low PE, mean reversion)
• Why diversification eliminates unsystematic risk but leaves systematic market risk fully intact, and why you cannot diversify away a market crash
• How dollar-cost averaging (DCA) uses a fixed dollar amount at regular intervals to buy more shares when prices fall, and why fixed share purchases are not DCA
• The specific numbers to memorize: correlation negative 1.0 for maximum diversification, correlation positive 1.0 for no diversification, Regulation T initial margin at 50%, FINRA minimum maintenance margin at 25%, plus or minus 5% rebalancing bands, and beta above 1 meaning greater volatility than the market
• When to use a protective put (downside protection, cost of premium) versus a covered call (premium income, capped upside), and why inverse leveraged exchange-traded funds (ETFs) are unsuitable for buy-and-hold