Hard Assets Investor

Countries, Commodities And Correlations The above link is to something I wrote for Hard Assets Investor. Hopefully I will have a couple of posts there every...

Hard Assets Investor

Countries, Commodities And Correlations The above link is to something I wrote for Hard Assets Investor. Hopefully I will have a couple of posts there every...

A Substitute For Another Fund

With apologies to The Who. I have been wondering whether this new BuyWrite ETN (BWV) could serve as substitute for a regular S&P 500 fund when combined with one or two other products. The idea would be to capture most of the effect with less volatility. My first thought is some sort of combo of BWV and iShares DJ Dividend Select Fund (DVY), which a few clients own. If SPY yields 1.5% a 50/50 mix of DVY, 3% yield, and BWV, no actual payout, obviously means no yield is given up. The thing that is given up is growth. You may have a negative opinion about growth but no growth makes for an undiversified portfolio. If you want to add growth, how much should you add? It appears that growth accounts for 48% of the S&P 500. I get 48% by looking at the Total Market Cap numbers for the S&P 500 Growth and S&P 500 Value ETFs, IVW and IVE respectively. Since this is just theoretical I could see where 25% to growth, 35% to DVY and 40% to BWV could create the effect but it would be very underweight growth. Because BWV is brand new there is no way (at least I’m not aware of away) to analyze this as portfolio. See the chart below though and you will see that during dips of varying magnitude in the last two and a half years the BXM index (the thing that BWV will try to mimic) has really held in very well which is why in other posts since this blog started I have wanted a product like...

A Substitute For Another Fund

With apologies to The Who. I have been wondering whether this new BuyWrite ETN (BWV) could serve as substitute for a regular S&P 500 fund when combined with one or two other products. The idea would be to capture most of the effect with less volatility. My first thought is some sort of combo of BWV and iShares DJ Dividend Select Fund (DVY), which a few clients own. If SPY yields 1.5% a 50/50 mix of DVY, 3% yield, and BWV, no actual payout, obviously means no yield is given up. The thing that is given up is growth. You may have a negative opinion about growth but no growth makes for an undiversified portfolio. If you want to add growth, how much should you add? It appears that growth accounts for 48% of the S&P 500. I get 48% by looking at the Total Market Cap numbers for the S&P 500 Growth and S&P 500 Value ETFs, IVW and IVE respectively. Since this is just theoretical I could see where 25% to growth, 35% to DVY and 40% to BWV could create the effect but it would be very underweight growth. Because BWV is brand new there is no way (at least I’m not aware of away) to analyze this as portfolio. See the chart below though and you will see that during dips of varying magnitude in the last two and a half years the BXM index (the thing that BWV will try to mimic) has really held in very well which is why in other posts since this blog started I have wanted a product like...