Candès, Hastie, Hogan, Kahn, Luo, and Spector develop a novel framework to measure whether thematic baskets capture real, coherent risks that matter for investors. Their findings challenge conventional risk models and highlight both the dangers and opportunities of betting on investment “themes.” Thematic Investing: a Risk-Based Perspective was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
Buffer ETFs have become one of the fastest-growing product lines in finance. But what risks are buffer investors carrying without realizing it? Let's zoom in on the two areas where they fall short and propose potential solutions that seek to address these issues. Improving Buffer Strategies: Pay Attention to the Tails! was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
A sufficient portfolio consists solely of a ladder of inflation-indexed bonds, such as U.S. Treasury Inflation-Protected Securities (TIPS), and a stock market index fund. We explain theoretically and demonstrate empirically how this strategy is less risky and more effective at maximizing lifetime retirement income than are methods commonly used by financial advisors. A TIPS Ladder Plus Stocks: Retirement Planning Solved? was originally published at Alpha Architect. Please read the Alpha Archi...| Alpha Architect
On the surface, buffer ETFs appear attractive: they seek to capture some upside while mitigating a portion of losses. However, this does not mean they are risk-free. In fact, under certain market conditions, these products can significantly underperform. The Problem with Buffer ETFs: Cap the Upside & Expose the Downside was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
Our friends Corey Hoffstein and Rodrigo Gordillo over at Return Stacked have done some interesting research on the potential for gold to improve your run-of-the-mill 60/40. You'll need to hit them directly on their site to get their full report. However, I read their very detailed white paper, and I thought the concept was intriguing [...] A Golden Opportunity to Upgrade a 60/40? was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
Investors care about more than just returns. They also care about risk. Thus, prudent investors include consideration of strategies that can provide at least some protection against adverse events that lead to left tail risk (portfolios crashing). The cost of that protection (the impact on expected returns) must play an important role in deciding whether to include them. For example, buying at-the-money puts, a strategy that eliminates downside risk, should have returns no better than the ris...| Alpha Architect
