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Nice video. For me, the fact that Treasury Inflation Protected Securities currently have guaranteed real yields in the +1.5% region if held to maturity makes a ladder of those a perfect hedging side of the barbell. I use precious metals ETFs and SPY call options for the risk side of the portfolio. Because I am 73, I have 88% allocation to the hedging side.
10:50 You follow Ray Dalio advice 9:29 Your Favorite Asset Allocation Strategy is the Barbell Model Conflicting Ideas here... Ray Dalio model in investing is done in an "All Weather" portfolio... 0:51 Model perfectly paints the picture of the difference between the 2 portfolios (Barbell vs All Weather) Which of these 2 portfolio are you really doing?
Barbell! And I don't think is mutually exclusive with the concept of diversification. Coz you can have good diversification within each barbell extreme. I see the All Weather portfolio as just another instance of a well-diversified portfolio, but I prefer the Barbell instance.
The benefits of the convex return function for call options are quite impressive. The clipping of the losses at the premium cost are able to drive the expected return of the calls at expiration positive even if the distribution of the value of the underlying asset is symmetric about the strike price at expiration. The key is that the premium needs to be small relative to the standard deviation of that distribution.
If the premium is small, then the probability of x2 will be very small (a very far otm call) such that the average return approximately equals p(x1) * r(x1). Most of the time, the premium will cost more than the average expected returns of the call option
@@JakeAllen3 My analysis was for ATM calls. As I recall, the premium needed to be smaller than about one-half of the standard deviation of the (symmetric) probability distribution of the price of the underlying asset at expiry, in order to have a positive expected return from the calls. I looked at just a few different distribution examples, all of them being symmetric around the strike price of the calls.
@@larryhorowitz6690 thanks. doing more research. so their strategy kind of is just a premium arbitraging strategy that can continually fund itself also provides some kind of convexity in explosive vol environments - but they have said the strategy is lumpy, not low-vol, and that you have to get used to losing and losing for long periods of time. So they probably funnel all the positive ev into further spreads and therefore the strategy doesn’t have positive ev in an environment where there’s continually no tail events only in the context of a tail events (which inevitably will happen at some point) does the strategy produce positive ev. I wonder how they calculate the losses they say they have no timing or discretionary decisions to run out of funding but that seems impossible unless they know they can continually fund for 12 months and then they just repeat with new capital but it doesn’t appear to be structured that way if it was idk why’d they’d mention 100%+ annual returns from 2007-2020 or whatever the years were. I’m sure they employ leverage too aside from the long options
Biggest mistake people make is trying to maximize gains over protecting your net worth. The point of investing is to compound as much over your life time and if you make a 50% loss you are screwed. The barbell prevents this from happening
Making money, starting a business and self development can only be achieved if you consistantly work on it, it is my personal experience... if you are reading this keep in mind that you cannot become successful in a week. BTW: enjoyed watching your video, thanks. a fellow creator====
Thanks for the video, good info. I can advise you to look more into mastercworks, I think its a scam tbh. Nobody whos smart really would invest in it and influencer themselves also dont invest in it but like to get affiliates and make money off it IMO. Could be worth to reflect on :)
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